<PAGE>
AIM DEVELOPING MARKETS FUND:
ADVISOR CLASS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
AIM DEVELOPING MARKETS FUND (THE "FUND") primarily seeks long-term capital
appreciation. Its secondary investment objective is income, to the extent
consistent with seeking capital appreciation. The Fund normally invests
substantially all of its assets in issuers in the developing (or "emerging")
markets of Asia, Europe, Latin America and elsewhere. A majority of the Fund's
assets ordinarily is invested in emerging market equity securities. The Fund
also invests in emerging market debt securities, which are selected based on
their potential to provide a combination of capital appreciation and current
income. There can be no assurance that the Fund will achieve its investment
objectives.
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a front-
end or contingent deferred sales charge or Rule 12b-1 fees.
The Fund is designed for long-term investors and not as a trading vehicle. The
Fund does not represent a complete investment program, nor is it suitable for
all investors. The Fund may invest significantly in equity and high yield, high
risk ("lower quality") debt securities that are predominantly speculative.
Investments of this type are subject to a greater risk of loss of principal and
interest. The Fund's investments in securities of issuers in developing markets
involves special considerations and risks that are not typically associated with
investments in securities of issuers in the United States or in other more
established markets. Investors should carefully assess the risks associated with
an investment in the Fund.
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Fund at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling (800) 347-4246. It is
also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
The Fund is managed by A I M Advisors, Inc. ("AIM") and is sub-advised and
sub-administered by INVESCO (NY), Inc. (the "Sub-adviser"). AIM and the
Sub-adviser and their worldwide asset management affiliates provide investment
management and/or administrative services to institutional, corporate and
individual clients around the world. AIM and the Sub-adviser are both indirect
wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are
an independent investment management group that has a significant presence in
the institutional and retail segment of the investment management industry in
North America and Europe, and a growing presence in Asia.
An investment in the Fund offers the following advantages:
/ / Access to Securities Markets Around the World
/ / Automatic Dividend and Other Distribution Reinvestment
/ / Exchange Privileges with the Advisor Class of the Other AIM/GT Funds
/ / Portfolio Rebalancing Program
FOR FURTHER INFORMATION, CALL
(800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISER.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
AIM DEVELOPING MARKETS FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 6
Investment Objectives and Policies........................................................ 7
Risk Factors.............................................................................. 12
How to Invest............................................................................. 17
How to Make Exchanges..................................................................... 19
How to Redeem Shares...................................................................... 20
Shareholder Account Manual................................................................ 22
Calculation of Net Asset Value............................................................ 23
Dividends, Other Distributions and Federal Income Taxation................................ 23
Management................................................................................ 25
Other Information......................................................................... 27
</TABLE>
Prospectus Page 2
<PAGE>
AIM DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in the
summary are to headings in the body of this Prospectus
<TABLE>
<S> <C> <C>
The Fund: The Fund is a non-diversified series of AIM Investment Funds, Inc. (the "Company").
Investment Objectives: The Fund's primary investment objective is long-term capital appreciation; its secondary objective is
income, to the extent consistent with seeking capital appreciation.
Principal Investments: The Fund normally invests a majority of its assets in emerging market equity securities and also may
invest in emerging market debt securities.
Principal Risk Factors: There is no assurance that the Fund will achieve its investment objectives. The Fund's net asset
value per share will fluctuate, reflecting fluctuations in the market value of its portfolio
holdings.
The Fund invests in foreign securities. Investments in foreign securities involve risks relating to
political and economic developments abroad and the differences between the regulations to which U.S.
and foreign issuers are subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency exchange rates will affect the Fund's
net asset value, earnings, and gains and losses realized on sales of securities. Securities of
foreign companies may be less liquid and their prices more volatile than those of securities of
comparable U.S. companies. The Fund normally invests substantially all of its assets in issuers in
emerging markets. Such investments entail greater risks than investing in issuers in developed
markets.
The Fund may engage in certain foreign currency, options and futures transactions to attempt to hedge
against the overall level of investment and currency risk associated with its present or planned
investments. Such transactions involve certain risks and transaction costs.
The value of debt securities held by the Fund generally fluctuates inversely with interest rate
movements. Certain investment grade debt securities may possess speculative qualities. The Fund may
invest in below investment grade debt securities. Investments of this type are subject to a greater
risk of loss of principal and interest.
See "Investment Objectives and Policies" and "Risk Factors."
Investment Managers: AIM and the Sub-adviser and their worldwide asset management affiliates provide investment management
and/or administrative services to institutional, corporate and individual clients around the world.
AIM and the Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and
its subsidiaries are an independent investment management group that has a significant presence in
the institutional and retail segment of the investment management industry in North America and
Europe, and a growing presence in Asia. AIM was organized in 1976 and, together with its affiliates,
currently advises approximately 90 investment company portfolios. AIM advises the Fund and other
investment
</TABLE>
Prospectus Page 3
<PAGE>
AIM DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
company portfolios which are sub-advised by the Sub-adviser ("AIM/GT Funds"). On May 29, 1998,
AMVESCAP PLC acquired the Asset Management Division of Liechtenstein Global Trust AG, which include
the Sub-adviser and certain other affiliates. AIM also serves as the investment adviser to other
mutual funds, which are not sub-advised by the Sub-adviser, that are part of The AIM Family of
Funds-Registered Trademark- ("The AIM Family of Funds," and together with the AIM/GT Funds, the "AIM
Funds").
Advisor Class Shares: Advisor Class shares are offered through this Prospectus to (a) trustees or other fiduciaries
purchasing shares for employee benefit plans that are sponsored by organizations that have at least
1,000 employees; (b) any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment adviser has investment discretion over such
account, and (ii) the account holder pays such person as compensation for its advice and other
services an annual fee of at least 0.50% on the assets in the account; (c) any account with assets of
a least $10,000 if (i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the assets in the account;
(d) accounts advised by INVESCO (NY), Inc. or one of the companies formerly affiliated with
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor Class shares of any of
the AIM/GT Funds on June 1, 1998; and (e) any of the companies composing or affiliated with AMVESCAP
PLC.
Shares Available Through: Advisor Class shares of the Fund are available through Financial Advisers (as defined herein) that
have entered into agreements with the Fund's distributor, A I M Distributors, Inc. ("AIM
Distributors") or certain of its affiliates. See "How to Invest" and "Shareholder Account Manual."
Exchange Privileges: Advisor Class shares may be exchanged for Advisor Class shares of other AIM/GT Funds. See "How to
Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Fund's Transfer Agent. See "How to Redeem Shares" and "Shareholder
Account Manual."
Dividends and Other Dividends and other distributions from net investment income, net short- term capital gain, net
Distributions: capital gain and net gains from foreign currency transactions, if any, are paid annually.
Reinvestment: Dividends and other distributions may be reinvested automatically in Advisor Class shares of the Fund
or in Advisor Class shares of other AIM/GT Funds.
</TABLE>
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
Prospectus Page 4
<PAGE>
AIM DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transactions costs
associated with investing in the Advisor Class shares of the Fund are reflected
in the following tables (1):
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------
<S> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases of shares (as a % of offering price)................................. None
Sales charges on reinvested distributions to shareholders.............................................. None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, whichever is
less)................................................................................................ None
Redemption charges..................................................................................... None
Exchange Fees.......................................................................................... None
ANNUAL FUND OPERATING EXPENSES (2):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.......................................................... 0.98%
12b-1 distribution and service fees.................................................................... None
Other expenses (after estimated waivers)............................................................... 0.52%
------
Total Fund Operating Expenses............................................................................ 1.50%
------
------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES (3):
An investor would have directly or indirectly paid the following expenses at the
end of the periods shown on a $1,000 investment in the Fund, assuming a 5%
annual return:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Advisor Class Shares...................................................................... $15 $ 48 $ 82 $180
</TABLE>
- ------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND.
(2) Expenses are estimated based on the fees and expenses the Fund is expected
to incur during its initial year as an open-end fund and AIM's undertaking
to limit the Fund's expenses (exclusive of brokerage commissions, taxes,
interest and extraordinary expenses) to the annual rate of 1.50% of the
average daily net assets of the Fund's Advisor Class shares. Without
waivers, "Other expenses" and "Total Fund Operating Expenses" are estimated
to be 0.65% and 1.63%, respectively, for Advisor Class shares. "Other
expenses" include custody, transfer agent, legal and audit fees and other
operating expenses. See "Management" herein and in the Statement of
Additional Information for more information. Investors purchasing Advisor
Class shares through financial planners, trust companies, bank trust
departments or registered investment advisers, or under a "wrap fee"
program, will be subject to additional fees charged by such entities or by
the sponsors of such programs. Where any account advised by one of the
companies composing or affiliated with AMVESCAP PLC invests in Advisor Class
shares of the Fund, such account shall not be subject to duplicative
advisory fees.
(3) THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. The tables and the
assumption in the example of a 5% annual return are required by regulations
of the SEC applicable to all mutual funds. The 5% annual return is not a
prediction of and does not represent the Fund's projected or actual
performance.
Prospectus Page 5
<PAGE>
AIM DEVELOPING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below provides condensed financial information concerning income and
capital changes for one share of G.T. Global Developing Markets Fund, Inc. (the
"Predecessor Fund") for the periods shown. This information is supplemented by
the financial statements and accompanying notes appearing in the Statement of
Additional Information. The financial information in the table below has been
audited by Coopers & Lybrand L.L.P., independent accountants. The Predecessor
Fund was a closed-end investment company whose single class of shares traded on
the New York Stock Exchange ("NYSE"). On October 31, 1997, the Fund, which had
no previous operating history, acquired the assets and assumed the liabilities
of the Predecessor Fund. On that date, all shareholders of the Predecessor Fund
received Class A shares of the Fund. The fees and expenses of the Fund will
differ from those of the Predecessor Fund. The Fund's fiscal year end will be
October 31, rather than December 31, which was the Predecessor Fund's fiscal
year end.
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
(SUCCESSOR TO G.T. GLOBAL DEVELOPING MARKETS FUND, INC.)
(For the entire period shown, the Predecessor Fund operated as a closed-end
investment company traded on the NYSE)
<TABLE>
<CAPTION>
JAN. 11, 1994
(COMMENCEMENT
YEAR ENDED DEC. 31, OF OPERATIONS)
PERIOD ENDED -------------------- TO
OCT. 31, 1997 1996 1995 DEC. 31, 1994
------------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................... $ 13.84 $ 11.60 $ 12.44 $ 15.00
------------- --------- --------- ----------------
Income from investment operations:
Net investment income........................................ 0.25 0.53 0.72 0.35
Net realized and unrealized gain (loss) on investments....... (1.53) 2.19 (0.84) (2.46)
------------- --------- --------- ----------------
Net increase (decrease) from investment operations......... (1.28) 2.72 (0.12) (2.11)
------------- --------- --------- ----------------
Distributions to shareholders:
From net investment income................................... -- (0.48) (0.72) (0.35)
From net realized gain on investments........................ -- -- -- (0.10)
------------- --------- --------- ----------------
Total distributions........................................ -- (0.48) (0.72) (0.45)
------------- --------- --------- ----------------
Net asset value, end of period................................. $ 12.56 $ 13.84 $ 11.60 $ 12.44
------------- --------- --------- ----------------
------------- --------- --------- ----------------
Market value, end of period.................................... $ 11.81 $ 13.84 $ 11.60 $ 12.44
------------- --------- --------- ----------------
------------- --------- --------- ----------------
Total investment return (based on net asset value) (a)......... (9.25)%+ 23.59% (0.95)% (14.07)%+
Total investment return (based on market value)................ 1.62%(b) 24.18% 6.60% (32.16)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................... $ 457,379 $ 504,012 $ 422,348 $ 452,872
Ratio of net investment income to average net assets........... 2.03%++ 4.07% 6.33% 2.75%++
Ratio of expenses to average net assets:
With expense reductions...................................... 1.75%++ 1.82% 1.77% 2.01%++
Without expense reductions................................... 1.83%++ 1.85% 1.80% 2.01%++
Portfolio turnover rate........................................ 184%++ 138% 75% 56%
Average commission rate per share paid on portfolio
transactions.................................................. $ 0.0023 $ 0.0022 N/A N/A
<FN>
- ------------------
</TABLE>
+ Not annualized
++ Annualized
(a) Total investment return differs from the Predecessor Fund's total investment
return based on market value.
N/A Not Applicable
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY NUMBER AVERAGE AMOUNT
AMOUNT OF DEBT AVERAGE MONTHLY AMOUNT OF REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT OF DEBT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- -------------------------------- --------------- ------------------------ ------------------------ ----------------
<S> <C> <C> <C> <C>
October 31, 1997................ -- $379,964 36,416,667 $0.0104
</TABLE>
Prospectus Page 6
<PAGE>
AIM DEVELOPING MARKETS FUND
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
The Fund's primary investment objective is long-term capital appreciation; its
secondary objective is income, to the extent consistent with seeking capital
appreciation. The Fund normally invests substantially all of its assets in
issuers in the developing (or "emerging") markets of Asia, Europe, Latin America
and elsewhere. A majority of the Fund's assets normally are invested in emerging
market equity securities. The Fund may invest in the following types of equity
securities: common stock, preferred stock, securities convertible into common
stock, American Depository Receipts, Global Depository Receipts, rights and
warrants to acquire such securities and substantially similar forms of equity
with comparable risk characteristics. The Fund may also invest in emerging
market debt securities that will be selected based on their potential to provide
a combination of capital appreciation and current income.
For purposes of the Fund's operations, emerging markets consist of all countries
determined by the Sub-adviser to have developing or emerging economies and
markets. These countries generally include every country in the world except the
United States, Canada, Japan, Australia, New Zealand and most countries located
in Western Europe. See "Investment Objectives and Policies" in the Statement of
Additional Information for a complete list of all the countries that the Fund
does not currently consider to be emerging markets.
For purposes of the Fund's policy of normally investing substantially all of its
assets in issuers in emerging markets, the Fund will consider investment in the
following emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
</TABLE>
Although the Fund considers each of the above-listed countries eligible for
investment, it will not be invested in all such markets at all times. Moreover,
investing in some of those markets currently may not be desirable or feasible,
due to the lack of adequate custody arrangements for the Fund's assets, overly
burdensome repatriation and similar restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus, an issuer in an emerging market is an entity (1) for
which the principal securities trading market is an emerging market, as defined
above, (2) that (alone or on a consolidated basis) derives 50% or more of its
total revenues from business in emerging markets, provided that, in the
Sub-adviser's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere, or
(3) organized under the laws of, or with a principal office in, an emerging
market.
In selecting investments, the Sub-adviser seeks to identify those countries and
industries where economic and political factors, including currency movements,
are likely to produce above-average
Prospectus Page 7
<PAGE>
AIM DEVELOPING MARKETS FUND
growth rates over the long term. The Sub-adviser seeks those emerging markets
that have strongly developing economies and in which the markets are becoming
more sophisticated. The Sub-adviser 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-adviser believes
that the issuers of securities in emerging markets often have sales and earnings
growth rates that exceed those in developed countries and that such growth rates
may in turn be reflected in more rapid share price appreciation.
As opportunities to invest in securities in other emerging markets develop, the
Fund expects to expand and further broaden the group of emerging markets in
which it invests. In some cases, investments in debt securities could provide
the Fund with access to emerging markets in the early stages of their economic
development, when equity securities are not yet generally available or, in the
Sub-adviser's view, do not yet present an acceptable investment alternative.
While the Fund generally is not restricted in the portion of its assets that may
be invested in a single region, under normal conditions its assets will be
invested in issuers in at least four countries, and it will not invest more than
25% of its assets in issuers in one country. The Fund's holdings of any one
foreign currency together with securities denominated in or indexed to such
currency will not exceed 40% of its assets.
INVESTMENTS IN DEBT SECURITIES. The Fund may invest up to 50% of its total
assets in the following types of emerging market debt securities: (1) debt
securities issued or guaranteed by governments, their agencies,
instrumentalities or political subdivisions, or by government owned, controlled
or sponsored entities, including central banks (collectively, "Sovereign Debt"),
including Brady Bonds; (2) interests in issuers organized and operated for the
purpose of restructuring the investment characteristics of Sovereign Debt; (3)
debt securities issued by banks and other business entities; and (4) debt
securities denominated in or indexed to the currencies of emerging markets. Debt
securities held by the Fund may take the form of bonds, notes, bills,
debentures, bank debt obligations, short-term paper, loan participations,
assignments and interests issued by entities organized and operated for the
purpose of restructuring the investment characteristics of any of the foregoing.
There is no requirement with respect to the maturity or duration of debt
securities in which the Fund may invest.
There is no limitation on the percentage of the Fund's assets that may be
invested in debt securities that are rated below investment grade. Investment in
below investment grade debt securities involves a high degree of risk and can be
speculative. These debt securities are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." Debt securities in which the Fund will
invest may not be rated; if rated, it is expected that such ratings will be
below investment grade. See "Risk Factors -- Risks Associated with Debt
Securities" and "-- Risks Associated with Below Investment Grade Debt
Securities."
The Fund may invest in "Brady Bonds," which are debt restructurings that provide
for the exchange of cash and loans for newly issued bonds. Brady Bonds have been
issued by the countries of Albania, Argentina, Brazil, Bulgaria, Costa Rica,
Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama, Peru,
Philippines, Poland, Uruguay, Venezuela and Vietnam, and are expected to be
issued by other emerging market countries. As of the date of this Prospectus,
the Fund is not aware of the occurrence of any payment defaults on Brady Bonds.
Investors should recognize, however, that Brady Bonds do not have a long payment
history. In addition, Brady Bonds are often rated below investment grade.
The Fund may invest in either collateralized or uncollateralized Brady Bonds.
U.S. dollar-denominated collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at the time of issuance and is adjusted at
regular intervals thereafter.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, relative interest rate levels and/or
the creditworthiness of issuers.
ADDITIONAL INVESTMENT POLICIES
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Sub-adviser may employ a temporary defensive investment strategy
for the Fund if it determines such a strategy
Prospectus Page 8
<PAGE>
AIM DEVELOPING MARKETS FUND
to be warranted due to market, economic or political conditions. Under a
defensive strategy, the Fund may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest any portion or all of its assets in
high quality money market instruments of U.S. or foreign issuers. In addition,
for temporary defensive purposes, most or all of the Fund's investments may be
made in the United States and denominated in U.S. dollars. To the extent the
Fund adopts a temporary defensive posture, it will not be invested so as to
directly achieve its investment objectives. In addition, pending investment of
proceeds from new sales of Fund shares or in order to meet ordinary daily cash
needs, the Fund may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and may invest in foreign or domestic high quality money market
instruments. For a full descripton of money market instruments, see "Temporary
Defensive Strategies" in the Investment Objectives and Policies section of the
Statement of Additional Information.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. In connection with meeting requests
for the redemption of Fund shares, the Fund may borrow from banks or may borrow
through reverse repurchase agreements. The Fund also may borrow up to 5% of its
total assets for temporary or emergency purposes other than to meet redemptions
but total borrowings may not exceed 33 1/3% of its total assets. However, the
Fund will not purchase securities while borrowings in excess of 5% of its total
assets are outstanding. Any borrowing by the Fund may cause greater fluctuation
in the value of its shares than would be the case if it did not borrow.
A reverse repurchase agreement is a borrowing transaction in which the Fund
transfers possession of a security to another party, such as a bank or
broker/dealer, in return for cash and agrees to repurchase the security in the
future at an agreed-upon price that includes an interest component.
