<PAGE> 1
AIM EASTERN EUROPE FUND
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
July 1, 1999
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval
of a proposal pursuant to which AIM Eastern Europe Fund ("Eastern Europe Fund")
would convert from a closed-end investment company to an open-end investment
company by reorganizing into AIM Developing Markets Fund ("Developing Markets
Fund"), a series of AIM Investment Funds (the "Trust"), an open-end investment
company (the "Reorganization"). If the proposal is approved and implemented,
each shareholder of Eastern Europe Fund automatically would become a holder of
Class A shares of Developing Markets Fund, and Eastern Europe Fund would
thereafter be liquidated.
After careful consideration, the Board of Trustees of Eastern Europe Fund
(the "Board") has unanimously approved the proposal and recommends that you read
the enclosed materials carefully and then vote FOR the proposal. As with many
closed-end investment companies, Eastern Europe Fund shares have historically
traded on the New York Stock Exchange at a discount to (i.e., below) the net
asset value of those shares. The Board believes that the Reorganization would
provide Eastern Europe Fund shareholders with the benefits of the open-end
investment company form of organization, while also providing shareholders with
the economies of scale and other benefits of a combination with a larger
existing fund having similar investment objectives but broader investment
policies.
Eastern Europe Fund's investment objective is long-term capital
appreciation. Developing Markets Fund has a primary investment objective of
long-term growth of capital and a secondary objective of income, to the extent
consistent with seeking growth of capital. To achieve its investment objectives,
Developing Markets Fund invests substantially all of its assets in the
securities of issuers located in developing markets. In contrast, Eastern Europe
Fund invests primarily in securities of issuers located in Eastern Europe. As a
result, Developing Markets Fund possesses greater investment flexibility than
Eastern Europe Fund, because it can and does invest in other regions, including
Latin America, Asia and Africa. The accompanying document describes the proposed
transaction and compares the investment policies, operating expenses, and
performance histories of the Funds in more detail.
Your vote is important. Please take a moment now to sign and return your
proxy card in the enclosed postage paid return envelope. If we do not hear from
you after a reasonable amount of time, you may receive a telephone call from our
proxy solicitor, Shareholder Communications Corporation, reminding you to vote
your shares.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman and President
<PAGE> 2
AIM EASTERN EUROPE FUND
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 25, 1999
TO THE SHAREHOLDERS OF AIM Eastern Europe Fund:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders ("Meeting")
of AIM Eastern Europe Fund ("Eastern Europe Fund") will be held at 11 Greenway
Plaza, Suite 100, Houston, TX 77046, on August 25, 1999, at 3:00 p.m., Central
time, for the following purposes:
1. To approve an Agreement and Plan of Reorganization and Termination
("Plan") that provides for the reorganization of Eastern Europe Fund into AIM
Developing Markets Fund ("Developing Markets Fund"), a series of AIM Investment
Funds ("Trust") ("Reorganization"). Pursuant to the Plan, Eastern Europe Fund
will transfer all of its assets to Developing Markets Fund, which will assume
all the liabilities of Eastern Europe Fund, and the Trust will issue to each
Eastern Europe Fund shareholder a number of full and fractional Class A shares
of Developing Markets Fund having an aggregate value that, on the effective date
of the Reorganization, is equal to the aggregate net asset value of the
shareholder's shares in Eastern Europe Fund;
2. To elect a Trustee of Eastern Europe Fund;
3. To ratify the selection of PricewaterhouseCoopers LLP as Eastern Europe
Fund's independent public accountants; and
4. To transact such other business that may properly come before the
Meeting, or any adjournment thereof, in the discretion of the proxies or their
substitutes.
Shareholders of record as of the close of business on June 21, 1999, are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
Please execute and return promptly in the enclosed envelope the
accompanying proxy, which is being solicited by the Board of Trustees of Eastern
Europe Fund. Returning your proxy promptly is important to ensure a quorum at
the Meeting. You may revoke your proxy at any time before it is exercised by the
subsequent execution and submission of a revised proxy, by giving written notice
of revocation to Eastern Europe Fund or by voting in person at the Meeting.