SECURITIES LENDING. The Fund may lend its portfolio securities to broker/dealers
or to other institutional investors. Securities lending allows the Fund to
retain ownership of the securities loaned and, at the same time, enhances the
Fund's total return. The Fund limits its loans of portfolio securities to an
aggregate of 30% of the value of its total assets, measured at the time any such
loan is made. While a loan is outstanding the borrower must maintain with the
Fund's custodian collateral consisting of cash, U.S. government securities or
certain irrevocable letters of credit equal to at least 100% of the value of the
borrowed securities plus any accrued interest or such other collateral as
permitted by the Fund's investment program and regulatory agencies, and as
approved by the Board. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delays in receiving additional
collateral or in recovery of the securities and possible loss of rights in the
collateral if the borrower fails financially.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. To attempt to increase
return, the Fund may write call options on securities. This strategy will be
employed only when, in the opinion of the Sub-adviser, the size of the premium
the Fund receives for writing the option is adequate to compensate it against
the risk that appreciation in the underlying security may not be fully realized
if the option is exercised. The Fund also is authorized to write put options to
attempt to enhance return, although it does not currently intend to do so.
The Fund may also use forward currency contracts, futures contracts, options on
securities, options on currencies, options on indices and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with its investments. These instruments are
often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency or an index of securities). The
Fund may enter into such instruments up to the full value of its portfolio
assets. See "Options, Futures and Currency Strategies" in the Statement of
Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Fund may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar or
may involve two foreign currencies. The Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to its
portfolio positions. The Fund also may purchase and sell put and call options on
currencies, futures contracts on currencies and options on such futures
contracts to hedge its portfolio against movements in exchange rates.
Prospectus Page 9
<PAGE>
AIM DEVELOPING MARKETS FUND
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets, to securities
denominated in such currencies or to securities of issuers domiciled or
principally engaged in business in such emerging markets. To the extent that
such a market does not exist, the Sub-adviser may not be able to effectively
hedge its investment in such markets.
In addition, the Fund may purchase and sell put and call options on equity and
debt securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or that the Sub-adviser intends to include in the
Fund's portfolio. The Fund also may purchase and sell put and call options on
stock indices to hedge against overall fluctuations in the securities markets or
in a specific market sector.
Further, the Fund may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or a specific market sector decline that could adversely affect the
Fund's portfolio. The Fund also may purchase index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund may use interest rate
futures contracts and options thereon to hedge the debt portion of its portfolio
against changes in the general level of interest rates.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Fund may be able to
invest in certain countries solely or primarily through governmentally
authorized investment vehicles or companies, some of which may be investment
vehicles or companies that are advised by the Sub-adviser or its affiliates
("Affiliated Funds"). Pursuant to the Investment Company Act of 1940, as amended
(the "1940 Act"), the Fund generally may invest up to 10% of its total assets in
the aggregate in shares of other investment companies and up to 5% of its total
assets in any one investment company, as long as each investment does not
represent more than 3% of the outstanding voting stock of the acquired
investment company at the time of investment.
Investment in other investment companies may involve the payment of substantial
premiums above the value of their portfolio securities and multiple layering of
fees and expenses and is subject to limitations under the 1940 Act and market
availability. The Fund does not intend to invest in other investment companies
unless, in the judgment of the Sub-adviser, the potential benefits of such
investment justify the payment of any applicable premium or sales charge. As a
shareholder in another investment company, the Fund would bear its ratable share
of that company's expenses, including its advisory and administration fees. At
the same time the Fund would continue to pay its own management fees and other
expenses. AIM and the Sub-adviser will waive their advisory fees to the extent
that the Fund invests in an Affiliated Fund.
PRIVATIZATIONS. The governments in some emerging markets have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-adviser believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain emerging markets, the ability of foreign entities such
as the Fund to participate in privatizations may be limited by local law or the
terms on which the Fund may be permitted to participate may be less advantageous
than those afforded local investors. There can be no assurance that governments
in emerging markets will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund may purchase debt
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Fund will purchase
or sell when-issued securities and forward commitments only with the intention
of actually receiving or delivering the securities, as the case may be. No
income accrues on securities that have been purchased pursuant to a forward
commitment or on a when-issued basis prior to delivery to the Fund. If the Fund
disposes of the right to acquire a when-issued security prior to its acquisition
or disposes of its right to deliver or receive against a forward commitment, it
may incur a gain or loss. At the time the Fund enters into
Prospectus Page 10
<PAGE>
AIM DEVELOPING MARKETS FUND
a transaction on a when-issued or forward commitment basis, the Fund will
segregate cash or liquid securities equal to the value of the when-issued or
forward commitment securities with its custodian bank and will mark to market
daily such assets. There is a risk that the securities may not be delivered and
that the Fund may incur a loss.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in fixed and floating
rate loans ("Loans") arranged through private negotiations between a foreign
entity and one or more financial institutions ("Lenders"). The majority of the
Fund's investments in Loans in emerging markets is expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Participations typically will result in the
Fund having a contractual relationship only with the Lender, not with the
borrower. The Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan nor any rights of set-off against the borrower,
and the Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the Fund will assume the
credit risk of both the borrower and the Lender that is selling the
Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
may be treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the borrower. The Fund will acquire
Participations only if the Lender interpositioned between the Fund and the
borrower is determined by the Sub-adviser to be creditworthy. When the Fund
purchases Assignments from Lenders, the Fund will acquire direct rights against
the borrower on the Loan. However, because Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by the Fund as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.
ZERO COUPON SECURITIES. The Fund may invest in certain zero coupon securities
that are "stripped" U.S. Treasury notes and bonds. The Fund also may invest in
zero coupon and other deep discount securities issued by foreign governments and
domestic and foreign corporations, including certain Brady Bonds and other
foreign debt, and in payment-in-kind securities. Zero coupon securities pay no
interest to holders prior to maturity, and payment-in-kind securities pay
"interest" in the form of additional securities. However, a portion of the
original issue discount on zero coupon securities and the interest on
payment-in-kind securities will be included in the Fund's income. Accordingly,
for the Fund to continue to qualify for tax treatment as a regulated investment
company and to avoid a certain excise tax (see "Taxes" in the Statement of
Additional Information), it may be required to distribute an amount that is
greater than the total amount of cash it actually receives. These distributions
may be made from the Fund's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and its
current income ultimately may be reduced as a result. Zero coupon and
payment-in-kind securities usually trade at a deep discount from their face or
par value and will be subject to greater fluctuations of market value in
response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
INDEXED COMMERCIAL PAPER. The Fund may invest without limitation in commercial
paper that is indexed to certain specific foreign currency exchange rates. The
terms of such commercial paper provide that its principal amount is adjusted
upwards or downwards (but not below zero) at maturity to reflect changes in the
exchange rate between two currencies while the obligation is outstanding. The
Fund will purchase such commercial paper with the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency, but the amount of principal payable by the issuer at
maturity will change in proportion to the change (if any) in the exchange rate
between the two specified currencies between the date the instrument is issued
and the date the instrument matures. While such commercial paper entails the
risk of loss of principal, the potential for realizing gains as a result of
changes in foreign currency exchange rates enables the Fund to hedge against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
The Fund will not purchase such commercial paper for speculation.
Prospectus Page 11
<PAGE>
AIM DEVELOPING MARKETS FUND
OTHER INDEXED SECURITIES. The Fund may invest in certain other indexed
securities, which are securities whose prices are indexed to the prices of other
securities, securities indices, currencies, precious metals or other commodities
or other financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is determined
by reference to a specific instrument or statistic. The performance of indexed
securities depends to a great extent on the performance of the security,
currency or other instrument to which they are indexed and also may be
influenced by interest rate changes in the United States and abroad. At the same
time, indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more volatile
than the underlying instruments. New forms of indexed securities continue to be
developed. The Fund may invest in such securities to the extent consistent with
its investment objectives.
OTHER INFORMATION. The Fund's investment objectives may not be changed without
the approval of a majority of its outstanding voting securities. The "majority
of its outstanding voting securities" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares. In addition, the
Fund has adopted certain investment limitations that also may not be changed
without shareholder approval. A complete description of these limitations is
included in the Statement of Additional Information. Unless specifically noted,
the Fund's investment policies described in this Prospectus and in the Statement
of Additional Information may be changed by the Company's Board of Directors
without shareholder approval. The Fund's policies regarding lending, and the
percentage of Fund assets that may be committed to borrowing, are fundamental
policies and may not be changed without shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Fund's investment policies or restrictions.
The Fund is authorized to engage in Short Sales, although it currently has no
intention of doing so, and may purchase American Depository Receipts, American
Depository Shares, Global Depository Receipts and European Depository Receipts.
See "Short Sales" and "Depository Receipts," respectively, in the Investment
Objectives and Policies section of the Statement of Additional Information.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. There is no assurance that the Fund will achieve its investment
objectives. Investing in the Fund entails a substantial degree of risk and an
investment in the Fund should be considered speculative. Investors are strongly
advised to consider carefully the special risks involved in investing in
emerging markets, which are in addition to the usual risks of investing in
developed markets around the world.
The Fund's net asset value will fluctuate, reflecting fluctuations in the market
value of its portfolio positions and its net currency exposure. Equity
securities, particularly common stocks, generally represent the most junior
position in an issuer's capital structure and entitle holders to an interest in
the assets of an issuer, if any, remaining after all more senior claims have
been satisfied. The value of equity securities held by the Fund will fluctuate
in response to general market and economic developments, as well as developments
affecting the particular issuers of such securities. In addition, the value of
debt securities held by the Fund generally will fluctuate with changes in the
perceived creditworthiness of the issuers of such securities and interest rates.
NON-DIVERSIFIED CLASSIFICATION. The Fund is classified under the 1940 Act as a
"non-diversified" fund. As a result, the Fund will be able to invest in a
smaller number of issuers than if it was classified under the 1940 Act as a
"diversified" fund. To the extent that the Fund invests in a smaller number
Prospectus Page 12
<PAGE>
AIM DEVELOPING MARKETS FUND
of issuers, the net asset value of its shares may fluctuate more widely and it
may be subject to greater investment and credit risk with respect to its
portfolio.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. The
securities of non-U.S. issuers generally will not be registered with, nor the
issuers thereof be subject to, the reporting requirements of, the SEC.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available about domestic securities and issuers.
Foreign companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. In addition, certain costs attributable to
foreign investing, such as custody charges, are higher than those attributable
to domestic investing. Securities of some foreign companies are less liquid and
their prices may be more volatile than securities of comparable domestic
companies. The Fund's net investment income from foreign issuers may be subject
to non-U.S. withholding taxes, thereby reducing that income.
Investing in some foreign countries involves risks relating to potential
political and economic instability within such countries and the risks of
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investment and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in that market.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, rate of savings and capital reinvestment, currency depreciation,
resource self-sufficiency and balance of payments positions. Investments in
foreign government securities involve special risks, including the risk that the
government issuers may be unable or unwilling to repay principal or interest
when due.
The Fund will also be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will affect the net asset value
of the Fund's shares and also may affect the value of dividends and interest
earned by the Fund and gains and losses realized by it.
INVESTING IN EMERGING MARKETS. Emerging markets generally are dependent heavily
upon international trade and, accordingly, have been and may continue to be
affected adversely by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. Inflation and rapid fluctuations in
inflation rates have had and may continue to have negative effects on the
economies and securities markets of certain countries with emerging markets.
Disclosure and regulatory standards in many respects are less stringent than in
the United States and other major markets. There also may be a lower level of
monitoring and regulation of emerging markets and the activities of investors in
such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Fund to make intended securities purchases due to settlement
problems could cause it to miss attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
developed countries. The risk also exists that an emergency situation may arise
in one or more emerging markets as a result of which trading of securities may
cease or may be substantially curtailed and prices for the Fund's portfolio
securities in such markets may not be readily available. Section 22(e) of the
1940 Act permits a registered investment company, such as the Fund, to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Fund believes that circumstances
dictate, it will promptly apply to the SEC for a determination that such an
emergency exists. During the period commencing with the Fund's identification of
such conditions until the date of any SEC action, the Fund's portfolio
securities in the affected markets will be valued at
Prospectus Page 13
<PAGE>
AIM DEVELOPING MARKETS FUND
fair value determined in good faith by or under the direction of the Company's
Board of Directors.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held by
the Fund generally will vary inversely with market interest rates. If interest
rates in a market fall, the Fund's debt securities issued by governments or
companies in that market ordinarily will increase in value. If market interest
rates increase, however, the debt securities owned by the Fund in that market
will likely decrease in value.
RISKS ASSOCIATED WITH BELOW INVESTMENT GRADE DEBT SECURITIES. The Fund may
invest up to 50% of its total assets in debt securities rated below investment
grade. Such investments involve a high degree of risk.
Debt rated Baa by Moody's Investors Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and
debt rated Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. While such
lower quality debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions. Debt rated C by Moody's or S&P is the lowest rated debt that is not
in default as to principal or interest, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Lower quality debt securities are also generally considered to be subject to
greater risk than securities with higher ratings with regard to a deterioration
of general economic conditions. These foreign debt securities are the equivalent
of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting it, such as its inability to meet specific
projected business forecasts or the unavailability of additional financing.
Similarly, certain emerging market governments that issue lower quality debt
securities are among the largest debtors to commercial banks, foreign
governments and supranational organizations such as the World Bank and may not
be able or willing to make principal and/or interest repayments as they come
due. The risk of loss due to default by the issuer is significantly greater for
the holders of lower quality securities because such securities are generally
unsecured and may be subordinated to the claims of other creditors of the
issuer.
Lower quality debt securities frequently have call or buy-back features that
would permit an issuer to call or repurchase the security from the Fund. In
addition, the Fund may have difficulty disposing of lower quality securities
because they may have a thin trading market. There may be no established retail
secondary market for many of these securities, and the Fund anticipates that
such securities could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market also may have an
adverse impact on market prices of such instruments and may make it more
difficult for the Fund to obtain accurate market quotations for purposes of
valuing its portfolio. The Fund may also acquire lower quality debt securities
during an initial underwriting or that are sold without registration under
applicable securities laws. Such securities involve special considerations and
risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Fund may invest
include (1) potential adverse publicity, (2) heightened sensitivity to general
economic or political conditions and (3) the likely adverse impact of a major
economic recession.
Prospectus Page 14
<PAGE>
AIM DEVELOPING MARKETS FUND
The Fund may also incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal or interest on its portfolio
holdings, and the Fund may have limited legal recourse in the event of a
default. Debt securities issued by governments in emerging markets can differ
from debt obligations issued by private entities in that remedies from defaults
generally must be pursued in the courts of the defaulting government, and legal
recourse is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable significance. There can be no assurance that the holders of
commercial bank debt may not contest payments to the holders of debt securities
issued by governments in emerging markets in the event of default by the
governments under commercial bank loan agreements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." Illiquid securities may be more difficult to value than liquid
securities, and the sale of illiquid securities generally will require more time
and result in higher brokerage charges or dealer discounts and other selling
expenses than the sale of liquid securities. Moreover, illiquid securities often
sell at a price lower than similar securities that are liquid.
CURRENCY RISK. Because the Fund may invest substantially in securities
denominated in currencies other than the U.S. dollar, and since the Fund may
hold foreign currencies, it will be affected favorably or unfavorably by
exchange control regulations or changes in the exchange rates between such
currencies and the U.S. dollar. Changes in currency exchange rates will affect
the net asset value of the Fund's shares and also may affect the value of
dividends and interest earned by the Fund and gains and losses realized by it.
Currencies generally are evaluated on the basis of fundamental economic criteria
(e.g., relative inflation and interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. Exchange rates are determined by the forces of
supply and demand in the foreign exchange markets. These forces are affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. If the
currency in which a security is denominated appreciates against the U.S. dollar,
the dollar value of the security will increase. Conversely, a decline in the
exchange rate of the currency would adversely affect the value of the security
expressed in dollars.
Many of the currencies of emerging market countries have experienced steady
devaluations relative to the U.S. dollar, and major devaluations have
historically occurred in certain countries. Any devaluations in the currencies
in which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund.
Some countries also may have fixed currencies whose values against the U.S.
dollar are not independently determined. In addition, there is a risk that
certain countries may restrict the free conversion of their currencies into
other currencies. Further, certain currencies may not be internationally traded.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Fund is authorized to
enter into options, futures and forward currency transactions. These
transactions involve certain risks, which include: (1) dependence on the
Sub-adviser's ability to predict movements in the prices of individual
securities, fluctuations in the general securities markets and movements in
interest rates and currency markets; (2) imperfect correlation, or even no
correlation, between movements in the price of forward contracts, options,
futures contracts or options thereon and movements in the price of the currency
or security hedged or used for cover; (3) the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which the Fund invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
and (6) the possible inability of the Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or the
possible need for the Fund to sell a security at a disadvantageous time, due to
the need for the Fund to maintain "cover" or to set aside securities in
connection with hedging transactions.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may have difficulty disposing of
Assignments and Participations. The liquidity of such securities is limited, and
the Fund anticipates that such securities could be sold only to a limited number
of institutional investors. The lack of a liquid secondary market could have an
adverse impact on the value of such securities and on the Fund's ability to
dispose of particular Assignments or Participations when necessary to meet its
liquidity needs or in response
Prospectus Page 15
<PAGE>
AIM DEVELOPING MARKETS FUND
to a specific economic event, such as a deterioration in the creditworthiness of
the borrower. The lack of a liquid secondary market for Assignments and
Participations also may make it more difficult for the Fund to assign a value to
those securities for purposes of valuing its portfolio and calculating its net
asset value.
SOVEREIGN DEBT. The Fund may invest in sovereign debt securities of emerging
market governments, including Brady Bonds. Investments in such securities
involve special risks. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due in accordance with the terms of such debt.
Periods of economic uncertainty may result in the volatility of market prices of
sovereign debt obligations and in turn the Fund's net asset value, to a greater
extent than the volatility inherent in domestic fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Emerging market governments could default on
their sovereign debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect the Fund's investments.
Emerging markets are faced with social and political issues, and some of them
have experienced high rates of inflation in recent years and have extensive
internal debt. Among other effects, high inflation and internal debt service
requirements may adversely affect the cost and availability of future domestic
sovereign borrowing to finance governmental programs and may have other adverse
social, political and economic consequences. Political changes or a
deterioration of a country's domestic economy or balance of trade may affect its
willingness to service its sovereign debt. Although the Sub-adviser intends to
manage the Fund in a manner that will minimize the exposure to such risks, there
can be no assurance that adverse political changes will not cause the Fund to
suffer a loss of interest or principal on any of its holdings.
In recent years, some of the emerging market countries in which the Fund expect
to invest have encountered difficulties in servicing their sovereign debt
obligations. Some of these countries have withheld payments of interest and/or
principal of sovereign debt. These difficulties have also led to agreements to
restructure external debt obligations -- in particular, commercial bank loans --
typically by rescheduling principal payments, reducing interest rates and
extending new credits to finance interest payments on existing debt. In the
future, holders of emerging market sovereign debt securities may be requested to
participate in similar rescheduling of such debt. Certain emerging market
countries are among the largest debtors to commercial banks and foreign
governments. Currently, Brazil, Mexico and Argentina are the largest debtors
among developing countries. At times certain emerging market countries have
declared moratoria on the payment of principal and interest on external debt;
such a moratorium is currently in effect in certain emerging market countries.
There is no bankruptcy proceeding by which a creditor may collect in whole or in
part sovereign debt on which an emerging market government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt securities is likely to be influenced strongly by a country's
balance of trade and its access to trade and other international credits. A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of such commodities.
Increased protectionism on the part of a country's trading partners could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any. To the extent that a country receives payment for its
exports in currencies other than hard currencies, its ability to make hard
currency payments could be affected.
Prospectus Page 16
<PAGE>
AIM DEVELOPING MARKETS FUND
As noted above, sovereign debt obligations issued by emerging market governments
generally are deemed to be the equivalent in terms of quality to securities
rated below investment grade by Moody's and S&P. Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of such securities, with respect
to which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. The
Fund may have difficulty disposing of and valuing certain sovereign debt
obligations because there may be a limited trading market for such securities.
Because there is no liquid secondary market for many of these securities, the
Fund anticipates that such securities could be sold only to a limited number of
dealers or institutional investors.
- --------------------------------------------------------------------------------
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Advisor Class shares are offered through this Prospectus to (a)
trustees or other fiduciaries purchasing shares for employee benefit plans that
are sponsored by organizations that have at least 1,000 employees; (b) any
account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment adviser has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least .50% on
the assets in the account ("Advisory Account"); (c) any account with assets of
at least $10,000 if (i) such account is established under a "wrap fee" program,
and (ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account ("Wrap Fee Account"); (d) accounts
advised by INVESCO (NY), Inc. or one of the companies formerly affiliated with
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the AIM/GT Funds on June 1, 1998; and (e) any of the
companies composing or affiliated with AMVESCAP PLC. Financial planners, trust
companies, bank trust companies and registered investment advisers referenced in
subpart (b) and sponsors of "wrap fee" programs referenced in subpart (c) are
collectively referred to as "Financial Advisers." Investors in Wrap Fee Accounts
and Advisory Accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors and certain of
its affiliates. Investors may be charged a fee by their agents or brokers if
they effect transactions other than through a dealer.
All purchase orders will be executed at the public offering price next
determined after the purchase order is received. Orders received by authorized
institutions (or their designees) before the close of regular trading on the
NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) on any Business Day will be
executed at the public offering price for the applicable class of shares
determined that day. Orders received by authorized institutions (or their
designees) before the close of regular trading on the NYSE on a Business Day
will be deemed to have been received by the Fund on such day and will be
effected that day, provided that such orders are transmitted to the Transfer
Agent prior to the time set for the receipt of such orders. A "Business Day" is
any day Monday through Friday on which the NYSE is open for business. The
authorized institution (or its designee) will be responsible for forwarding the
investor's order to the Transfer Agent so that it will be received prior to the
required time.
THE FUND AND AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND
TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Fund
and AIM Distributors may reject purchase orders or exchanges by investors who
appear to follow, in the Sub-adviser's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How to Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to AIM Distributors concerning their eligibility to purchase
Advisor Class shares. For specific information on opening an account, please
contact your Financial Adviser or AIM Distributors.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY
Prospectus Page 17
<PAGE>
AIM DEVELOPING MARKETS FUND
PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO INCREASE, WAIVE OR
LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY ANY OF THE TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any Fund named on the cover
page, AIM Distributors and its agents will use their best efforts to provide
notice of any such actions through correspondence with broker-dealers and
existing shareholders, supplements to the AIM/GT Funds' prospectuses, or other
appropriate means, and will provide sixty (60) days' notice in the case of
termination or material modification to the exchange privilege discussed under
the caption "How to Make Exchanges."
PURCHASE BY BANK WIRE. Shares of the Fund may also be purchased by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Fund. Prior telephonic or facsimile notice that a bank wire is being sent must
be provided to the Transfer Agent. A bank may charge a service fee for wiring
money to the Fund. The Transfer Agent currently does not charge a service fee
for facilitating wire purchases, but reserves the right to do so in the future.
For more information, please refer to the Shareholder Account Manual in this
Prospectus.
CERTIFICATES. Physical certificates representing the Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Fund are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than similar transactions
involving non-certificated shares because the physical delivery and processing
of properly executed certificates is required. ACCORDINGLY, THE FUND RECOMMENDS
THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders to establish and maintain an allocation across a
range of AIM/GT Funds. The Program automatically rebalances holdings of AIM/ GT
Funds to the established allocation on a periodic basis. Under the Program, a
shareholder may predesignate, on a percentage basis, how the total value of his
or her holdings in a minimum of two, and a maximum of ten, AIM/GT Funds
("Personal Portfolio") is to be rebalanced on a monthly, quarterly, semiannual,
or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more AIM/ GT Funds in the shareholders' Personal Portfolio for shares of
the same class of one or more other AIM/GT Funds in the shareholder's Personal
Portfolio. See "How to Make Exchanges." If shares of the AIM/GT Fund(s) in a
shareholder's Personal Portfolio have appreciated during a rebalancing period,
the Program will result in shares of AIM/GT Fund(s) that have appreciated most
during the period being exchanged for shares of AIM/GT Fund(s) that have
appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME
TAX PURPOSES. See "Dividends, Other Distributions and Federal Income Taxation."
Participation in the Program does not assure that a shareholder will profit from
purchases under the Program nor does it prevent or lessen losses in a declining
market.
The Program will automatically rebalance the shareholder's Personal Portfolio on
the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Fund would be 2% or less. In
predesignating percentages, shareholders must use whole percentages and totals
must equal 100%. Shareholders participating in the Program may not request
issuance of physical certificates representing a Fund's shares. Exchanges made
under the Program are not subject to the four free exchanges per year
limitation. The Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Certain Financial Institutions
may charge a fee for establishing accounts relating to the Program. Investors
should contact their Financial Institution or AIM Distributors for more
information.
Prospectus Page 18
<PAGE>
AIM DEVELOPING MARKETS FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
any other AIM/GT Fund, based on their respective net asset values without
imposition of any sales charges, provided that the registration remains
identical. Exchange requests received in good order by the Transfer Agent before
the close of regular trading on the NYSE on any Business Day will be processed
at the net asset value calculated on that day.
EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR
LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." In addition to the Fund, the AIM/GT
Funds include the following:
- AIM AMERICA VALUE FUND
- AIM DOLLAR FUND
- AIM EMERGING MARKETS FUND
- AIM EUROPE GROWTH FUND
- AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
- AIM GLOBAL FINANCIAL SERVICES FUND
- AIM GLOBAL GOVERNMENT INCOME FUND
- AIM GLOBAL GROWTH & INCOME FUND
- AIM GLOBAL HEALTH CARE FUND
- AIM GLOBAL HIGH INCOME FUND
- AIM GLOBAL INFRASTRUCTURE FUND
- AIM GLOBAL RESOURCES FUND
- AIM GLOBAL TELECOMMUNICATIONS FUND
- AIM INTERNATIONAL GROWTH FUND
- AIM JAPAN GROWTH FUND
- AIM LATIN AMERICAN GROWTH FUND
- AIM MID CAP GROWTH FUND
- AIM NEW DIMENSION FUND
- AIM NEW PACIFIC GROWTH FUND
- AIM SMALL CAP EQUITY FUND
- AIM STRATEGIC INCOME FUND
- AIM WORLDWIDE GROWTH FUND
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisers to request the prospectuses of
the other AIM/GT Fund(s) being considered. Other investors should contact AIM
Distributors. The terms of the exchange offer may be modified at any time, on 60
days' prior written notice.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to the
shareholder's Financial Adviser. Exchange orders will be accepted by telephone
provided that the exchange involves only uncertificated shares on deposit in the
shareholder's account or for which certificates previously have been deposited.
Shareholders automatically have telephone privileges to authorize exchanges. The
Fund, AIM Distributors and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The AIM/GT Funds are not intended
to serve as vehicles for frequent trading in response to short-term fluctuations
in the market. Due to the disruptive effect that market-timing investment
strategies and excessive trading can have on efficient portfolio management,
each AIM/GT Fund and AIM Distributors reserve the right to refuse purchase
orders and exchanges by any person or group, if, in the Sub-adviser's judgment,
such person or group was following a market-timing strategy or was otherwise
engaging in excessive trading.
In addition, each AIM/GT Fund and AIM Distributors reserve the right to refuse
purchase orders and exchanges by any person or group if, in the Sub-adviser's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although an AIM/GT Fund will attempt to give
investors prior notice whenever it is reasonably able to do so, it may impose
the above restrictions at any time.
Finally, as described above, each AIM/GT Fund and AIM Distributors reserve the
right to reject any purchase order.
Prospectus Page 19
<PAGE>
AIM DEVELOPING MARKETS FUND
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Fund shares may be redeemed at their net asset value and redemption proceeds
will be sent within seven days of the execution of a redemption request.
Redemption requests may be transmitted to the Transfer Agent by telephone or by
mail, in accordance with the instructions provided in the Shareholder Account
Manual. Redemptions will be effected at the net asset value next determined
after the Transfer Agent has received the request, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by any required supporting documentation.
Redemption requests will not require a signature guarantee if the redemption
proceeds are to be sent either: (i) to the redeeming shareholder at the
shareholder's address of record as maintained by the Transfer Agent, provided
the shareholder's address of record has not been changed within the preceding
fifteen days; or (ii) directly to a pre-designated bank, savings and loan or
credit union account ("Pre-Designated Account"). ALL OTHER REDEMPTION REQUESTS
MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE REDEEMING SHAREHOLDER'S
SIGNATURE. A signature guarantee can be obtained from any bank, U.S. trust
company, a member firm of a U.S. stock exchange or a foreign branch of any of
the foregoing or other eligible guarantor institutions. A notary public is not
an acceptable guarantor.
Shareholders with Pre-Designated Accounts should request that redemption
proceeds be sent either by bank wire or by check. The minimum redemption amount
for a bank wire is $500. Shareholders requesting a bank wire should allow two
business days from the time the redemption request is effected for the proceeds
to be deposited in the shareholder's Pre-Designated Account. See "How to Redeem
Shares -- Other Important Redemption Information." Shareholders may change their
Pre-Designated Accounts only by a letter of instruction to the Transfer Agent
containing all account signatures, each of which must be guaranteed. The
Transfer Agent currently does not charge a bank wire service fee for each wire
redemption sent but reserves the right to do so in the future. The shareholder's
bank may charge a bank wire service fee.
REDEMPTIONS BY TELEPHONE. Redemption requests may be made by telephone by
calling the Transfer Agent at the appropriate toll free number provided in the
Shareholder Account Manual. Shareholders who hold certificates for shares may
not redeem by telephone. REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, AIM Distributors and the Transfer Agent shall not be liable for any
loss or damage for acting in good faith upon instructions received by telephone
and reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in a Wrap Fee Account or Advisory Account who is in doubt
as to
Prospectus Page 20
<PAGE>
AIM DEVELOPING MARKETS FUND
what documents are required should contact his Financial Adviser or the Transfer
Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or in writing will be made promptly
after receipt of a redemption request, if in good order, but not later than
seven days after the date the request is executed. Requests for redemption which
are subject to any special conditions or which specify a future or past
effective date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which the Fund has not
yet received good payment, the Fund may delay payment of redemption proceeds
until the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
AIM Distributors reserves the right to redeem the shares of any Advisory Account
or Wrap Fee Account if the amount invested in AIM/GT Funds through such account
is reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in AIM/ GT Funds through such account to an
aggregate amount of $500 or more.
For more information on how to redeem Fund shares, see the Shareholder Account
Manual in this Prospectus, or contact your Financial Adviser.
Prospectus Page 21
<PAGE>
AIM DEVELOPING MARKETS FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Adviser. INVESTORS SHOULD
REFERENCE "ADVISOR CLASS" IN ALL INSTRUCTIONS PROVIDED. See "How to Invest,"
"How to Make Exchanges," "How to Redeem Shares" and "Dividends, Other
Distributions and Federal Income Taxation" for more information.
The Fund's Transfer Agent is GT GLOBAL INVESTOR SERVICES, INC.
INVESTMENTS BY MAIL
Send completed Account Application (if initial purchase) or letter stating Fund
name, class of shares, shareholder's registered name and account number (if
subsequent purchase) with a check to:
AIM/GT Funds
P.O. Box 7345
San Francisco, CA 94120-7345
INVESTMENTS BY BANK WIRE
A new account may be opened by calling 1-800-223-2138 to obtain an account
number. WITHIN SEVEN DAYS OF PURCHASE A COMPLETED ACCOUNT APPLICATION CONTAINING
THE INVESTOR'S CERTIFIED TAXPAYER IDENTIFICATION NUMBER MUST BE SENT TO THE
ADDRESS PROVIDED ABOVE UNDER "INVESTMENTS BY MAIL." Wire instructions must state
Fund name, class of shares, shareholder's registered name and account number.
Bank wires should be sent through the Federal Reserve Bank Wire System to:
WELLS FARGO BANK N.A.
ABA 121000248
Attn: GT GLOBAL
Account No. 4023-050701
EXCHANGES BY TELEPHONE
Call the Transfer Agent at 1-800-223-2138.
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, class of
shares, amount of exchange, name of the AIM/GT Fund exchanging into,
shareholder's registered name and account number, to:
AIM/GT Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent at 1-800-223-2138.
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
AIM/GT Funds
P.O. Box 7893
San Francisco, CA 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, follow the above instructions
but send to the following:
GT Global Investor Services, Inc.
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call the Transfer Agent at 1-800-223-2138.
Prospectus Page 22
<PAGE>
AIM DEVELOPING MARKETS FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each Business Day. The
Fund's net asset value per share is computed by determining the value of its
total assets (the securities it holds plus any cash or other assets, including
dividends and interest accrued but not yet received), subtracting all of its
liabilities (including accrued expenses), and dividing the result by the total
number of shares outstanding. Net asset value is determined separately for each
class of the Fund's shares.
Equity securities are valued at the last sale price on the exchange or in the
over-the-counter market in which the securities are primarily traded, as of the
close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Long-term obligations are valued at the
mean of representative quoted bid and asked prices for the securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Sub-adviser deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. When market quotations for futures and options positions held by the Fund
are readily available, those positions are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
The Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or over-the-counter dealer markets that trade on days when the
NYSE is closed (such as a Saturday). As a result, the net asset value of the
Fund may be significantly affected by such trading on days when shareholders
cannot purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund annually declares and pays as a
dividend all of its net investment income, if any, which includes dividends,
accrued interest and earned discount (including both original issue and market
discounts) less applicable expenses. The Fund also annually distributes
substantially all of its realized net capital gains and net gains from foreign
currency transactions, if any. The Fund may make an additional dividend or other
distribution each year if necessary to avoid a 4% excise tax on certain
undistributed income and gain.
Dividends and other distributions paid by the Fund with respect to all classes
of its shares are calculated in the same manner and at the same time. The per
share income dividends on Advisor Class shares will be higher than the per share
income dividends on other classes of the Fund's shares as a result of the
service and distribution fees applicable to those other shares. SHAREHOLDERS MAY
ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Advisor Class shares of the Fund (or other AIM/GT Funds); or
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional Advisor Class shares of the Fund (or other AIM/ GT
Funds); or
Prospectus Page 23
<PAGE>
AIM DEVELOPING MARKETS FUND
/ / to receive other distributions in cash and have dividends automatically
reinvested in additional Advisor Class shares of the Fund (or other AIM/ GT
Funds); or
/ / to receive dividends and other distributions in cash.
Automatic reinvestments in additional Advisor Class shares are made at net asset
value without imposition of a sales charge. IF NO ELECTION IS MADE BY A
SHAREHOLDER, ALL DIVIDENDS AND OTHER DISTRIBUTIONS WILL BE AUTOMATICALLY
REINVESTED IN ADDITIONAL ADVISOR CLASS SHARES OF THE FUND. Reinvestments in
another AIM/GT Fund may only be directed to an account with the identical
shareholder registration and account number. These elections may be changed by a
shareholder at any time; to be effective with respect to a distribution, the
shareholder or the shareholder's broker must contact the Transfer Agent by mail
or telephone at least 15 Business Days prior to the payment date. THE FEDERAL
INCOME TAX CONSEQUENCES OF DIVIDENDS AND OTHER DISTRIBUTIONS ARE THE SAME
WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN ADDITIONAL SHARES.
Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the ex-distribution date by the amount thereof.
Therefore, a dividend or other distribution paid shortly after a purchase of
shares would represent, in substance, a return of capital to the shareholder (to
the extent the distribution is paid on the shares so purchased), even though
subject to income tax, as discussed below.
TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that the Fund so
qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on that part of its investment company taxable income (consisting
generally of net investment income, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or reinvested in additional shares) are taxable to its shareholders as
ordinary income to the extent of its earnings and profits. Distributions of the
Fund's net capital gain, when designated as such, are taxable to its
shareholders as long-term capital gains, regardless of how long they have held
their Fund shares and whether paid in cash or reinvested in additional shares.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. The Fund may divide each net capital
gain distribution into a 28% rate gain distribution and a 20% rate gain
distribution (in accordance with the Fund's holding periods for the securities
it sold that generated the distributed gain), in which event its shareholders
must treat those portions accordingly.
The Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) by the
Fund, in which event each shareholder would be required to include in his or her
gross income his or her pro rata share of those taxes but might be entitled to
claim a credit or deduction for them. The information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to backup
withholding. Fund accounts opened via a bank wire purchase (see "How to Invest
- -- Purchases Through the Distributor") are considered to have uncertified
taxpayer identification numbers unless a completed Form W-8 or W-9 or Account
Application is received by the Transfer Agent within seven days after the
purchase. A shareholder should contact the Transfer Agent if the shareholder is
uncertain whether a proper taxpayer identification number is on file with the
Fund.
Prospectus Page 24
<PAGE>
AIM DEVELOPING MARKETS FUND
A redemption of the Fund shares may result in taxable gain or loss to the
redeeming shareholder, depending upon whether the redemption proceeds are more
or less than the shareholder's adjusted basis for the redeemed shares. An
exchange of Fund shares for shares of another mutual fund generally will have
similar tax consequences. In addition, if Fund shares are purchased within 30
days before or after redeeming other Fund shares (regardless of class) at a
loss, all or a part of the loss will not be deductible and instead will increase
the basis of the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders. See "Taxes" in
the Statement of Additional Information for a further discussion. There may be
other federal, state, local or foreign tax considerations applicable to a
particular investor. Prospective investors therefore are urged to consult their
tax advisers.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Fund. The Company's Board of Directors has approved all significant
agreements between the Company on the one side and persons or companies
furnishing services to the Fund on the other, including the investment advisory
and administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of the Fund's shares, the custody agreement
with State Street Bank and Trust Company and the transfer agency agreement with
GT Global Investor Services, Inc. The day-to-day operations of the Fund are
delegated to the officers of the Company, subject always to the objective and
policies of the Fund and to the general supervision of the Company's Board of
Directors. See "Directors and Executive Officers" in the Statement of Additional
Information for information on the Company's Directors.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Fund's investment managers and administrators include
determining the composition of the Fund's portfolio and placing orders to buy,
sell or hold particular securities; furnishing corporate officers and clerical
staff; providing office space, services and equipment; and supervising all
matters relating to the Fund's operation. For these services, the Fund pays AIM
investment management and administration fees, computed daily and paid monthly,
based on its average daily net assets, at the annualized rate of .975% on the
first $500 million, .95% on the next $500 million, .925% on the next $500
million and .90% on amounts thereafter. Out of the aggregate fees payable by the
Fund, AIM pays the Sub-adviser sub-advisory and sub-administration fees equal to
40% of the aggregate fees AIM receives from the Fund. The investment management
and administration fees paid by the Fund are higher than those paid by most
mutual funds. AIM has undertaken to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the annual
rate of 1.50% of the average daily net assets of the Fund's Advisor Class
shares.