By Order of the Board of Trustees,
/s/ SAMUEL D. SIRKO
Samuel D. Sirko
Secretary
July 1, 1999
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
<PAGE> 3
AIM EASTERN EUROPE FUND
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TX 77046-1173
TOLL FREE: (800) 347-4246
AIM DEVELOPING MARKETS FUND
(A PORTFOLIO OF AIM INVESTMENT FUNDS)
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TX 77046-1173
TOLL FREE: (800) 347-4246
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: July 1, 1999
This document is being furnished in connection with the Annual Meeting of
Shareholders of AIM Eastern Europe Fund ("Eastern Europe Fund"), a Massachusetts
business trust, to be held at 11 Greenway Plaza, Suite 100, Houston, TX 77046 on
August 25, 1999 at 3:00 p.m., Central time (such meeting and any adjournments
thereof are referred to as the "Meeting"). At the Meeting, the shareholders of
Eastern Europe Fund are being asked to consider and approve an Agreement and
Plan of Reorganization and Termination ("Plan") that provides for the
reorganization ("Reorganization") of Eastern Europe Fund into AIM Developing
Markets Fund ("Developing Markets Fund"), a series of AIM Investment Funds, a
Delaware business trust ("Trust"). A form of the Plan is attached as Appendix A
to this Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus").
THE BOARD OF TRUSTEES OF EASTERN EUROPE FUND ("BOARD") HAS UNANIMOUSLY APPROVED
THE PLAN AS BEING IN THE BEST INTEREST OF EASTERN EUROPE FUND.
Pursuant to the Plan, Eastern Europe Fund will transfer all of its assets
to Developing Markets Fund, which will assume all the liabilities of Eastern
Europe Fund, and the Trust will issue a number of full and fractional Class A
shares of beneficial interest in Developing Markets Fund having an aggregate
value that, on the effective date of the Reorganization, is equal to the
aggregate net asset value of the outstanding shares of beneficial interest in
Eastern Europe Fund. The value of each Eastern Europe Fund shareholder's account
with Developing Markets Fund immediately after the Reorganization will be same
as the net asset value of such shareholder's shares of Eastern Europe Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction. No initial sales charge will be imposed on Developing
Markets Fund Class A shares issued in connection with the Reorganization. Such
shares will be subject to a 2% fee payable to Developing Markets Fund if they
are presented for redemption within the first year following the Reorganization.
Developing Markets Fund is a non-diversified series of the Trust, which is
an open-end management investment company comprised of several outstanding
series. Developing Markets Fund's primary investment objective is long-term
growth of capital; its secondary investment objective is income, to the extent
consistent with seeking growth of capital. Developing Markets Fund seeks to
achieve its investment objectives by investing primarily in equity securities of
developing market issuers. Developing Markets Fund may also invest up to 50% of
its total assets in various types of developing market debt securities.
This Proxy Statement/Prospectus sets forth the information that a
shareholder of Eastern Europe Fund should know before voting on the Plan. It
should be read and retained for future reference.
A copy of the current Prospectus of Developing Markets Fund, dated March 1,
1999, is attached as Appendix B to this Proxy Statement/Prospectus. In addition,
the management's discussion of the performance of Developing Markets Fund, which
is included in the Annual Report to Shareholders of Developing Markets Fund for
the fiscal year ended October 31, 1998, is attached as Appendix C to this Proxy
Statement/Prospectus. The current Annual Report to Shareholders of Eastern
Europe Fund for the fiscal year ended October 31, 1998 is on file with the
Securities and Exchange Commission (the "SEC") and is incorporated by reference
into this Proxy Statement/Prospectus. In addition, the current Statement of
Additional Information of Developing Markets Fund, dated March 1, 1999, and the
Annual Report to Shareholders of Developing Markets Fund for the fiscal year
ended October 31, 1998 (part of which is attached as Appendix C), are on file
with the SEC and are incorporated by reference into this Proxy
<PAGE> 4
Statement/Prospectus. Such documents are available without charge by writing to
A I M Distributors, Inc., P.O. Box 4739, Houston, Texas 77210-4739 or by calling
(800) 347-4246. The SEC maintains a web site at http://www.sec.gov that contains
the documents described above and other information about Eastern Europe Fund
and the Trust. Additional information about Developing Markets Fund may also be
obtained on the web at http://www.aimfunds.com.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
WHETHER THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS ADEQUATE OR
ACCURATE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
<PAGE> 5
[AIM LOGO APPEARS HERE]
THE AIM FAMILY OF FUNDS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- ------------- ----
<S> <C>
INTRODUCTION................................................ 1
PROPOSAL NO. 1: REORGANIZATION OF EASTERN EUROPE FUND INTO
DEVELOPING MARKETS FUND................................... 3
REASONS FOR THE REORGANIZATION.............................. 3
Board Considerations...................................... 3
SYNOPSIS.................................................... 5
The Reorganization........................................ 5
Comparison of the Funds................................... 5
COMPARISON OF PRINCIPAL RISK FACTORS........................ 11
Primary Differences in Risks of the Funds................. 11