The Sub-adviser also serves as the Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of the AIM/GT Funds and 0.02%
to the assets in excess of $5 billion, and allocating the result according to
the Fund's average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Fund pursuant to a master investment advisory
agreement, dated as of May 29, 1998 (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. The Sub-adviser, INVESCO (NY), Inc., 50 California
Street, 27th Floor, San Francisco, California 94111, and 1166 Avenue of the
Americas, New York, New York 10036, serves as the sub-adviser to the Fund
pursuant to an investment sub-advisory agreement dated as of May 29, 1998. Prior
to May 29, 1998, the Sub-adviser was known as
Prospectus Page 25
<PAGE>
AIM DEVELOPING MARKETS FUND
Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-adviser,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-adviser and
certain other affiliates. As a result of this transaction, the Sub-adviser is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-adviser and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the Fund, the
Sub-adviser employs a team approach, taking advantage of its investment
resources around the world.
The investment professionals primarily responsible for the portfolio management
of the Fund are as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES BUSINESS EXPERIENCE
NAME/OFFICE FOR THE FUND PAST FIVE YEARS
- -------------------------- -------------------------- ---------------------------------------------------------------
<S> <C> <C>
Allan Conway Portfolio Manager since Head of Global Emerging Market Equities for the Sub- adviser
London 1997 and INVESCO GT Asset Management PLC (London) ("GT Asset
Management"), an affiliate of the Sub-adviser, since January
1997. Director of International Equities at Hermes Investment
Management from 1992 to 1997. Portfolio Manager, Head of
Overseas Equities at Provident Mutual from 1982 to 1992.
Mark Thorogood Portfolio Manager since Portfolio Manager for the Sub-adviser and GT Asset Management
London 1997 since May 1997. Proprietary Trader for ING-Barings (Hong Kong)
from 1994 to 1997. Analyst and Portfolio Manager for Provident
Mutual from 1987 to 1994.
Cheng-Hock Lau Portfolio Manager since Chief Investment Officer for Global Fixed Income for the
New York 1997 Sub-adviser since October 1996. Senior Portfolio Manager for
Global/International Fixed Income for the Sub-adviser from
July 1995 to October 1996. Employed by Chancellor Capital
Management, Inc. ("Chancellor Capital"), a predecessor of the
Sub-adviser, from 1995 to October 1996. Senior Vice President
and Senior Portfolio Manager for Fiduciary Trust Company
International from 1993 to 1995. Vice President at Bankers
Trust Company from 1991 to 1993.
</TABLE>
Prospectus Page 26
<PAGE>
AIM DEVELOPING MARKETS FUND
In placing securities orders for the Fund's portfolio transactions, the
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser may consider a broker/dealer's
sale of shares of the AIM Funds as a factor in considering through whom
portfolio transactions will be effected. Brokerage transactions may be executed
through affiliates of AIM or the Sub-adviser. High portfolio turnover (over
100%) involves correspondingly greater brokerage commissions and other
transaction costs that the Fund will bear directly and could result in the
realization of net capital gains which would be taxable when distributed to
shareholders.
DISTRIBUTION OF FUND SHARES. AIM Distributors is the distributor of the Fund's
Advisor Class shares. AIM Distributors is a wholly owned subsidiary of AIM. The
address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739.
The Sub-adviser or an affiliate thereof may make ongoing payments to Financial
Advisers and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
The Fund reserves the right to suspend the offering of its shares upon the
advice of the Sub-adviser that doing so is in the best interest of the portfolio
management process.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, AIM Distributors
intends to engage banks (if at all) only to perform administrative and
shareholder servicing functions. Banks and broker/dealer affiliates of banks may
also execute dealer agreements with AIM Distributors for the purpose of selling
shares of the Fund. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in the Fund, the shareholder will receive from
the Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to the Fund's automatic
dividend reinvestment program may be provided quarterly. Shortly after the end
of the Fund's fiscal year on October 31 and fiscal half-year on April 30 of each
year, shareholders receive an annual and semiannual report, respectively. In
addition, the federal income tax status of distributions made by the Fund to
shareholders is reported after the end of each calendar year on Form 1099-DIV.
Under certain circumstances, duplicate mailings of the foregoing reports to the
same household may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. Prior to May 29, 1998, the Company operated under the name
G.T. Investment Funds, Inc. From time to time, the Company has established and
may continue to establish other funds, each corresponding to a distinct
investment portfolio and a distinct series of the Company's shares. Shares of
the Fund are entitled to one vote per share (with proportional voting for
fractional shares) and are freely transferable. Shareholders have no preemptive
or conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, shares of a particular class of the Fund
may vote on matters affecting only that Class. The shares of the Fund and the
Company's other funds will be voted in the aggregate on other matters, such as
the election of Directors and ratification of the selection of the Company's
independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The Company would be required to
Prospectus Page 27
<PAGE>
AIM DEVELOPING MARKETS FUND
hold a shareholders' meeting in the event that at any time less than a majority
of the Directors holding office had been elected by shareholders. Directors
shall continue to hold office until their successors are elected and have
qualified. Shares of the Company's funds do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the election
of Directors can elect all the Directors. A Director may be removed upon a
majority vote of the shareholders qualified to vote in the election.
Shareholders holding 10% of the Company's outstanding voting securities may call
a meeting of shareholders for the purpose of voting upon the question of removal
of any Director or for any other purpose. The 1940 Act requires the Company to
assist shareholders in calling such a meeting.
The Fund offers Advisor Class shares through this prospectus to certain
investors. The Fund also offers Class A shares and Class B shares to investors
through a separate prospectus. Each class of shares will experience different
net asset values and dividends as a result of different expenses borne by each
class of shares. The per share net asset value and dividends of the Advisor
Class shares of the Fund generally will be higher than that of the Class A and B
shares of the Fund because of the higher expenses borne by the Class A and B
shares. The per share dividends on Advisor Class shares of the Fund will
generally be higher than the per share dividends on Class A and B shares of the
Fund as a result of the service and distribution fees applicable with respect to
Class A and B shares. Consequently, during comparable periods, the Fund expects
that the total return on an investment in shares of the Advisor Class will be
higher than the total return on Class A or Class B shares.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Fund; 100 million shares have been classified as Class A shares, 100 million
shares have been classified as Class B shares, and 100 million shares have been
classified as Advisor Class shares. These amounts may be increased from time to
time in the discretion of the Board of Directors. Each share of the Fund
represents an interest in the Fund only, has a par value of $0.0001 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
at the discretion of the Board of Directors. Each Class A, Class B and Advisor
Class share of the Fund is equal in earnings, assets and voting privileges,
except as noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of the Fund, when issued, are fully paid and
nonassessable.
Shareholders have been asked to vote on the reorganization of the Company into a
Delaware business trust. If approved by shareholders, it is anticipated that the
reorganization would occur prior to October 1, 1998.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll-free at (800) 223-2138 or by writing to the Fund at P.O. Box 7893, San
Francisco, CA 94120-7893.
PERFORMANCE INFORMATION. The Fund, from time to time, may include information on
its investment results and/or comparisons of its investment results to various
unmanaged indices or results of other mutual funds or groups of mutual funds in
advertisements, sales literature or reports furnished to present or prospective
shareholders.
In such materials, the Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of the Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of one-, five- and ten-year periods, reduced by the maximum
applicable sales charge imposed on sales of Fund shares. If a one-, five- and/or
ten-year period has not yet elapsed, data will be provided as of the end of a
shorter period corresponding to the life of the Fund. Standardized Return
assumes reinvestment of all dividends and other distributions.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment return,
the Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized return reflects percentage rates of return encompassing all
elements of total return (e.g., income and capital appreciation or
depreciation); it assumes reinvestment of all dividends and other distributions.
Non-Standardized Return may be quoted for the same or different periods as those
for which Standardized Return is quoted; it may consist of an aggregate or
average annual percentage rate of return, actual year-by-year rates or any
combination thereof. Non-Standardized Return may or may not
Prospectus Page 28
<PAGE>
AIM DEVELOPING MARKETS FUND
take sales charges into account; performance data calculated without taking the
effect of sales charges into account will be higher than data including the
effect of such charges.
The Fund's performance data reflects past performance and is not necessarily
indicative of future results. The Fund's investment results will vary from time
to time depending upon market conditions, the composition of its portfolio and
its operating expenses. These factors and possible differences in calculation
methods should be considered when comparing the Fund's investment results with
those published for other investment companies, other investment vehicles and
unmanaged indices. The Fund's results also should be considered relative to the
risks associated with its investment objective and policies. See "Investment
Results" in the Statement of Additional Information.
The Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the Fund, AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely on internal computer
systems as well as external computer systems provided by third parties. Some of
these systems were not originally designed to distinguish between the year 1900
and the year 2000. This inability, if not corrected, could adversely affect the
services AIM, AIM Distributors, the Transfer Agent and the Sub-adviser and
others provide the Fund and its shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of Fund data in all systems. Phase (i) has been
completed; phase (ii) is substantially completed; phase (iii) has commenced; and
phase (iv) is expected to commence during the third quarter of 1998. The Project
is scheduled to be completed by December 31, 1998. Following completion of the
Project, AIM, AIM Distributors and the Sub-adviser will review any systems
subsequently acquired to confirm that they are year 2000 compliant.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Fund are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Sub-adviser and AIM and maintains its
offices at California Plaza, 2121 North California Boulevard, Suite 450, Walnut
Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110 is custodian of the Fund's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company and the Fund.
Kirkpatrick & Lockhart LLP also acts as counsel to the Sub-adviser and the
Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109. Coopers
& Lybrand L.L.P. conducts an annual audit of the Fund, assists in the
preparation of the Fund's federal and state income tax returns and consults with
the Company and the Fund as to matters of accounting, regulatory filings, and
federal and state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 29
<PAGE>
AIM DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
AIM DEVELOPING MARKETS FUND
AIM/GT FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE FUNDS LISTED
BELOW, INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
AIM NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six global
theme funds
AIM WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
AIM INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
AIM EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
AIM DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / GLOBAL THEME FUNDS
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
AIM GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
AIM GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
AIM GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
AIM GLOBAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
AIM GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
AIM NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
AIM EUROPE GROWTH FUND
Focuses on investment opportunities in Europe
AIM LATIN AMERICAN GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
AIM SMALL CAP EQUITY FUND
Invests in equity securities of small U.S. companies
AIM MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
AIM AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
AIM JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
AIM GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
AIM GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
AIM STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
AIM GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
AIM FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
MONEY MARKET FUND
AIM DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AIM INVESTMENT FUNDS, INC.,
AIM DEVELOPING MARKETS FUND, A I M ADVISORS, INC., INVESCO (NY), INC. OR
A I M DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION.
DVM-PRO-2
<PAGE>
AIM DEVELOPING MARKETS FUND:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Advisor Class shares of
AIM Developing Markets Fund (the "Fund"). The Fund is a non-diversified series
of AIM Investment Funds, Inc. (the "Company"), a registered open-end management
investment company. On October 31, 1997, the Fund, which had no previous
operating history, acquired the assets and assumed the liabilities of G.T.
Global Developing Markets Fund, Inc. (the "Predecessor Fund"), a closed-end
investment company. This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the Fund's
current Advisor Class Prospectus dated June 1, 1998, a copy of which is
available without charge by writing to the above address or by calling the Fund
at the toll-free telephone number listed above.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and INVESCO (NY), Inc. (the "Sub-adviser") serves as the
investment sub-adviser and sub-administrator for the Fund. The distributor of
the Fund's shares is A I M Distributors, Inc. ("AIM Distributors"). The Fund's
transfer agent is GT Global Investor Services, Inc. ("GT Services" or the
"Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 7
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 21
Execution of Portfolio Transactions...................................................................................... 23
Directors and Executive Officers......................................................................................... 25
Management............................................................................................................... 28
Valuation of Fund Shares................................................................................................. 29
Information Relating to Sales and Redemptions............................................................................ 30
Taxes.................................................................................................................... 32
Additional Information................................................................................................... 35
Investment Results....................................................................................................... 36
Description of Debt Ratings.............................................................................................. 40
Financial Statements..................................................................................................... 42
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
AIM DEVELOPING MARKETS FUND
INVESTMENT OBJECTIVES AND
POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The primary investment objective of the Fund is long-term capital appreciation.
Its secondary investment objective is income, to the extent consistent with
seeking capital appreciation. The Fund normally invests substantially all of its
assets in issuers in the developing (or "emerging") markets of Asia, Europe,
Latin America and elsewhere. The Fund does not consider the following countries
to be emerging markets: Australia, Austria, Belgium, Canada, Denmark, England,
Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Spain, Sweden, Switzerland and the United States. In determining which
countries constitute emerging markets, the Sub-adviser 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").
SELECTION OF EQUITY INVESTMENTS
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-adviser 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.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Sub-adviser ordinarily
considers the following factors: prospects for relative economic growth among
the different countries in which the 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 in emerging markets for investment by the Fund, the
Sub-adviser ordinarily looks for one or more of the following characteristics:
an above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by the
Fund. 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 Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act"), from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
countries, commercial banks act as securities broker/dealers, investment
advisers 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 Securities and Exchange Commission
("SEC") to permit it to invest in certain of these securities subject to certain
restrictions.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of investment companies (including
investment vehicles or companies advised by the Sub-adviser or its affiliates
("Affiliated Funds")) within the limits of the 1940 Act. These limitations
currently provide
Statement of Additional Information Page 2
<PAGE>
AIM DEVELOPING MARKETS FUND
that, in general, the Fund may purchase shares of a closed-end investment
company unless (a) such a purchase would cause the Fund to own in the aggregate
more than 3 percent of the total outstanding voting stock of the investment
company or (b) such a purchase would cause the Fund to have more than 5 percent
of its total assets invested in the investment company or more than 10 percent
of its total assets invested in an aggregate of all such investment companies.
Investment in such investment companies may also involve the payment of
substantial premiums above the value of such companies' portfolio securities.
The Fund does not intend to invest in such investment companies unless, in the
judgment of the Sub-adviser, the potential benefits of such investments justify
the payment of any applicable premiums. The return on such securities will be
reduced by operating expenses of such companies including payments to the
investment managers of those investment companies. With respect to investments
in Affiliated Funds, the Sub-adviser waives its advisory fee to the extent that
such fees are based on assets of the Fund invested in Affiliated Funds.
DEPOSITORY RECEIPTS
The Fund may hold equity securities of foreign issuers in the form of American
Depository Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs") and European Depository 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 the Fund's
investment policies, the Fund's investments in ADRs, ADSs, GDRs and EDRs will be
deemed to be investments in the equity securities representing securities of
foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored." While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A depository may establish
an unsponsored facility without participation by (or even necessarily the
acquiescence of) the issuer of the deposited securities, although typically the
depository requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all
the costs of such facilities. The depository usually charges fees upon the
deposit and withdrawal of the deposited securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distributions, and the
performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Fund may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer. Warrants are securities permitting,
but not obligating, their holder to subscribe for other securities or
commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities amounting to not more than 30% of its total assets.
Securities loans are made to broker/dealers or institutional investors pursuant
to agreements requiring that the loans continuously be secured by collateral at
least equal at all times to the value of the securities lent plus any accrued
interest, "marked to market" on a daily basis. The Fund may pay reasonable
administrative and custodial fees in connection with loans of its securities.
While the securities loan is outstanding, the Fund will continue
Statement of Additional Information Page 3
<PAGE>
AIM DEVELOPING MARKETS FUND
to receive the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. The Fund will have a right to call each loan and obtain the
securities within the stated settlement period. The Fund will not have the right
to vote equity securities while they are lent, but it may call in a loan in
anticipation of any important vote. Loans will be made only to firms deemed by
the Sub-adviser to be of good standing and will not be made unless, in the
judgment of the Sub-adviser, the consideration to be earned from such loans
would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the 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 the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the 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 the 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 the 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 the Fund if the other party
to the repurchase agreement becomes bankrupt, the Fund intends to enter into
repurchase agreements only with banks and dealers believed by the Sub-adviser to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Directors. The Sub-adviser will review and monitor the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the 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 the 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, the 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 the Fund's assets that may
be subject to repurchase agreements at any given time. The 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 its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING AND REVERSE REPURCHASE AGREEMENTS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund may be required to sell portfolio
securities to restore the 300% asset coverage, even though from an investment
standpoint such sales might be disadvantageous. The Fund also may borrow up to
5% of its total assets for temporary or emergency purposes other than to meet
redemptions. Any borrowing by the Fund may cause greater fluctuation in the
value of its shares than would be the case if the Fund did not borrow.
The Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. The Fund, however, currently is prohibited, pursuant to
a non-fundamental investment policy, from borrowing money in order to purchase
securities. Nevertheless, this policy may be changed in the future by a vote of
a majority of the Company's Board of Directors. If the 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.
Statement of Additional Information Page 4
<PAGE>
AIM DEVELOPING MARKETS FUND
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund transfers possession of a
security to another party, such as a bank or broker/dealer in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. The Fund will segregate with a custodian,
cash or liquid securities in an amount sufficient to cover its obligations under
reverse repurchase agreements with broker/dealers. No segregation is required
for reverse repurchase agreements with banks.
SHORT SALES
The Fund may make short sales of securities, although it has no current
intention of doing so. A short sale is a transaction in which the Fund sells a
security in anticipation that the market price of that security will decline.
The Fund may make short sales (i) as a form of hedging to offset potential
declines in long positions in securities it owns, or anticipates acquiring, and
(ii) in order to maintain portfolio flexibility. The Fund may only make short
sales "against the box." 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 the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and
does not receive the proceeds from the sale. To make delivery to the purchaser,
the executing broker borrows the securities being sold short on behalf of the
seller. The seller is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Fund will
deposit in a separate account with its custodian an equal amount of the
securities sold short or securities convertible into or exchangeable for such
securities at no cost. The Fund 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, because the Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.
The Fund might make a short sale "against the box" in order to hedge against
market risks when the Sub-adviser believes that the price of a security may
decline, causing a decline in the value of a security owned by the 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.
YANKEE BONDS
The Fund may invest in U.S. dollar-denominated bonds sold in the United States
by non-U.S. issuers ("Yankee bonds"). As compared with bonds issued in the
United States, such bond issues normally carry a higher interest rate but are
less actively traded.
TEMPORARY DEFENSIVE STRATEGIES
The Fund 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); (e) repurchase agreements with respect to the
foregoing; and (f) other substantially similar short-term debt securities with
comparable characteristics.
The Fund 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 Sub-
adviser 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.
PREMIUM SECURITIES
The 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
Statement of Additional Information Page 5
<PAGE>
AIM DEVELOPING MARKETS FUND
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
The 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
The 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.
The Fund is permitted to invest in a class of Structured Investments that is
either subordinated or not subordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments.
Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the Fund's investment in
these Structured Investments may be limited by the restrictions contained in the
1940 Act described above under "Investment Objectives and Policies --
Investments in Other Investment Companies." Structured Investments are typically
sold in private placement transactions, and there currently is no active trading
market for Structured Investments.
STRIPPED INCOME SECURITIES
Stripped income securities 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 or "IO" class), while
the other class will receive all of the principal (the principal-only or "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
Income securities may provide for floating or variable rate interest or dividend
payments. The floating or variable rate may be determined by reference to a
known lending rate, such as a bank's prime rate, a certificate of deposit rate
or the London Inter Bank Offered Rate (LIBOR). Alternatively, the rate may be
determined through an auction or remarketing process. The rate also may be
indexed to changes in the values of interest rate or securities indexes,
currency exchange rates or other commodities. The amount by which the rate paid
on an income security may increase or decrease may be subject to periodic or
lifetime caps. Floating and variable rate income securities include securities
whose rates vary inversely with changes in market rates of interest. Such
securities may also pay a rate of interest determined by applying a multiple to
the variable rate. The extent of increases and decreases in the value of
securities whose rates vary inversely with changes in market rates of interest
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
SWAPS, CAPS, FLOORS AND COLLARS
The 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
Statement of Additional Information Page 6
<PAGE>
AIM DEVELOPING MARKETS FUND
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 the Fund with another party of their
respective commitments to pay or receive interest (for example, an exchange of
floating rate payments for fixed rate payments) with respect to a notional
amount of principal. A currency swap is an agreement to exchange cash flows on a
notional amount based on changes in the values of the reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.