Risks Common to Both Funds................................ 11
Investing in Securities Generally...................... 11
Investing in Foreign Securities and Developing
Markets............................................... 12
Lower Quality Debt..................................... 12
Sovereign Debt......................................... 12
Illiquid Securities.................................... 12
Non-Diversified Classification......................... 13
Year 2000.............................................. 13
FINANCIAL HIGHLIGHTS........................................ 13
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION............. 16
Terms of the Reorganization............................... 16
Description of Securities to be Issued.................... 16
Dividends and Other Distributions......................... 17
Potential Net Redemption.................................. 17
Accounting Treatment...................................... 18
Federal Income Tax Considerations......................... 18
ORGANIZATION OF THE FUNDS................................... 19
NAV, MARKET PRICE, AND DISCOUNT OF EASTERN EUROPE FUND
SHARES.................................................... 19
CAPITALIZATION.............................................. 20
PROPOSAL NO. 2: ELECTION OF A TRUSTEE....................... 20
PROPOSAL NO. 3: RATIFICATION OF THE SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS........................................ 23
</TABLE>
i
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<TABLE>
<CAPTION>
SECTION TITLE PAGE
- ------------- ----
<S> <C>
LEGAL MATTERS............................................... 23
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND NYSE....................................... 24
INFORMATION ABOUT THE FUNDS' ADVISOR AND SUB-ADVISOR, AND
DEVELOPING MARKETS FUND'S DISTRIBUTOR..................... 24
ADDITIONAL INFORMATION ABOUT EASTERN EUROPE FUND AND
DEVELOPING MARKETS FUND................................... 25
EXPERTS..................................................... 25
SHAREHOLDER PROPOSALS....................................... 25
OWNERSHIP OF EASTERN EUROPE FUND AND DEVELOPING MARKETS FUND
SHARES.................................................... 26
APPENDIX A: Agreement and Plan of Reorganization and
Termination............................................... A-1
APPENDIX B: Prospectus of AIM Developing Markets Fund....... B-1
APPENDIX C: Management's Discussion of Fund Performance..... C-1
</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,
Invest with Discipline, La Familia AIM de Fondos and La Familia AIM de Fondos
and Design are registered service marks and AIM Bank Connection, AIM Funds,
A I M Funds and Design and AIM Investor are service marks, of A I M Management
Group Inc.
ii
<PAGE> 7
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Eastern Europe Fund in connection with the solicitation of proxies by the Board
for use at the Meeting. All properly executed and unrevoked proxies received in
time for the Meeting will be voted in accordance with the instructions contained
therein. If no instructions are given, shares represented by proxies will be
voted FOR all the proposals described in this Proxy Statement/Prospectus and in
accordance with management's recommendation on other matters. The presence in
person or by proxy of Eastern Europe Fund shareholders entitled to cast 50% of
all the votes entitled to be cast at the Meeting will constitute a quorum. If a
quorum is not present at the Meeting or a quorum is present but sufficient votes
to approve any proposal described in this Proxy Statement/ Prospectus are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of the shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR any proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST any
proposal against such adjournment. In addition, if you sign, date, and return
the proxy card, the duly appointed proxies may, in their discretion, vote upon
such other matters as may come before the Meeting.
The proposal to approve the Plan requires the affirmative vote of a
"majority of the outstanding voting securities" of Eastern Europe Fund, which
for this purpose means the affirmative vote of the lesser of (1) more than 50%
of the outstanding shares of Eastern Europe Fund or (2) 67% or more of the
shares of Eastern Europe Fund present at the meeting if more than 50% of the
outstanding shares of Eastern Europe Fund are represented at the Meeting in
person or by proxy. A plurality of all the votes cast at the Meeting is required
for the election of the Trustee. Ratification of the selection of
PricewaterhouseCoopers LLP as independent accountants for Eastern Europe Fund
requires the affirmative vote of a majority of the votes cast thereon at the
Meeting.
Abstentions and broker non-votes will be counted as shares present at the
Meeting for quorum purposes, but will not be considered votes cast at the
Meeting. Accordingly, abstentions and broker non-votes are effectively a vote
against a proposal where the required vote is a percentage of the shares present
at the Meeting. Broker non-votes arise from a proxy returned by a broker holding
shares for a customer which indicates that the broker has not been authorized by
the customer to vote on a proposal. Any person giving a proxy has the power to
revoke it at any time prior to its exercise by executing a superseding proxy or
by submitting a written notice of revocation to the Secretary of Eastern Europe
Fund (the "Secretary"). To be effective, such revocation must be received by the
Secretary prior to the Meeting and must indicate your name and account number.
In addition, although mere attendance at the Meeting will not revoke a proxy, a
registered shareholder present at the Meeting may withdraw his proxy and vote in
person. Shareholders may also transact any other business not currently
contemplated that may properly come before the Meeting in the discretion of the
proxies or their substitutes.
Shareholders of record as of the close of business on June 21, 1999 (the
"Record Date"), are entitled to vote at the Meeting. On the Record Date, there
were approximately 5,864,783 shares of Eastern Europe Fund outstanding. Each
share is entitled to one vote for each full share held and a fractional vote for
a fractional share held. Except as set forth under the caption "Ownership of
Eastern Europe Fund and Developing Markets Fund Shares," AIM does not know of
any person who owned beneficially 5% or more of the shares of Eastern Europe
Fund or Developing Markets Fund on the Record Date.
Eastern Europe Fund has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Meeting.
Eastern Europe Fund expects to solicit proxies principally by mail, but it or
SCC may also solicit proxies by telephone, facsimile, telegraph, or personal
interview. Eastern Europe Fund officers and employees of A I M Advisors, Inc.
("AIM") who assist in the proxy solicitation will not receive any additional or
special compensation for any such efforts. Each Fund will bear its own expenses
incurred in connection with the Reorganization (including any shareholder
solicitation costs), which are expected to be approximately $70,000 for Eastern
Europe Fund and $15,000 for Developing Markets Fund. However, because Eastern
Europe Fund and Developing Markets Fund currently operate at
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<PAGE> 8
their respective expense limits, their portion of the Reorganization expenses
will effectively be borne by AIM through reimbursement of expenses and waivers.
Eastern Europe Fund will request broker/dealer firms, custodians, nominees, and
fiduciaries to forward proxy material to the beneficial owners of the shares
held of record by such persons. Eastern Europe Fund may reimburse such
brokers/dealer firms, custodians, nominees, and fiduciaries for their reasonable
expenses incurred in connection with such proxy solicitation.
Eastern Europe Fund intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about July 6, 1999.
2
<PAGE> 9
PROPOSAL NO. 1:
REORGANIZATION OF EASTERN EUROPE
FUND INTO DEVELOPING MARKETS FUND
REASONS FOR THE REORGANIZATION
BOARD CONSIDERATIONS
The Board, including a majority of trustees who are not "interested
persons" of Eastern Europe Fund, as that term is defined in the Investment
Company Act of 1940 ("1940 Act"), has determined that the Reorganization is in
the best interests of Eastern Europe Fund and that the interests of Eastern
Europe Fund's shareholders will not be diluted as a result of the
Reorganization.
At a Board meeting held on May 13, 1999, AIM proposed that the Board
approve the reorganization of Eastern Europe Fund into Developing Markets Fund
(each a "Fund"). The Board received from AIM written materials that described
the structure and expected tax consequences of the Reorganization and contained
information concerning both Funds, including comparative total return
information, a comparison of their investment objectives, policies, and risks,
comparative and pro forma expense information, and biographical information on
the portfolio managers of Developing Markets Fund. The Board then made extensive
inquiry into a number of factors with respect to the Reorganization, including:
(1) the compatibility of the Funds' investment objectives, policies, and
restrictions; (2) the Funds' respective investment performance; (3) the effect
of the Reorganization on the expense ratio of Developing Markets Fund Class A
shares and that expense ratio relative to Eastern Europe Fund's current expense
ratio; (4) the costs to be incurred by each Fund as a result of the
Reorganization; (5) the tax consequences of the Reorganization; (6) possible
alternatives to the Reorganization, including continuing to operate Eastern
Europe Fund as a closed-end fund, converting it to an open-end investment
company without reorganizing it into any pre-existing fund, or liquidating it;
and (7) the potential benefits of the Reorganization to other persons,
especially AIM and its affiliates.