- --------------------------------------------------------------------------------
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Sub-adviser's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Sub-adviser is experienced in
the use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a
short hedge because the Sub-adviser 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. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the 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. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other
Statement of Additional Information Page 7
<PAGE>
AIM DEVELOPING MARKETS FUND
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.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of the Sub-adviser are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the 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 the
Fund's investment objective. When writing a call option, the 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, the 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 the 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 Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the 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-adviser will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The 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, the 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.
The 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.
Statement of Additional Information Page 8
<PAGE>
AIM DEVELOPING MARKETS FUND
WRITING PUT OPTIONS
The 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 substantially identical to that of call options.
The Fund generally would write put options in circumstances where the
Sub-adviser 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 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 the Fund will be obligated
to purchase the security or currency at more than its market value.
PURCHASING PUT OPTIONS
The Fund may purchase put options on securities, indices and currencies. As the
holder of a put option, the Fund has the right to sell the underlying security
or currency at the exercise price any any time until (American style) or
(European style) the expiration date. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund 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, 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.
The 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
The Fund may purchase call options on securities, indices and currencies. As the
holder of a call option, the 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. The 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 the 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 the 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.
The 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 the 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
Statement of Additional Information Page 9
<PAGE>
AIM DEVELOPING MARKETS FUND
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 the
Fund's total assets at the time of purchase.
The Fund 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 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 the 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. The Fund might purchase a currency put
option, for example, to protect itself against a decline in the dollar value of
a currency in which it holds or anticipates holding securities. If the
currency's value should decline against the dollar, the loss in currency value
should be offset, in whole or in part, by an increase in the value of the put.
If the value of the currency instead should rise against the dollar, any gain to
the Fund would be reduced by the premium it had paid for the put option. A
currency call option might be purchased, for example, in anticipation of, or to
protect against, a rise in the value against the dollar of a currency in which
the 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. The 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.
The 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.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The 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 the 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 Fund 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 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 the 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 the Fund buys a call on an
index, it pays a premium and has the same rights as to such calls as are
indicated above. When the 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 the Fund writes a put on an index, it
Statement of Additional Information Page 10
<PAGE>
AIM DEVELOPING MARKETS FUND
receives a premium and the purchaser has the right, prior to the expiration
date, to require the Fund to deliver to it an amount of cash equal to the
difference between the closing level of the index and the exercise price times
the multiplier, if the closing level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when the Fund writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The 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, the 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 the 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, the 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 the Fund purchases an index option and exercises it before the closing index
value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
The Fund may enter into interest rate, currency or stock index futures contracts
(collectively, "Futures" or "Futures Contracts"), as a hedge against changes in
prevailing levels of interest rates, currency exchange rates or stock price
levels, respectively, in order to establish more definitely the effective return
on securities or currencies held or intended to be acquired by it. The Fund'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 or 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.
The Fund 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 the Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, the Fund may be able to hedge its exposure more
effectively and at a lower cost through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. 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
Statement of Additional Information Page 11
<PAGE>
AIM DEVELOPING MARKETS FUND
the identical financial instrument or currency and the same delivery date. If
the offsetting purchase price is less than the original sale price, the Fund
realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction costs
also must be included in these calculations. There can be no assurance, however,
that the Fund will be able to enter into an offsetting transaction with respect
to a particular Futures Contract at a particular time. If the 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.
The 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 the 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 the
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 the 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, among other things, by 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 the Fund's portfolio
being hedged. The degree of imperfection of correlation depends upon
circumstances such as: variations in speculative market demand for futures and
for securities or currencies, including technical influences in Futures trading;
and differences between the financial instruments being hedged and the
instruments underlying the standard Futures Contracts available for trading. A
decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
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 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 the 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
Statement of Additional Information Page 12
<PAGE>
AIM DEVELOPING MARKETS FUND
risk with respect to the position. In addition, except in the case of purchased
options, the Fund would continue to be required to make daily variation margin
payments and might be required to maintain the position being hedged by the
Future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser the right, in return
for the premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account, which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing level of the securities, currencies or index upon
which the Futures Contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If the 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.
The 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 the 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 liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund has
entered into. In general, a call option on a Futures Contract is "in-the-money"
if the value of the underlying Futures Contract exceeds the strike, i.e.,
exercise, price of the call; a put option on a futures contract is
"in-the-money" if the value of the underlying Futures Contract is exceeded by
the strike price of the put. This guideline may be modified by the Company's
Board of Directors without a shareholder vote. This limitation does not limit
the percentage of the Fund's assets at risk to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank or
other currency dealer, to purchase or sell a currency against another currency
at a future date and price as agreed upon by the parties. The 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.
The Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The Fund might sell a
particular foreign currency forward, for example, when it holds bonds
denominated in a
Statement of Additional Information Page 13
<PAGE>
AIM DEVELOPING MARKETS FUND
foreign currency but anticipates, and seeks to be protected against, a decline
in the currency against the U.S. dollar. Similarly, the Fund might sell the U.S.
dollar forward when it holds bonds denominated in U.S. dollars but anticipates,
and seeks to be protected against, a decline in the U.S. dollar relative to
other currencies. Further, the Fund might purchase a currency forward to "lock
in" the price of securities denominated in that currency that it anticipates
purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement and no commissions are charged at
any stage for trades. The 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 Company's Board of Directors.
The 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 the 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 the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the 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, the 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 the 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 the 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
The 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 the 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.
The 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, the 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-adviser believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally
Statement of Additional Information Page 14
<PAGE>
AIM DEVELOPING MARKETS FUND
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 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 the Fund) expose the Fund to an obligation to another
party. The Fund 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. The Fund 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 the Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid securities.
Securities may be considered illiquid if the Fund cannot reasonably expect
within seven days to sell the securities for approximately the amount at which
the Fund values such securities. The sale of illiquid securities, if they can be
sold at all, generally will require more time and result in higher brokerage
charges or dealer discounts and other selling expenses than the sale of liquid
securities, such as securities eligible for trading on U.S. securities exchanges
or in the over-the-counter markets. Moreover, restricted securities which may be
illiquid for purposes of this limitation, often sell, if at all, at a price
lower than similar securities that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, the 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
Statement of Additional Information Page 15
<PAGE>
AIM DEVELOPING MARKETS FUND
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
the 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 Company's Board of
Directors 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-adviser in accordance with
procedures approved by the Board. The Sub-adviser takes into account a number of
factors in reaching liquidity decisions, including (i) the frequency of trading
in the security, (ii) the number of dealers 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-adviser monitors the liquidity of securities in the Fund's portfolio and
periodically reports such determinations to the Board. If the liquidity
percentage restriction of the 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 the Fund increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Fund.
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, the 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 Fund. 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
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose its entire investment in
such countries. The Fund's investments would similarly be adversely affected by
exchange control regulation in any of those countries.
RELIGIOUS AND ETHNIC STABILITY. Certain countries in which the Fund 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 the 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 Fund invests and adversely affect the value of the Fund's assets.
Statement of Additional Information Page 16
<PAGE>
AIM DEVELOPING MARKETS FUND
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 Fund. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Fund. 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 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.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ in some cases significantly from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the securities held by the Fund 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 Fund than is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, the Sub-adviser will take appropriate steps
to evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because the Fund, 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 the
Fund's investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
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 the Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund has insufficient cash in U. S. dollars to meet
distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the United
States, and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund 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
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 United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign
Statement of Additional Information Page 17
<PAGE>
AIM DEVELOPING MARKETS FUND
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 Fund are uninvested and no return is earned thereon.
The inability of the 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 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 Sub-adviser will consider
such difficulties when determining the allocation of the Fund's assets, although
the Sub-adviser does not believe that such difficulties will have a material
adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian, (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from securities of
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing that income or delaying the receipt of income where
those taxes may be recaptured. See "Taxes."
CONCENTRATION. To the extent the 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 the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property.
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 into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, the Fund 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.
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
Statement of Additional Information Page 18
<PAGE>
AIM DEVELOPING MARKETS FUND
on repatriation of invested capital, profits and dividends, and on the 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 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 the Fund invests and adversely affect the
value of the Fund's assets. In addition, asset expropriations or future
confiscatory levels of taxation possibly may affect the Fund.
Several of the Asia Pacific region countries have, or in the past have had,
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is engaged in border disputes with several of its neighbors, including
China and Pakistan. An uneasy truce exists between North Korea and South Korea,
and the recurrence of hostilities remains possible. Reunification of North Korea
and South Korea could have a detrimental effect on the economy of South Korea.
Also, China continues to claim sovereignty over Taiwan and recently has
conducted military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
China recently assumed sovereignty over Hong Kong in July 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance.
In addition, the Chinese sovereignty over Hong Kong also presents a 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.
Statement of Additional Information Page 19
<PAGE>
AIM DEVELOPING MARKETS FUND
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.
SOVEREIGN DEBT. Sovereign Debt generally offers high yields, reflecting not
only perceived credit risk, but also the need to compete with other local
investments in domestic financial markets. Certain Latin American countries are
among the largest debtors to commercial banks and foreign governments. A
sovereign debtor's willingness or ability to repay principal and interest due in
a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy towards
the International Monetary Fund and the political constraints to which a
sovereign debtor may be subject. Sovereign debtors may default on their
Sovereign Debt. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and others abroad
to reduce principal and interest arrearages on their debt. The commitment on the
part of these governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
In recent years, some of the Latin American countries in which the Fund expects
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 rescheduling of such
debt.
The ability of Latin American governments to make timely payments on their
Sovereign Debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by the Fund
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 Fund than is available concerning U.S. issuers. In
instances where the financial statements of an issuer are not deemed to reflect
accurately the financial situation of the issuer, the Sub-adviser will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. In addition, for companies that keep accounting records
in local currency, inflation accounting rules in some Latin American
Statement of Additional Information Page 20
<PAGE>
AIM DEVELOPING MARKETS FUND
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. There is substantially less publicly
available information about foreign companies, including Latin American
companies, and the governments of Latin American countries than there are
reports and ratings published about U.S. companies and the U.S. government.
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.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund's investment objectives may not be changed without the approval of a
majority of its outstanding voting securities. As defined in the 1940 Act and as
used in this Statement of Additional Information a "majority of the Fund's
outstanding voting securities" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented and (ii) more than 50% of the outstanding shares. In addition, the
Fund has adopted the following fundamental investment limitations that may not
be changed without approval of a majority of its outstanding voting securities.
The 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 the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(2) 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;
(3) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(5) purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(6) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan.
Notwithstanding any other investment policy 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 concentration policy of the 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.
Statement of Additional Information Page 21
<PAGE>
AIM DEVELOPING MARKETS FUND
In addition, to comply with federal tax requirements for qualification as a
"regulated investment company" ("RIC"), the Fund's investments will be limited
so that, at the close of each quarter of its taxable year, (a) not more than 25%
of the value of its total assets is invested in the securities (other than U.S
government securities or the securities of other RICs) of any one issuer and (b)
at least 50% of the value of its total assets is represented by cash and cash
items, U.S. government securities, securities of other RICs and other
securities, with these other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of its total assets and that
does not represent more than 10% of the issuer's outstanding voting securities
("Diversification Requirements"). These tax-related limitations may be changed
by the Company's Board of Directors to the extent necessary to comply with
changes to applicable tax requirements.
The following operating policy of the Fund is not a fundamental policy and may
be changed by vote of the Company's Board of Directors without shareholder
approval: The 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.
Statement of Additional Information Page 22
<PAGE>
AIM DEVELOPING MARKETS FUND
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the
Sub-adviser is responsible for the execution of the Fund's portfolio
transactions and the selection of broker/dealers who execute such transactions
on behalf of the Fund. In executing portfolio transactions, the Sub-adviser
seeks the best net results for the 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-adviser generally seeks reasonably competitive
commission rates and spreads, payment of the lowest commission or spread is not
necessarily consistent with the best net results. While the Fund may engage in
soft dollar arrangements for research services, as described below, the Fund has
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 the Fund, the Sub-adviser may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Sub-adviser for its use in managing the
Fund and its other advisory accounts. Such services may include furnishing
analyses, reports and information concerning issuers, industries, securities,
geographic regions, economic factors and trends, portfolio strategy, and
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Research and
brokerage services received from such brokers are in addition to, and not in
lieu of, the services required to be performed by the Sub-adviser 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-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed by
the Sub-adviser are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Fund. 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 Fund is concerned, in other cases, the Sub-adviser
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which AIM
or the Sub-adviser serves as investment manager in selecting brokers and dealers
for the execution of portfolio transactions. This policy does not imply a
commitment to execute portfolio transactions through all broker/dealers that
sell shares of the Fund and such other funds.
The 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
Statement of Additional Information Page 23
<PAGE>
AIM DEVELOPING MARKETS FUND
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 the 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 the Fund may invest generally are traded in the OTC markets.
The 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-adviser. The Company's Board of Directors has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to such affiliates are reasonable and fair
in the context of the market in which they are operating. Any such transactions
will be effected and related compensation paid only in accordance with
applicable SEC regulations.
For the fiscal years ended December 31, 1997, 1996 and 1995, the Predecessor
Fund paid aggregate brokerage commissions of $2,212,022, $1,580,879 and
$1,311,090, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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 the 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 the Fund does not intend generally to trade for short-term profits, the
securities in the 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 the Fund's average
month-end portfolio values, excluding short-term investments. The portfolio
turnover rate will not be a limiting factor when the Sub-adviser deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly and may result in the realization of net capital gains that are taxable
when distributed to the Fund's shareholders. For the fiscal years ended December
31, 1997 and 1996, the Predecessor Fund's portfolio turnover rates were 184% and
138%, respectively.
Statement of Additional Information Page 24
<PAGE>
AIM DEVELOPING MARKETS FUND
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. ("GT Global") since 1995; Director, GT Global
Director, Chairman of the Board and since 1991; Senior Vice President and Director of Sales and Marketing, GT Global from May
President 1992 to April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the 1940 Act, that is sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 57 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 25
<PAGE>
AIM DEVELOPING MARKETS FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
John J. Arthur+, 53 Director, Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice President and
Vice President Treasurer, A I M Management Group Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and Fund Management Company.
Kenneth W. Chancey, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since 1997; Vice
Vice President and President -- Mutual Fund Accounting, the Sub-adviser from 1992 to 1997.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Melville B. Cox, 54 Vice President and Chief Compliance Officer, A I M Advisors, Inc., A I M Capital
Vice President Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc. and Fund Management
Company.
Gary T. Crum, 50 Director and President, A I M Capital Management, Inc.; Director and Senior Vice
Vice President President, A I M Management Group Inc. and A I M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.
Robert H. Graham, 51 Director, President and Chief Executive Officer, A I M Management Group Inc.; Director and
Vice 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; Director, AMVESCAP PLC; Chairman of the Board of Directors and President, INVESCO
Holdings Canada Inc.; and Director, AIM Funds Group Canada Inc. and INVESCO G.P. Canada
Inc.
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser since October 1997;
Vice President Executive Vice President of the Asset Management Division of Liechtenstein Global Trust
50 California Street since October 1996; Senior Vice President, General Counsel and Secretary of LGT Asset
San Francisco, CA 94111 Management, Inc., INVESCO (NY), Inc., GT Global, GT Global Investor Services, Inc. and
G.T. Insurance from May 1994 to October 1996; Senior Vice President, General Counsel and
Secretary of Strong/Corneliuson Management, Inc. and Secretary of each of the Strong Funds
from October 1991 through May 1994.
Carol F. Relihan+, 43 Director, Senior Vice President, General Counsel and Secretary, A I M Advisors, Inc.; Vice
Vice President President, General Counsel and Secretary, A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management Company; Vice President and General
Counsel, A I M Fund Services, Inc.; and Vice President, A I M Capital Management, Inc. and
A I M Distributors, Inc.
Dana R. Sutton, 39 Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant Vice President and
Vice President and Assistant Treasurer Assistant Treasurer, Fund Management Company.
</TABLE>
- ------------------
+ Mr. Arthur and Ms. Relihan are married to each other.
Statement of Additional Information Page 26
<PAGE>
AIM DEVELOPING MARKETS FUND
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and Officers of the Company is also a Director or
Trustee and officer of AIM Investment Portfolios, Inc., AIM Floating Rate Fund,
AIM Growth Series, AIM Series Trust, AIM Eastern Europe Fund, GT Global Variable
Investment Trust, GT Global Variable Investment Series, Global High Income
Portfolio, Floating Rate Portfolio and Global Investment Portfolio, which are
also registered investment companies advised by AIM and sub-advised by the
Sub-adviser or an affiliate thereof. Each Director, Officer serves in total as a
Director, Trustee Officer, respectively, of 12 registered investment companies
with 47 series managed or administered by AIM and sub-advised or
sub-administered by the Sub-adviser. Each Director, who is not a director,
officer or employee of the Sub-adviser or any affiliated company, is paid
aggregate fees of $5,000 a year, plus $300 per Fund for each meeting of the
Board attended, and reimbursed travel and other expenses incurred in connection
with attendance at such meetings. Other Directors and Officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss
Quigley, who are not directors, officers or employees of the Sub-adviser or
other affiliated company, received total compensation of $38,650, $38,650,
$27,850 and $38,650, respectively, from the Company for their services as
Directors. For the fiscal year ended October 31, 1997, Mr. Anderson, Mr. Bayley,
Mr. Patterson and Miss Quigley, who are not directors, officers or employees of
the Sub-adviser or any other affiliated company, received total compensation of
$117,304, $114,386, $88,350 and $111,688, respectively, from the investment
companies managed or administered by AIM and sub-advised or sub-administered by
the Sub-adviser for which he or she serves as a Director or Trustee. Fees and
expenses disbursed to the Directors contained no accrued or payable pension or
retirement benefits. As of May 7, 1998, the Officers and Directors and their
families as a group owned in the aggregate beneficially or of record less than
1% of the outstanding shares of the Fund or of all the Company's series in the
aggregate.
Statement of Additional Information Page 27
<PAGE>
AIM DEVELOPING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Fund's investment manager and administrator under an
investment management and administration contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the sub-adviser and sub-
administrator to the Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors 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 Contracts provide that with respect to the Fund, the Company or each
of AIM or the Sub-adviser may terminate the Management Contract without penalty
upon sixty days' written notice. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Predecessor Fund to the Sub-adviser during the
Predecessor Fund's last three fiscal years:
<TABLE>
<CAPTION>
PERIOD AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
Fiscal year ended October 31, 1997......................................................................... $ 7,383,823
Fiscal year ended December 31, 1996........................................................................ $ 7,864,840
Fiscal year ended December 31, 1995........................................................................ $ 6,878,640
</TABLE>
DISTRIBUTION SERVICES
The Fund's Advisor Class shares are offered continuously through the Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis pursuant to a distribution contract between the Company and AIM
Distributors without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for the Fund. For
these services, the Transfer Agent receives an annual maintenance fee of $17.50
per account, a new account fee of $4.00 per account, a per transaction fee of
$1.75 for all transactions other than exchanges and a per exchange fee of $2.25.
The Transfer Agent also is reimbursed by the Fund for its out-of-pocket expenses
for such items as postage, forms, telephone charges, stationery and office
supplies. The Sub-adviser serves as the Fund's pricing and accounting agent.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM Distributors
and other agents. These expenses include, in addition to the advisory,
distribution, transfer agency, pricing and accounting agency and brokerage fees
discussed above, legal and audit expenses, custodian fees, directors' fees,
organizational fees, fidelity bond and other insurance premiums, taxes,
extraordinary expenses and the expenses of reports and prospectuses sent to
existing investors. The allocation of general Company expenses and expenses
shared among the Fund and other funds organized as series of the Company are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Fund or the nature of the services performed and
relative applicability to the 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 the 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 Fund generally
are higher than the comparable expenses of such other funds.
Statement of Additional Information Page 28
<PAGE>
AIM DEVELOPING MARKETS FUND
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at the close of regular trading on the New York
Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern Time, unless weather,
equipment failure or other factors contribute to an earlier closing time) on
each business day the NYSE is open for business. Currently, the NYSE is closed
on weekends and on certain days relating to the following holidays: New Year's
Day, Martin Luther King Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, GDRs and EDRs, whcih are traded on
stock exchanges, are valued at the last sale price on the exchange or in the
principal over-the-counter market in which such securities are traded, as of the
close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined by
the Sub-adviser to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Sub-adviser deems it appropriate, prices obtained for the day of valuation
from a bond pricing service will be used. Short-term investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Sub-adviser on that day. When market quotations for
futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or at the mean of the
current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available, or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
Statement of Additional Information Page 29
<PAGE>
AIM DEVELOPING MARKETS FUND
NYSE is not open. In addition, trading in securities on European and Far Eastern
securities exchanges and OTC markets generally is completed well before the
close of the business day in New York. Consequently, the calculation of the
Fund's net asset value may not take place contemporaneously with the
determination of the prices of securities held by the Fund. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Fund's net asset value unless the Sub-adviser, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, the Fund's net asset value may
be significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares purchased should accompany the purchase order,
or funds should be wired to the Transfer Agent as described in the Prospectus.
Payment, other than by wire transfer, must be made by check or money order drawn
on a U.S. bank. Checks or money orders must be payable in U.S. dollars.
As a condition of this offering, if an order to purchase Advisor Class shares is
cancelled due to nonpayment (for example, because a check is returned for
insufficient funds), the person who made the order will be responsible for any
loss incurred by the Fund by reason of such cancellation, and if such purchaser
is a shareholder, the Fund shall have the authority as agent of the shareholder
to redeem shares in his or her account at their then-current net asset value per
share to reimburse the Fund for the loss incurred. Investors whose purchase
orders have been cancelled due to nonpayment may be prohibited from placing
future orders.
The Fund reserves the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on the
Fund until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, the Fund reserves the right to reject any offer for a purchase of
shares by any individual.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAs") AND OTHER TAX-DEFERRED PLANS
IRAs: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless you and your spouse's
earnings exceed a certain level, you may also establish an "Education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax advisor for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAs: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of a series of substantially equal periodic payments, generally is
subject to regular wage withholding or withholding at the rate of 10% (depending
on the type and amount of the distribution), unless you elect not to have any
withholding apply. Please consult your tax advisor for more information.
Statement of Additional Information Page 30
<PAGE>
AIM DEVELOPING MARKETS FUND
SEP-IRAs: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(b)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(k)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Code Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirements plans.
EXCHANGES BETWEEN FUNDS
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
the corresponding class of other AIM/GT Funds, based on their respective net
asset values without imposition of any sales charges, provided that the
registration remains identical. The exchange privilege is not an option or right
to purchase shares but is permitted under the current policies of the respective
AIM/GT Funds. The privilege may be discontinued or changed at any time by any of
those funds upon sixty days' written notice to the shareholders of the fund and
is available only in states where the exchange may be made legally. Before
purchasing shares through the exercise of the exchange privilege, a shareholder
should obtain and read a copy of the prospectus of the fund to be purchased and
should consider its investment objective(s).
TELEPHONE REDEMPTIONS
A corporation or partnership wishing to utilize telephone redemption services
must submit a "Corporate Resolution" or "Certificate of Partnership" indicating
the names, titles and the required number of signatures of persons authorized to
act on its behalf. The certificate must be signed by a duly authorized
officer(s) and, in the case of a corporation, the corporate seal must be
affixed. All shareholders may request that redemption proceeds be transmitted by
bank wire upon request directly to the shareholder's predesignated account at a
domestic bank or savings institution, if the proceeds are at least $500. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 will be mailed to
the shareholder's registered address of record. The Fund and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon fifteen days' written notice.
SUSPENSION OF REDEMPTION PRIVILEGES
The Fund may suspend redemption privileges or postpone the date of payment for
more than seven days after a redemption order is received during any period (1)
when the NYSE is closed other than customary weekend and holiday closings, or
trading on the NYSE is restricted as directed by the SEC, (2) when an emergency
exists, as defined by the SEC, which makes it not reasonably practicable for the
Fund to dispose of securities owned by it or fairly to determine the value of
its assets, or (3) as the SEC may otherwise permit.
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Company's Board of Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 31
<PAGE>
AIM DEVELOPING MARKETS FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
To continue to qualify for treatment as a RIC under the Internal Revenue Code of
1986, as amended ("Code"), the Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income, 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"); (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.
Dividends and other distributions declared by the 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 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 the 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 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.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year plus certain other amounts.
FOREIGN TAXES
Dividends and interest received by the 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 the 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. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's foreign
taxes and income from sources within, and taxes paid to, foreign countries and
U.S. possessions if it makes this election. Pursuant to the Taxpayer Relief
Statement of Additional Information Page 32
<PAGE>
AIM DEVELOPING MARKETS FUND
Act of 1997 ("Tax Act"), individuals who have no more than $300 ($600 for
married persons filing jointly) of creditable foreign taxes included on Form
1099 and all of whose foreign source income is "qualified passive income" may
elect each year to be exempt from the extremely complicated foreign tax credit
limitation and will be able to claim a foreign tax credit without having to file
the detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- that, in general, meets either of the following tests: (1)
at least 75% of its gross income is passive or (2) an average of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, the 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 the Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the 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 the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the 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. The Fund's
adjusted basis is each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in1992 would provide a similar election with respect to the
stock of certain PFICs.
NON-U.S. SHAREHOLDERS
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a nonresident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The 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 the 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 the 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 the Fund at the end of its taxable year
generally will be deemed to have been sold 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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for
Statement of Additional Information Page 33
<PAGE>
AIM DEVELOPING MARKETS FUND
the reduced maximum tax rates on net capital gain enacted by the Tax Act -- 20%
(10% for taxpayers in the 15% marginal tax bracket) for gain recognized on
capital assets held for more than 18 months -- instead of the 28% rate in effect
before that legislation, which now applies to gain recognized on capital assets
held for more than one year but not more than 18 months, although technical
corrections legislation passed by the House of Representatives late in 1997
would treat it as qualifying therefor.
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 Fund attempts to monitor section 988 transactions to minimize
any adverse tax impact.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are urged to
consult their own tax advisers for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
Statement of Additional Information Page 34
<PAGE>
AIM DEVELOPING MARKETS FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. AIM is a direct, wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. AIM is the sole
shareholder of the Funds' principal underwriter, AIM Distributors. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are an
independent investment management group that has a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, acts as custodian of the Fund's assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of the Fund to be held in separate accounts
outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Fund's independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P. conducts an annual audit of
the Fund, assists in the preparation of the Fund's federal and state income tax
returns and consults with the Company and the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P. as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
NAME
Prior to May 29, 1998, the Fund operated under the name of GT Global Developing
Markets Fund.
Statement of Additional Information Page 35
<PAGE>
AIM DEVELOPING MARKETS FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
The Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Advisor Class shares of the Fund, as follows:
Standardized Return (average annual total return ("T")) is computed by using the
ending redeeming value ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of years ("n") according to the following formula as
required by the SEC: P(1+T) to the (n)th power = ERV. The following assumptions
will be reflected in computations made in accordance with this formula: (1) for
Class A shares, deduction of the maximum sales charge of 4.75% from the $1,000
initial investment; (2) for Advisor Class shares, deduction of a sales charge is
not applicable; (3) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Company's Board of
Directors; and (4) a complete redemption at the end of any period illustrated.
The Standardized Returns of the Predecessor Fund (recomputed for Class A shares
to reflect the deduction of the maximum sales charge of 4.75% for Class A
shares), stated as average annualized total returns, for the periods shown,
were:
<TABLE>
<CAPTION>
DEVELOPING DEVELOPING
MARKETS FUND MARKETS FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- -------------------------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................................................. (9.61)% (5.10)%
Jan. 11, 1994 (commencement of operations) through Oct. 31, 1997................ (2.47)% (1.21)%
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, the Fund may also include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Advisor Class shares of the Fund and may
be calculated according to several different formulas. Non-Standardized Returns
may be quoted for the same or different time periods for which Standardized
Returns are quoted. Non-Standardized Returns may or may not take sales charges
into account; performance data calculated without taking the effect of sales
charges into account will be higher than data including the effect of such
charges. Advisor Class shares are not subject to sales charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T=(VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
The aggregate Non-Standardized Return of the Predecessor Fund (not recomputed to
take sales charges into account) for the period January 11, 1994 (commencement
of operations) through October 31, 1997 was (4.53)%.
OTHER INFORMATION REGARDING STANDARDIZED AND NON-STANDARDIZED RETURNS
The Standardized and Non-Standardized Return Data are based on the performance
of the Predecessor Fund as a closed-end investment company. The Standardized
Return Data, however, have been recomputed to reflect the deduction of the
current maximum sales charge of 4.75% for Class A shares which went into effect
on November 1, 1997. Future performance of the Fund will be effected by expenses
that it will incur as a series of an open-end investment company.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index, ("CPI"), which is a measure of the average
change in prices over time in a fixed market basket of goods and services
(e.g., food, clothing, shelter, fuels, transportation fares, charges for
doctors' and dentists' services, prescription medicines, and other goods and
services that people buy for day-to-day living). There is inflation risk
which does not affect a security's value but its purchasing power, i.e., the
risk of changing price levels in the economy that affects security prices or
the price of goods and services.
Statement of Additional Information Page 36
<PAGE>
AIM DEVELOPING MARKETS FUND
(2) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger") Morningstar, Inc,
("Morningstar"), Micropal, Inc. and/or other companies that rank and/or
compare mutual funds by overall performance, investment objectives, assets,
expense levels, periods of existence and/or other factors. In this regard,
the Fund may be compared to its "peer group" as defined by Lipper,
CDA/Wiesenberger and/or other firms, as applicable, or to specific funds or
groups of funds within or outside of such peer group. Lipper generally ranks
funds on the basis of total return, assuming reinvestment of distributions,
but does not take sales charges or redemption fees into consideration, and
is prepared without regard to tax consequences. In addition to the mutual
fund rankings, the Fund's performance may be compared to mutual fund
performance indices prepared by Lipper. Morningstar is a mutual fund rating
service that also rates mutual funds on the basis of risk-adjusted
performance. Morningstar ratings are calculated from a fund's three, five
and ten year average annual returns with appropriate fee adjustments and a
risk factor that reflects fund performance relative to the three-month U.S.
Treasury bill monthly returns. Ten percent of the funds in an investment
category receive five stars and 22.5% receive four stars. The ratings are
subject to change each month.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP")-weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) Standard & Poor's 500 Composite Stock Price Index, which is a widely
recognized index composed of the capitalization-weighted average of the
price of 500 of the largest publicly traded stocks in the United States.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and looks at
global and regional economic trends and their implications for the
developing economies.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service, Inc., Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
Statement of Additional Information Page 37
<PAGE>
AIM DEVELOPING MARKETS FUND
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock and bond markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates. Savings accounts offer
a guaranteed rate of return on principal, but no opportunity for capital
growth. During a portion of the period, the maximum rates paid on some
savings deposits were fixed by law.
Indices, economic and financial data prepared by the research departments of
various financial organizations such as Salomon Brothers Inc., Lehman Brothers,
Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Financial Research
Corporation, J. P. Morgan, Morgan Stanley, Dean Witter, Discover & Co., Smith
Barney Shearson, S.G. Warburg, Jardine Flemming, The Bank for International
Settlements, Asian Development Bank, Bloomberg, L.P. and Ibbotson Associates may
be used, as well as information reported by the Federal Reserve and the
respective central banks of various nations. In addition, AIM Distributors may
use performance rankings, ratings and commentary reported periodically in
national financial publications, including Money Magazine, Mutual Fund Magazine,
Smart Money, Global Finance, EuroMoney, Financial World, Forbes, Fortune,
Business Week, Latin Finance, The Wall Street Journal, Emerging Markets Weekly,
Kiplinger's Guide To Personal Finance, Barron's, The Financial Times, USA Today,
The New York Times, Far Eastern Economic Review, The Economist and Investors
Business Digest. The Fund may compare its performance to that of other
compilations or indices of comparable quality to those listed above and other
indices that may be developed and made available in the future.
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Fund, nor is it
a prediction of such performance. The performance of the Fund will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while the Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of the Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all AIM
Funds or the dollar amount of Fund assets under management or rankings by DALBAR
Surveys, Inc. in advertising materials.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. The
Fund does not represent a complete investment program and investors should
consider the Fund as appropriate for a portion of their overall investment
portfolio with regard to their long-term investment goals. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors may refer to or advertise the names of U.S.
and non-U.S. companies and their products, although there can be no assurance
that any AIM Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets is based on the returns of different
indices.
AIM Funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these
Statement of Additional Information Page 38
<PAGE>
AIM DEVELOPING MARKETS FUND
capital markets. The risks associated with the security types in any capital
market may or may not correspond directly to those of the Fund. Ibbotson
calculates total returns in the same method as the Fund.
The Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R(2) in advertising. In addition, the Fund
may compare these measures to those of other funds. Measures of volatility seek
to compare the Fund's historical share price fluctuations or total return to
those of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in the Fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when prices
are low. While such a strategy does not assure a profit or guard against loss in
a declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may describe in its sales material and advertisements how an investor
may invest in AIM Funds through various retirement plans or other programs that
offer deferral of income taxes on investment earnings and pursuant to which an
investor may make deductible contributions. Because of their advantages, these
retirement plans and programs may produce returns superior to comparable
non-retirement investments. For example, a $10,000 investment earning a taxable
return of 10% annually would have an after-tax value of $17,976 after ten years,
assuming tax was deducted from the return each year at a 39.6% rate. An
equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
("IRAs") and Other Tax-Deferred Plans."
AIM Distributors may from time to time in its sales methods and advertising
discuss the risks inherent in investing. The major types of investment risk are
market risk, industry risk, credit risk, interest rate risk and inflation risk.
Risk represents the possibility that you may lose some or all of your investment
over a period of time. A basic tenet of investing is the greater the potential
reward, the greater the risk.
From time to time, the Fund and AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, G.T. Guide to World Equity Markets,
Salomon Brothers, Inc. and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World Indices.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, G.T. Guide to World
Equity Markets, Salomon Brothers, Inc., and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
Statement of Additional Information Page 39
<PAGE>
AIM DEVELOPING MARKETS FUND
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to, electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The
World Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady Plan:
the Sub-adviser.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, AIM Distributors may include in its advertisements and sales
material, information about privatization, which is an economic process
involving the sale of state-owned companies to the private sector.
In advertising and sales materials, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser provided assistance to the government of Hong
Kong in linking its currency to the U.S. dollar, and that in 1987 Japan's
Ministry of Finance licensed GT Asset Management Ltd. as one of the first
foreign discretionary investment managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser by the government of Hong Kong, Japan's Ministry of Finance or any
other government or government agency. Nor do any such accomplishments of the
Sub-adviser provide any assurance that the AIM/GT Funds' investment objectives
will be achieved.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
Statement of Additional Information Page 40
<PAGE>
AIM DEVELOPING MARKETS FUND
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the Company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("S&P"),
rates the securities debt of various entities in categories ranging from "AAA"
to "D" according to quality. Investment grade ratings are the first four
categories:
AAA -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," 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
Statement of Additional Information Page 41
<PAGE>
AIM DEVELOPING MARKETS FUND
the event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial commitment
on the obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The "D" rating
also will be used upon the filing of a bankruptcy petition or the taking of
a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designation "Prime-1" to indicate commercial paper
having a superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from "A1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. A-1 -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. A-2 -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
The Fund may invest only in high quality commercial paper, i.e. commercial paper
rated Prime-1 by Moody's, A-1 by S&P, or, if unrated, judged by the Sub-adviser
to be of comparable quality.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements for the Fund as of October 31, 1997 and the
fiscal year then ended appear on the following pages.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
GT Global Developing Markets Fund ("Fund"):
We have audited the accompanying statement of assets and liabilities of GT
Global Developing Markets Fund (formerly G.T. Global Developing Markets Fund,
Inc.), including the portfolio of investments, as of October 31, 1997, the
related statement of operations for the ten months then ended and for the year
ended December 31, 1996, the statements of changes in net assets for the ten
months then ended and for each of the two years in the period ended December 31,
1996, and the financial highlights for each of the periods indicated therein.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Developing Markets Fund as of October 31, 1997, the results of its
operations for the ten months then ended and for the year ended December 31,
1996, the changes in its net assets for the ten months then ended and for each
of the two years in the period ended December 31, 1996, and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (13.0%)
LUKoil Holding - ADR{\/} ................................ RUS 97,586 $ 8,172,833 1.8
OIL
Sasol Ltd. .............................................. SAFR 537,556 6,481,964 1.4
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred .......... BRZL 27,126,040 5,044,302 1.1
OIL
C.A. La Electricidad de Caracas ......................... VENZ 3,443,139 4,526,264 1.0
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) -
ADR{\/} ................................................ BRZL 94,834 3,793,360 0.8
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A. (Eletrobras): ....... BRZL -- -- 0.8
ELECTRICAL & GAS UTILITIES
"B" ADR{\/} ........................................... -- 118,958 2,617,076 --
Preferred ............................................. -- 2,112,000 913,846 --
Chilgener S.A. - ADR{\/} ................................ CHLE 124,972 3,374,244 0.7
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................. CHLE 94,858 3,130,314 0.7
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ......... CHLE 127,657 2,569,097 0.6
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ...................................... ARG 68,960 2,206,720 0.5
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} ................... PAK 70,300 2,196,875 0.5
ENERGY SOURCES
Light - Participacoes S.A. .............................. BRZL 7,485,850 1,914,922 0.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................. BRZL 5,322,290 1,767,016 0.4
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................ RUS 174,640 1,484,440 0.3
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................ THAI 138,800 1,415,622 0.3
OIL
Unified Energy Systems - Reg S GDR-/- {c} {\/} .......... RUS 40,700 1,271,875 0.3
ELECTRICAL & GAS UTILITIES
Manila Electric Co. "B" ................................. PHIL 361,110 1,111,108 0.2
ELECTRICAL & GAS UTILITIES
Bombay Suburban Electric Supply (BSES) Ltd. ............. IND 200,000 1,004,209 0.2
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ...... HGRY 43,600 942,850 0.2
ENERGY SOURCES
Mosenergo: .............................................. RUS -- -- 0.2
ELECTRICAL & GAS UTILITIES
ADR-/- {\/} ........................................... -- 10,964 460,488 --
144A ADR{.} {\/} ...................................... -- 10,000 420,000 --
Korea Electric Power Corp. - ADR{\/} .................... KOR 93,330 764,139 0.2
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ....... THAI 447,200 745,333 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ...................................... ARG 100,460 629,257 0.1
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Tenaga Nasional Bhd. .................................... MAL 235,000 $ 508,261 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. ............................................. KOR 10,980 148,688 --
OIL
Guangdong Electric Power Development Co., Ltd. "B"{*} ... CHNA 201,000 113,371 --
ENERGY SOURCES
------------
59,728,474
------------
Multi-Industry/Miscellaneous (11.6%)
Barlow Ltd. ............................................. SAFR 657,524 6,629,920 1.4
CONGLOMERATE
PT Telekomunikasi Indonesia ............................. INDO 5,018,500 4,683,001 1.0
MULTI-INDUSTRY
Anglo American Corporation of South Africa Ltd. ......... SAFR 104,020 4,498,162 1.0
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 567,700 3,610,164 0.8
MULTI-INDUSTRY
Delta Corporation Ltd. (subdivision)-/- ................. ZBBW 2,472,400 3,520,823 0.8
MULTI-INDUSTRY
ITC Ltd.: ............................................... IND -- -- 0.7
MULTI-INDUSTRY
Common ................................................ -- 136,000 2,102,842 --
GDR-/- {\/} ........................................... -- 44,370 811,971 --
Billiton PLC-/- ......................................... SAFR 980,865 2,875,301 0.6
CONGLOMERATE
The Saudi Arabian Investment Fund Ltd.-/- {\/} .......... UK 281,000 2,810,000 0.6
COUNTRY FUNDS
PT Gudang Garam ......................................... INDO 949,500 2,697,744 0.6
MULTI-INDUSTRY
China Resources Enterprise Ltd. ......................... HK 870,000 2,386,028 0.5
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ....................... HK 471,000 2,096,041 0.5
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V. ....................... MEX 263,477 2,044,708 0.4
CONGLOMERATE
Central Asia Regional Growth Fund-/- {\/} ............... IRE 210,000 1,999,200 0.4
COUNTRY FUNDS
Malaysian Resources Corp., Bhd. ......................... MAL 2,396,000 1,425,077 0.3
CONGLOMERATE
Koc Holding AS .......................................... TRKY 3,234,900 1,216,923 0.3
CONGLOMERATE
Empresas La Moderna, S.A. de C.V. "A"-/- ................ MEX 240,600 1,181,389 0.3
MULTI-INDUSTRY
NASR (El) City Company For Housing & Construction-/- .... EGPT 17,005 1,175,296 0.3
MISCELLANEOUS
PT Bimantara Citra ...................................... INDO 1,219,000 1,120,529 0.2
MULTI-INDUSTRY
PT Hanjaya Mandala Sampoerna ............................ INDO 590,500 1,032,141 0.2
MULTI-INDUSTRY
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd.: ................................... ISRL -- -- 0.2
CONGLOMERATE
ADR{\/} ............................................... -- 22,043 $ 471,169 --
Common ................................................ -- 2,850 294,482 --
Graboplast Rt. .......................................... HGRY 13,452 725,231 0.2
MISCELLANEOUS
GT Taiwan Fund-/- +X+ {\/} .............................. TWN 49,751 626,368 0.1
COUNTRY FUNDS
Quinenco S.A. - ADR-/- {\/} ............................. CHLE 32,400 473,850 0.1
CONGLOMERATE
Discount Investment Corp. ............................... ISRL 11,613 316,356 0.1
MULTI-INDUSTRY
------------
52,824,716
------------
Services (11.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ........... BRZL -- -- 2.3
TELEPHONE NETWORKS
ADR{\/} ............................................... -- 57,481 5,834,322 --
Common ................................................ -- 49,594,258 4,408,329 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ......... MEX 176,363 7,627,700 1.7
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/ } ............................................. VENZ 114,579 5,012,831 1.1
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: ................................. SAFR -- -- 0.8
RETAILERS-OTHER
Common ................................................ -- 1,889,154 2,847,477 --
"N" ................................................... -- 780,702 1,071,234 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ....... CHLE 128,402 3,563,156 0.8
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 155,070 3,062,633 0.7
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: .................................... MEX -- -- 0.3
RETAILERS-OTHER
"C" ................................................... -- 636,000 1,104,431 --
"A" ................................................... -- 306,000 563,626 --
"B" ................................................... -- 66,334 132,509 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- .............................................. BRZL 9,188,127 1,666,932 0.4
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. .......................... IND 233,600 1,627,623 0.4
TELECOM - OTHER
Telefonica de Argentina S.A. - ADR{\/} .................. ARG 55,228 1,553,288 0.3
TELEPHONE NETWORKS
Indian Hotels Co., Ltd.: ................................ IND -- -- 0.2
LEISURE & TOURISM
GDR-/- {\/} ........................................... -- 35,200 607,200 --
Common ................................................ -- 25,850 418,541 --
Migros Turk T.A.S. ...................................... TRKY 848,300 890,294 0.2
RETAILERS-FOOD
Portugal Telecom S.A. - Registered ...................... PORT 20,551 843,433 0.2
TELEPHONE NETWORKS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 1,878,600 $ 841,164 0.2
TELEPHONE NETWORKS
PT Citra Marga Nusaphala Persada ........................ INDO 2,847,000 812,862 0.2
BUSINESS & PUBLIC SERVICES
PT Indosat .............................................. INDO 344,500 779,683 0.2
TELECOM - OTHER
Santa Isabel S.A. - ADR{\/} ............................. CHLE 40,666 752,321 0.2
RETAILERS-FOOD
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ........................................... PORT 18,602 695,194 0.2
RETAILERS-OTHER
Danubius Hotel and Spa Rt.-/- ........................... HGRY 21,940 686,611 0.2
LEISURE & TOURISM
Konsortium Perkapalan Bhd. .............................. MAL 267,000 501,277 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ..... PAK 6,000 486,000 0.1
TELEPHONE NETWORKS
Advanced Info. Service - Foreign ........................ THAI 85,700 460,478 0.1
WIRELESS COMMUNICATIONS
Investec-Consultoria Internacional S.A.-/- .............. PORT 14,612 457,144 0.1
BROADCASTING & PUBLISHING
Super Sol Ltd. .......................................... ISRL 154,231 443,830 0.1
RETAILERS-FOOD
BEC World Public Co., Ltd. - Foreign .................... THAI 77,800 406,418 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. .................. PORT 3,854 252,110 0.1
RETAILERS-OTHER
Siam Makro Public Co., Ltd. - Foreign-/- ................ THAI 170,000 224,129 --
RETAILERS-OTHER
PT Matahari Putra Prima ................................. INDO 1,035,000 201,811 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred ... BRZL 495,118 129,349 --
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. ............................. HK 162,000 50,298 --
TRANSPORTATION - ROAD & RAIL
------------
51,016,238
------------
Materials/Basic Industry (10.9%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" .............. MEX 1,389,779 6,125,014 1.3
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) .......... SAFR 9,521,806 4,948,964 1.1
METALS - STEEL
Sappi Ltd. .............................................. SAFR 587,133 3,722,985 0.8
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ........................... EGPT 166,230 3,507,942 0.8
CEMENT
Suez Cement Co. - Reg S GDR{c} {\/} ..................... EGPT 158,195 3,282,546 0.7
CEMENT
Apasco S.A. ............................................. MEX 428,533 2,617,387 0.6
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Industrias Penoles S.A. (CP) ............................ MEX 634,803 $ 2,527,808 0.6
METALS - NON-FERROUS
Ameriyah Cement Co.-/- .................................. EGPT 94,500 2,390,294 0.5
CEMENT
De Beers Centenary AG - Linked Unit{=} .................. SAFR 78,000 1,861,622 0.4
MISC. MATERIALS & COMMODITIES
Torah Portland Cement Co.-/- ............................ EGPT 67,950 1,858,632 0.4
CEMENT
Hindalco Industries Ltd. ................................ IND 63,600 1,660,561 0.4
METALS - NON-FERROUS
Paints & Chemical Industry: ............................. EGPT -- -- 0.3
CHEMICALS
Common-/- ............................................. -- 31,400 1,052,916 --
144A GDR{.} -/- {\/} .................................. -- 44,000 440,000 --
Pohang Iron & Steel Co., Ltd. - ADR{\/} ................. KOR 88,870 1,444,138 0.3
METALS - STEEL
Turk Sise ve Cam Fabrikalari AS-/- ...................... TRKY 16,264,000 1,396,565 0.3
GLASS
North Cairo Flour Mills-/- .............................. EGPT 32,010 1,393,376 0.3
MISC. MATERIALS & COMMODITIES
Pannonplast Rt. ......................................... HGRY 20,732 1,138,897 0.2
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- .................................... EGPT 8,000 1,094,353 0.2
BUILDING MATERIALS & COMPONENTS
Grupo Industrial Minera Mexico "L" ...................... MEX 277,300 823,598 0.2
METALS - NON-FERROUS
Maanshan Iron and Steel Co. "H"{*} ...................... CHNA 4,939,000 785,895 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ....... CHLE 12,200 632,875 0.1
CHEMICALS
Israel Chemicals Ltd. ................................... ISRL 499,158 625,750 0.1
CHEMICALS
Cosco Pacific Ltd. ...................................... HK 516,000 600,776 0.1
PAPER/PACKAGING
Cimpor-Cimentos de Portugal, SGPS S.A. .................. PORT 21,964 555,972 0.1
CEMENT
PT Aneka Tambang-/- ..................................... INDO 1,364,500 532,117 0.1
METALS - NON-FERROUS
Engro Chemicals Pakistan Ltd. ........................... PAK 137,800 435,263 0.1
CHEMICALS
HI Cement Corp. ......................................... PHIL 3,961,000 361,117 0.1
CEMENT
Cahya Mata Sarawak Bhd. ................................. MAL 355,000 345,509 0.1
BUILDING MATERIALS & COMPONENTS
Siam Cement Co., Ltd. - Foreign ......................... THAI 39,800 338,597 0.1
CEMENT
Agros Holding S.A.-/- ................................... POL 16,123 338,212 0.1
MISC. MATERIALS & COMMODITIES
Compania de Minas Buenaventura S.A. - ADR{\/} ........... PERU 16,000 287,000 0.1
METALS - NON-FERROUS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
PT Indah Kiat Pulp & Paper Corp.Tbk ..................... INDO 709,000 $ 271,553 0.1
PAPER/PACKAGING
Fauji Fertilizer Co., Ltd. .............................. PAK 116,300 258,997 0.1
MISC. MATERIALS & COMMODITIES
------------
49,657,231
------------
Finance (8.3%)
ABSA Group Ltd. ......................................... SAFR 761,136 4,509,849 1.0
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred .................. BRZL 142,972,483 3,628,783 0.8
BANKS-MONEY CENTER
State Bank of India Ltd.: ............................... IND -- -- 0.7
BANKS-MONEY CENTER
Common ................................................ -- 267,000 1,931,961 --
GDR{\/} ............................................... -- 71,640 1,318,176 --
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................ CHLE 142,366 2,384,631 0.5
INVESTMENT MANAGEMENT
Egyptian American Bank SAE-/- ........................... EGPT 57,663 1,857,088 0.4
BANKS-MONEY CENTER
Commercial International Bank: .......................... EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ...................................... -- 58,000 1,261,500 --
Common ................................................ -- 23,940 553,789 --
Banco de A. Edwards - ADR{\/} ........................... CHLE 100,934 1,753,728 0.4
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................ PERU 94,800 1,700,475 0.4
BANKS-MONEY CENTER
Global Menkul Degerler AS-/- ............................ TRKY 69,103,256 1,601,182 0.4
SECURITIES BROKER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................ PAN 37,631 1,495,832 0.3
OTHER FINANCIAL
Turkiye Is Bankasi (Isbank) "C" ......................... TRKY 15,098,500 1,461,119 0.3
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} ........ ARG 48,968 1,205,837 0.3
BANKS-MONEY CENTER
Aksigorta A.S. .......................................... TRKY 15,080,000 1,171,573 0.3
INSURANCE - MULTI-LINE
Liberty Life Association of Africa Ltd. ................. SAFR 37,400 933,056 0.2
INSURANCE-LIFE
BPI-SGPS S.A. ........................................... PORT 40,637 914,217 0.2
BANKS-MONEY CENTER
Yapi ve Kredi Bankasi AS ................................ TRKY 29,106,092 888,639 0.2
BANKS-REGIONAL
Kookmin Bank - GDR-/- {\/} .............................. KOR 128,480 822,272 0.2
BANKS-MONEY CENTER
Ayala Land, Inc. "B" .................................... PHIL 1,723,800 675,278 0.1
REAL ESTATE
Bank Leumi Le - Israel .................................. ISRL 406,668 624,411 0.1
BANKS-REGIONAL
Metroplex Bhd. .......................................... MAL 1,751,000 610,141 0.1
REAL ESTATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Turkiye Garanti Bankasi AS .............................. TRKY 11,565,600 $ 599,025 0.1
BANKS-REGIONAL
Bank Hapoalim Ltd. ...................................... ISRL 244,830 579,448 0.1
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- .......................... PAK 546,500 558,844 0.1
BANKS-MONEY CENTER
JSC Kazkommertsbank Co. - GDR-/- {\/} (.) ............... KAZ 26,600 558,600 0.1
BANKS-REGIONAL
SM Prime Holdings, Inc. ................................. PHIL 2,664,600 470,670 0.1
REAL ESTATE
Thai Farmers Bank Public Co., Ltd. - Foreign ............ THAI 166,400 455,323 0.1
BANKS-REGIONAL
Bank Slaski S.A. ........................................ POL 7,316 426,767 0.1
BANKS-MONEY CENTER
Banco Santander Chile - ADR{\/} ......................... CHLE 28,100 365,300 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ............... THAI 392,300 341,555 0.1
REAL ESTATE
Belle Corp.-/- .......................................... PHIL 3,297,000 300,581 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ....................... MAL 116,200 209,432 --
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign ................. THAI 56,400 196,418 --
BANKS-MONEY CENTER
C & P Homes, Inc. ....................................... PHIL 1,382,000 104,339 --
REAL ESTATE
------------
38,469,839
------------
Consumer Non-Durables (6.5%)
South African Breweries Ltd. ............................ SAFR 226,892 6,037,874 1.3
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............ MEX 738,356 5,217,126 1.1
BEVERAGES - ALCOHOLIC
Gruma S.A. "B"-/- ....................................... MEX 883,073 3,468,838 0.8
FOOD
Companhia Cervejaria Brahma Preferred ................... BRZL 4,662,721 2,918,430 0.6
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. ................................... SAFR 174,000 2,496,050 0.5
FOOD
Eastern Tobacco Co.-/- .................................. EGPT 90,785 2,276,300 0.5
TOBACCO
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ..... EGPT 62,514 1,719,135 0.4
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A.: .............................. CHLE -- -- 0.4
BEVERAGES - NON-ALCOHOLIC
"B" ADR{\/} ........................................... -- 41,497 850,689 --
"A" ADR{\/} ........................................... -- 34,400 825,600 --
Hindustan Lever Ltd. .................................... IND 40,650 1,438,245 0.3
PERSONAL CARE/COSMETICS
San Miguel Corp. "B" .................................... PHIL 851,600 958,353 0.2
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Compania Cervecerias Unidas S.A. ADR{\/} ................ CHLE 36,800 $ 897,000 0.2
BEVERAGES - ALCOHOLIC
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ............... POL 4,461 333,293 0.1
BEVERAGES - ALCOHOLIC
Reliance Industries Ltd. - GDR-/- {\/} (.) .............. IND 12,100 255,008 0.1
TEXTILES & APPAREL
Kuala Lumpur Kepong Bhd. ................................ MAL 60,000 144,187 --
OTHER CONSUMER GOODS
La Tondena Distillers, Inc. ............................. PHIL 137,900 84,469 --
BEVERAGES - ALCOHOLIC
------------
29,920,597
------------
Technology (2.3%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} .......... TWN 830,248 10,149,782 2.2
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ........................ ISRL 2,754 399,041 0.1
SEMICONDUCTORS
LG Information & Communication .......................... KOR 2,728 156,860 --
TELECOM TECHNOLOGY
------------
10,705,683
------------
Capital Goods (1.6%)
New World Infrastructure Ltd.-/- ........................ HK 1,076,000 2,129,728 0.5
CONSTRUCTION
Cheung Kong Infrastructure Holdings ..................... HK 643,000 1,663,648 0.4
CONSTRUCTION
United Engineers Ltd. ................................... MAL 428,000 1,015,680 0.2
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} ............................. RUS 68,712 927,612 0.2
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries ................................. KOR 99,000 577,500 0.1
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................ POL 58,947 555,592 0.1
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} ......................... ISRL 16,200 447,525 0.1
TELECOM EQUIPMENT
Sungmi Telecom Electronics Co. .......................... KOR 184 8,999 --
TELECOM EQUIPMENT
------------
7,326,284
------------
Health Care (1.6%)
Egypt International Pharmaceutical Industries Co.
(EIPICO) ............................................... EGPT 33,200 2,402,118 0.5
PHARMACEUTICALS
Richter Gedeon Rt. - Reg S GDR{c} {\/} .................. HGRY 17,552 1,632,336 0.4
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. ............................... IND 79,850 1,555,391 0.3
MEDICAL TECHNOLOGY & SUPPLIES
Teva Pharmaceutical Industries Ltd. ..................... ISRL 25,548 1,189,452 0.3
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
PT Kalbe Farma - Foreign ................................ INDO 479,000 $ 293,538 0.1
PHARMACEUTICALS
------------
7,072,835
------------
Consumer Durables (1.4%)
Arcelik AS .............................................. TRKY 12,233,800 1,367,315 0.3
APPLIANCES & HOUSEHOLD
Bajaj Auto Ltd. ......................................... IND 79,200 1,261,094 0.3
AUTOMOBILES
Qingling Motors Co., Ltd.{*} ............................ CHNA 1,671,000 1,091,662 0.2
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd.: .............. IND -- -- 0.2
AUTOMOBILES
GDR{\/} ............................................... -- 48,000 499,200 --
Common ................................................ -- 25,000 219,069 --
Samsung Electronics Co. - 144A GDR{.} -/- {\/} .......... KOR 34,850 705,713 0.2
CONSUMER ELECTRONICS
PT Astra International, Inc. ............................ INDO 785,000 584,923 0.1
AUTOMOBILES
Mahindra & Mahindra Ltd. ................................ IND 43,300 430,653 0.1
AUTOMOBILES
------------
6,159,629
------------ -----
TOTAL EQUITY INVESTMENTS (cost $359,966,965) .............. 312,881,526 68.5
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (10.1%)
Argentina (1.2%)
Republic of Argentina:
Global Bond, 11.375% due 1/30/17 .................... USD 2,741,000 2,617,655 0.6
Par Bond Series L, 5.5% due 3/31/23++ ............... USD 2,690,000 1,830,881 0.4
Global Bond, 11% due 10/9/06 ........................ USD 720,000 713,700 0.2
Brazil (0.4%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ............................................ USD 3,020,000 1,996,975 0.4
Bulgaria (2.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ...................................... USD 9,017,000 4,914,265 1.1
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ .............................................. USD 7,099,000 4,663,156 1.0
Ecuador (0.4%)
Republic of Ecuador, Discount Bond, 6.6875% due 2/28/25
- Euro+ .............................................. USD 2,845,000 1,998,613 0.4
Mexico (2.2%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+ +/+ ... USD 6,110,000 5,533,369 1.2
Global Bond, 9.875% due 1/15/07 ..................... USD 1,615,000 1,633,169 0.4
Global Bond, 11.375% due 9/15/16 .................... USD 1,455,000 1,547,756 0.3
Global Bond, 11.5% due 5/15/26 ...................... USD 1,421,000 1,534,680 0.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Panama (0.6%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ............................................ USD 3,536,000 $ 2,486,250 0.6
Peru (0.3%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17++ ............................................. USD 2,533,000 1,443,810 0.3
South Africa (0.8%)
Republic of South Africa, 13% due 8/31/10{j} .......... ZAR 20,173,000 3,807,589 0.8
United States (1.6%)
United States Treasury:
6.375% due 8/15/27 .................................. USD 4,032,000 4,149,180 0.9
5.875% due 9/30/02 .................................. USD 3,033,000 3,049,587 0.7
Venezuela (0.5%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ ........................................... USD 2,543,000 2,128,173 0.5
------------
Total Government & Government Agency Obligations (cost
$49,316,056) ............................................. 46,048,808
------------
Sovereign Debt (4.9%)
Russia (4.9%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- {j} ............................... USD 22,635,000 20,131,003 4.4
Participation ** -/- ................................ DEM 4,186,000 2,227,112 0.5
------------
Total Sovereign Debt (cost $12,006,889) ................... 22,358,115
------------
Corporate Bonds (3.2%)
Argentina (0.5%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} ..... USD 1,193,000 1,109,490 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ...... USD 661,000 654,390 0.2
Brazil (0.2%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ...... USD 1,107,000 1,079,325 0.2
China (0.6%)
Panda Global Energy Co., 12.5% due 4/15/04{.} ......... USD 2,139,000 2,010,660 0.4
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} ..... USD 960,000 876,000 0.2
Dominican Republic (0.1%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............. USD 652,000 645,480 0.1
Hong Kong (0.1%)
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} .............................................. USD 700,000 652,750 0.1
India (0.2%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ......... USD 1,093,000 954,189 0.2
Indonesia (0.1%)
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} .............................................. USD 653,000 574,640 0.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Mexico (0.8%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} .......................... USD 2,104,000 $ 1,930,420 0.4
8.85% due 9/15/07 - 144A{.} ......................... USD 1,050,000 1,009,313 0.2
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} .............................................. USD 996,000 1,088,130 0.2
Russia (0.4%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} .............................................. USD 851,000 1,144,595 0.3
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} .... USD 555,000 488,400 0.1
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................. ZAR 4,990,000 826,527 0.2
------------
Total Corporate Bonds (cost $15,533,169) .................. 15,044,309
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $76,856,114) ......... 83,451,232 18.2
------------ -----
<CAPTION>
UNDERLYING
NOMINAL VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$312,660) .............................................. USD 17,370,000 126,732 --
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 .......... INDO 2,070,000 115,320 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights,
expire 11/12/97 ........................................ BRZL 257,975 234 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) .................................... 115,554 --
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) ............. PHIL 659,400 122 --
------------ -----
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $34,850,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$45,720,975, including accrued interest).
(cost $44,816,933) .................................... $ 44,816,933 9.8
------------ -----
TOTAL INVESTMENTS (cost $481,952,672) * .................. 441,392,099 96.5
Other Assets and Liabilities .............................. 15,987,089 3.5
------------ -----
NET ASSETS ................................................ $457,379,188 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
+X+ The GT Global Developing Markets Fund (the "Fund") has invested in
the GT Global Taiwan Fund, a fund managed by LGT Asset Management
Ltd. who is an affiliate of the Fund's manager, Chancellor LGT
Asset Management, Inc.
** Underlying loan agreement currently in default.
{j} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities. See Note 1 to the
Financial Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{*} Security denominated in Hong Kong Dollars.
{=} Each Centenary Linked Unit consists of 1 registered deferred share
of De Beers Consolidated Mine + 1 Centenary Depositary Receipt.
(.) Restricted securities: At October 31, 1997, the Fund owned the
following restricted securities constituting 0.2% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
ACQUISITION MARKET VALUE
DESCRIPTION DATE SHARES COST PER SHARE
- ------------------------------ ------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
JSC Kazkommertsbank Co. -
GDR.......................... 7/15/97 26,600 $ 500,080 $ 21.00
Reliance Industries - GDR..... 5/20/94 12,100 223,850 21.08
</TABLE>
* For Federal income tax purposes, cost is $483,269,089 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,262,525
Unrealized depreciation: (68,139,515)
-------------
Net unrealized depreciation: $ (41,876,990)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.2 1.7 2.9
Brazil (BRZL/BRL) .................... 7.6 0.6 8.2
Bulgaria (BUL/LEV) ................... 2.1 2.1
Chile (CHLE/CLP) ..................... 4.8 4.8
China (CHNA/RMB) ..................... 0.4 0.6 1.0
Dominican Republic (DR/USD) .......... 0.1 0.1
Ecuador (ECDR/ECS) ................... 0.4 0.4
Egypt (EGPT/EGP) ..................... 5.7 5.7
Hong Kong (HK/HKD) ................... 2.0 0.1 2.1
Hungary (HGRY/HUF) ................... 1.2 1.2
India (IND/INR) ...................... 3.8 0.2 4.0
Indonesia (INDO/IDR) ................. 2.9 0.1 3.0
Ireland (IRE/IEP) .................... 0.4 0.4
Israel (ISRL/ILS) .................... 1.2 1.2
Kazakhstan (KAZ/KTS) ................. 0.1 0.1
Korea (KOR/KRW) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.9 0.9
Mexico (MEX/MXN) ..................... 8.1 3.0 11.1
Pakistan (PAK/PKR) ................... 0.9 0.9
Panama (PAN/PND) ..................... 0.3 0.6 0.9
Peru (PERU/PES) ...................... 1.2 0.3 1.5
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.4 0.4
Portugal (PORT/PTE) .................. 0.9 0.9
Russia (RUS/SUR) ..................... 2.8 5.3 8.1
South Africa (SAFR/ZAR) .............. 10.5 1.0 11.5
Taiwan (TWN/TWD) ..................... 2.3 2.3
Thailand (THAI/THB) .................. 1.2 1.2
Turkey (TRKY/TRL) .................... 2.4 2.4
United Kingdom (UK/GBP) .............. 0.6 0.6
United States (US/USD) ............... 1.6 13.3 14.9
Venezuela (VENZ/VEB) ................. 2.1 0.5 2.6
Zimbabwe (ZBBW/ZWD) .................. 0.8 0.8
------ ----- ----- -----
Total ............................... 68.5 18.2 13.3 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $457,379,188.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,681,647 1.84950 11/06/97 $ (113,656)
Indonesian Rupiahs...................... 1,114,206 3610.00000 11/05/97 (6,173)
South African Rands..................... 3,338,977 5.04500 1/30/98 (73,645)
-------------- --------------
Total Contracts to Sell (Receivable
amount $5,941,356)................... 6,134,830 (193,474)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.34%.
Total Open Forward Foreign Currency
Contracts............................ $ (193,474)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $481,952,672) (Note 1).......................... $441,392,099
U.S. currency................................................................. $1,159,740
Foreign currencies (cost $14,108,834)......................................... 14,122,604 15,282,344
----------
Receivable for securities sold............................................................ 13,029,046
Interest receivable....................................................................... 1,251,368
Dividends receivable...................................................................... 366,109
Unamortized organizational costs (Note 1)................................................. 85,312
Miscellaneous receivable.................................................................. 11,894
-----------
Total assets............................................................................ 471,418,172
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,905,923
Payable for investment management and administration fees (Note 2)........................ 722,480
Payable for open forward foreign currency contracts (Note 1).............................. 193,474
Payable for professional fees............................................................. 39,732
Payable for printing and postage expenses................................................. 37,656
Payable for custodian fees................................................................ 30,062
Payable for Directors' fees and expenses (Note 2)......................................... 15,494
Payable for transfer agent fees (Note 2).................................................. 5,964
Payable for fund accounting fees (Note 2)................................................. 4,387
Payable for registration and filing fees.................................................. 2,127
Other accrued expenses.................................................................... 81,685
-----------
Total liabilities....................................................................... 14,038,984
-----------
Net assets.................................................................................. $457,379,188
-----------
-----------
Class A:
Net asset value per share ($457,379,188 DIVIDED BY 36,416,667 shares outstanding)........... $ 12.56
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $545,103,263
Undistributed net investment income....................................................... 8,645,635
Accumulated net realized loss on investments and foreign currency transactions............ (55,602,092)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (207,045)
Net unrealized depreciation of investments................................................ (40,560,573)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $457,379,188
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................... $11,436,242 $20,641,051
Dividend income (net of foreign withholding tax of $365,717 and $420,409,
respectively)............................................................ 5,481,523 7,351,830
Other income.............................................................. -- 74,487
------------- -------------
Total investment income................................................. 16,917,765 28,067,368
------------- -------------
Expenses:
Investment management fees (Note 2)....................................... 6,274,911 6,673,159
Administration fees (Note 2).............................................. 1,108,912 1,191,681
Custodian fees (Note 1)................................................... 317,289 332,166
Fund accounting fees (Note 2)............................................. 108,484 119,321
Professional fees......................................................... 92,091 101,382
Printing and postage expenses............................................. 33,504 65,880
Transfer agent fees (Note 2).............................................. 63,520 190,834
Amortization of organization costs (Note 1)............................... 58,930 70,949
Directors' fees and expenses (Note 2)..................................... 25,536 38,064
Registration and filing fees.............................................. -- 3,000
Other expenses............................................................ 119,278 37,139
------------- -------------
Total expenses before reductions........................................ 8,202,455 8,823,575
Expense reductions (Notes 1 & 5)...................................... (374,173) (162,760)
------------- -------------
Total net expenses...................................................... 7,828,282 8,660,815
------------- -------------
Net investment income....................................................... 9,089,483 19,406,553
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies: (Note 1)
Net realized gain on investments.......................................... 46,804,651 1,845,666
Net realized loss on foreign currency transactions........................ (1,151,351) (900,512)
------------- -------------
Net realized gain during the periods.................................... 45,653,300 945,154
------------- -------------
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................. (297,303) 91,835
Net change in unrealized appreciation (depreciation) of investments....... (101,078,671) 78,628,364
------------- -------------
Net unrealized appreciation (depreciation) during the periods........... (101,375,974) 78,720,199
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies................................................................. (55,722,674) 79,665,353
------------- -------------
Net increase (decrease) in net assets resulting from operations............. $(46,633,191) $99,071,906
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ------------------------
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income.......................................... $ 9,089,483 $19,406,553 $26,375,900
Net realized gain (loss) on investments and foreign currency
transactions.................................................. 45,653,300 945,154 (78,379,558)
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currencies... (297,303) 91,835 (3,021)
Net change in unrealized appreciation (depreciation) of
investments................................................... (101,078,671) 78,628,364 47,401,359
------------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.................................................. (46,633,191) 99,071,906 (4,605,320)
------------- ----------- -----------
Distributions to shareholders: (Note 1)
From net investment income..................................... -- (17,407,047) (26,292,834)
------------- ----------- -----------
Capital share transactions: (Note 4)
Adjustment to estimate of initial offering expenses............ -- -- 373,757
------------- ----------- -----------
Total increase (decrease) in net assets...................... (46,633,191) 81,664,859 (30,524,397)
Net assets:
Beginning of period............................................ 504,012,379 422,347,520 452,871,917
------------- ----------- -----------
End of period *................................................ $457,379,188 $504,012,379 $422,347,520
------------- ----------- -----------
------------- ----------- -----------
* Includes undistributed net investment income (loss) of........ $ 8,645,635 $ 363,782 $ (7,034)
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
JANUARY 11, 1994
(COMMENCEMENT
TEN MONTHS YEAR ENDED OF OPERATIONS)
ENDED DECEMBER 31, TO
OCTOBER 31, ---------------------- DECEMBER 31,
1997 1996 1995 1994
----------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 13.84 $ 11.60 $ 12.44 $ 15.00
----------- ---------- ---------- ----------------
Income from investment operations:
Net investment income................. 0.25 0.53 0.72 0.35
Net realized and unrealized gain
(loss) on investments................ (1.53) 2.19 (0.84) (2.46)
----------- ---------- ---------- ----------------
Net increase (decrease) from
investment operations.............. (1.28) 2.72 (0.12) (2.11)
----------- ---------- ---------- ----------------
Distributions to shareholders:
From net investment income............ -- (0.48) (0.72) (0.35)
From net realized gain on
investments.......................... -- -- -- (0.10)
----------- ---------- ---------- ----------------
Total distributions................. -- (0.48) (0.72) (0.45)
----------- ---------- ---------- ----------------
Net asset value, end of period.......... $ 12.56 $ 13.84 $ 11.60 $ 12.44
----------- ---------- ---------- ----------------
----------- ---------- ---------- ----------------
Market value, end of period............. $ 11.81 $ 11.63 $ 9.75 $ 9.75
----------- ---------- ---------- ----------------
----------- ---------- ---------- ----------------
Total investment return (based on market
value)................................. 1.62%(b) 24.18% 6.60% (32.16)% (b)
Total investment return (based on net
asset value)........................... (9.25)%(b) 23.59% (0.95)% (14.07)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 457,379 $ 504,012 $ 422,348 $ 452,872
Ratio of net investment income to
average net assets..................... 2.03%(a) 4.07% 6.33% 2.75 % (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.75%(a) 1.82% 1.77% 2.01 % (a)
Without expense reductions............ 1.83%(a) 1.85% 1.80% 2.01 % (a)
Portfolio turnover rate................. 184%(a) 138% 75% 56 %
Average commission rate per share paid
on portfolio transactions.............. $ 0.0023 $ 0.0022 N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
N/A Not Applicable.
These financial highlights provide per share financial information of G.T.
Global Developing Markets Fund, Inc. ("Predecessor Fund") for the periods
shown. The fees and expenses of the Fund differ from those of the
Predecessor Fund (See Note 2).
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Developing Markets Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Company
has thirteen series of shares in operation, each series corresponding to a
distinct portfolio of investments.
On October 31, 1997, at the close of business, the Fund acquired the assets and
assumed the liabilities of G.T. Global Developing Markets Fund, Inc., a Maryland
corporation registered under the 1940 Act as a non-diversified closed-end
management investment company ("Predecessor Fund"), in exchange for Class A
shares of the Fund in a tax-free reorganization of the Predecessor Fund.
Shareholders of the Predecessor Fund approved the reorganization on October 20,
1997. Prior to October 28, 1997 the Closed-End Fund's shares traded on the New
York Stock Exchange. As a result of the reorganization of the Predecessor Fund
into the Fund, the Fund has a fiscal year end of October 31 to coincide with the
fiscal years of the other series of the Company. Class A shares of the Fund
issued in connection with the reorganization of the Predecessor Fund will be
subject to a 2% redemption fee for redemptions until May 1, 1998. The financial
statements presented are the financial statements for the Predecessor Fund.
Commencing November 1, 1997, the Fund began to offer Class A, Class B, and
Advisor Class shares, each of which has equal rights as to assets and voting
privileges except that Class A and Class B each has exclusive voting rights with
respect to its distribution plan. Investment income, realized and unrealized
capital gains and losses, and the common expenses of the Fund are allocated on a
pro rata basis to each class based on the relative net assets of each class to
the total net assets of the Fund. Each class of shares differs in its respective
service and distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities of comparative maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost, adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Fund's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from
F19
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection of income on securities, income is
recorded net of all withholding tax with any rebate recorded when received. The
Fund may trade securities on other than normal settlement terms. This may
increase the market risk if the other party to the transaction fails to deliver
and causes the Fund to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $29,571,465
were on loan to brokers. The loans were secured by cash collateral of
$33,239,507 received by the Fund. For international
F20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
securities, cash collateral is received by the Fund against loaned securities in
an amount at least equal to 105% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
103% of the market value of the loaned securities during the period of the loan.
For domestic securities, cash collateral is received by the Fund against loaned
securities in an amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained at
not less than 100% of the market value of the loaned securities during the
period of each loan. For the period ended October 31, 1997, the Fund received
securities lending income of $302,308 which was used to reduce the Fund's
custodian fees and administrative expenses.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$54,472,976 which expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, restricted
securities (excluding 144A issues) are shown at the end of the Fund's Portfolio
of Investments.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has purchased and sold when-issued securities during the period and has set
aside liquid securities as collateral for these commitments.
(P) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager ("GT Funds"), has a line of credit with each of BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of the Fund's total assets. On October 31,
1997, the Fund had no loans outstanding.
For the period ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $12,607,909, with a weighted average interest rate of 6.29%.
Interest expense for the Fund for the period ended October 31, 1997 was $24,241,
and is included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
(A) PREDECESSOR FUND THROUGH OCTOBER 31, 1997
Chancellor LGT Asset Management, Inc. was the Predecessor Fund's investment
manager and administrator. The Predecessor Fund paid the Manager investment
management fees, which were computed weekly and paid monthly, at the annualized
rate of 1.40% of the funds average weekly net assets. The Manager also acted as
administrator of the Predecessor Fund and paid the Manager administration fees,
which were computed and paid monthly, at an annualized rate of 0.25% of the
Fund's average weekly net assets.
The Manager was the pricing and accounting agent for the Predecessor Fund. The
monthly fee for these services to the Manager was a percentage, not to exceed
0.03% annually, of the Predecessor Fund's average daily net assets. The annual
fee rate was derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of
F21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
$5 billion and allocating the result according to the Predecessor Fund's average
daily net assets.
The Predecessor Fund paid each of its Directors who was not an employee, officer
or director of the Manager or any of its affiliated companies $5,000 per year
plus $300 for each meeting of the board or any committee thereof attended by the
Director.
(B) THE FUND COMMENCING NOVEMBER 1, 1997
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. The Fund pays the Manager investment management and
administration fees at the annualized rate of 0.975% on the first $500 million
of average daily net assets of the Fund; 0.95% on the next $500 million; 0.925%
on the next $500 million and 0.90% on amounts thereafter. These fees are
computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. Purchases of Class A shares exceeding $500,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. GT Global also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. In addition, GT Global makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by the waivers by
the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/ or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any of its affiliated companies $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $736,422,573 and $765,404,012, respectively. Purchases
of U.S. government obligations by the Fund were $7,226,388 for the year. There
were no sales of U.S. government obligations by the Fund for the year.
4. CAPITAL SHARES
At October 31, 1997, the Predecessor Fund was authorized to issue 100 million
shares of capital stock, $0.001 par value, all of which was classified as Common
Stock.
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 400,000,000 were
classified as shares of GT
F22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fourteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified.
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $71,865 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For its fiscal year ended October 31, 1997, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was approximately $.7797 per share (representing an approximate total of
$15,509,507). The total amount of taxes paid by the Fund to such countries was
approximately $.0213 per share (representing an approximate total of $424,399).
F23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
AIM DEVELOPING MARKETS FUND
AIM/GT FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE FUNDS LISTED
BELOW, INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
AIM NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six global
theme funds
AIM WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
AIM INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
AIM EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
AIM DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / GLOBAL THEME FUNDS
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
AIM GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
AIM GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
AIM GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
AIM GLOBAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
AIM GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
AIM NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
AIM EUROPE GROWTH FUND
Focuses on investment opportunities in Europe
AIM LATIN AMERICAN GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
AIM SMALL CAP EQUITY FUND
Invests in equity securities of small U.S. companies
AIM MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
AIM AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
AIM JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
AIM GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
AIM GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
AIM STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
AIM GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
AIM FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
MONEY MARKET FUND
AIM DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AIM
INVESTMENT FUNDS, INC., AIM DEVELOPING MARKETS FUND, A I M ADVISORS, INC.,
INVESCO (NY), INC. OR A I M DISTRIBUTORS, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
GROSX703 MC