As compared to the available alternatives, the Board determined that
converting Eastern Europe Fund to open-end format by reorganizing it into
Developing Markets Fund was the most advantageous to Eastern Europe Fund. As
with most closed-end funds, shares of Eastern Europe Fund have historically
traded at a discount to net asset value ("NAV"). This discount has persisted
despite conversion of Eastern Europe Fund to "interval fund" status and the
occurrence of repurchase offers at NAV in each of the past four years. While the
Board noted that the closed-end structure offers benefits in terms of portfolio
management, such as the ability to invest without limitation in illiquid
securities and to manage the portfolio without concern to inflows and outflows
of fund assets, continuing to operate Eastern Europe Fund as a closed-end fund
would not address the persistent discount to NAV at which Fund shares have
historically traded. Converting Eastern Europe Fund to open-end format would
eliminate the discount by enabling shareholders to redeem shares at NAV, rather
than selling them in the secondary market. On balance, the Board concluded that
the benefits of the closed-end structure were outweighed by the advantages of
operating as an open-end fund, most notably elimination of the discount to NAV.
Combining the Funds, rather than operating Eastern Europe Fund as a stand-alone
open-end fund, would provide Eastern Europe Fund shareholders with the benefits
of the open-end form of organization, while also providing them with potential
economies of scale and other benefits of a combination with a larger existing
fund having a similar primary investment objective and broader investment
policies. Operating Eastern Europe Fund as a stand-alone open-end fund might not
be economically feasible given its comparatively small asset base, which would
be subject to further reduction by possible net redemptions following conversion
to open-end format.
Terminating Eastern Europe Fund would result in additional expenses arising
out of liquidating the Fund's portfolio securities and would be a taxable event
to shareholders.
The Board then considered the investment objectives and policies of the
Funds. Eastern Europe Fund's investment objective is long-term capital
appreciation. Developing Markets Fund has a primary investment objective of
long-term growth of capital and a secondary objective of income, to the extent
consistent with growth of capital. To achieve its investment objectives,
Developing Markets Fund may invest substantially all
3
<PAGE> 10
of its assets in the securities of issuers located in developing markets. In
contrast, Eastern Europe Fund invests at least 65% of its total assets in
securities of issuers located in eastern Europe. As a result, Developing Markets
Fund possesses greater investment flexibility than Eastern Europe Fund. Such
flexibility could, over the long term, benefit shareholders. The Board also
considered the fact that, although Developing Markets Fund has a broader
investment mandate, the Funds' investment objectives and policies are
sufficiently compatible to enable Developing Markets Fund to maintain its
investment policies without any material changes due to the Reorganization. The
Board also noted that Eastern Europe Fund is subject to somewhat greater risk
than Developing Markets Fund because of its narrower geographical focus, but
recognized that Developing Markets Fund is potentially subject to more risk to
the extent that the other countries and regions in which it invests, primarily
in Latin American and Pacific Region countries, have experienced and may
continue to experience substantial economic difficulties. More information on
the risks of investing in developing markets generally, and in Latin America and
Pacific Region countries specifically, is provided below in "Comparison of
Principal Risk Factors -- Investing in Foreign Countries and Developing
Markets."
The Board also considered the historic performance of Eastern Europe Fund
in relation to the performance of Developing Markets Fund. AIM advised the Board
that, while past performance provides no guarantee of future results, Developing
Markets Fund recently had experienced better investment performance than Eastern
Europe Fund. Information on the relative performance of the Funds is provided
below in "Comparison of the Funds -- Performance."
The Board also considered the impact the Reorganization would have on
expenses. As a closed-end fund, Eastern Europe Fund currently pays no Rule 12b-1
distribution or service fees. The Developing Markets Fund Class A shares that
Eastern Europe Fund shareholders would receive in the Reorganization are subject
to an annual Rule 12b-1 distribution and service fee of up to 0.50% of average
net assets attributable to Class A. Open-end funds such as Developing Markets
Fund also normally pay higher transfer agency fees than closed-end funds due to
the continuous sale and redemption of their shares. In addition, open-end funds
such as Developing Markets Fund incur expenses associated with maintaining
continuous federal securities registration. Closed-end funds such as Eastern
Europe Fund typically do not incur these expenses.
In analyzing expenses, the Board also considered the lower investment
advisory and administration fees paid by Developing Market Fund. Eastern Europe
Fund pays total investment advisory and administrative fees of 1.40% of its
average net assets, which includes a voluntary reimbursement by AIM of 0.05% of
average net assets. Developing Markets Fund pays investment advisory and
administration fees of 0.975% on the first $500 million of its average net
assets, 0.95% on the next $500 million of those assets, 0.925% on the next $500
million of those assets, and 0.90% on those assets over $1.5 billion.
The Board also considered that, overall, the Reorganization may result in
slightly higher total operating expenses for Eastern Europe Fund shareholders.
For its fiscal year ended October 31, 1998, Eastern Europe Fund had total
operating expenses of 1.78% (1.83% before reimbursements) of average weekly net
assets. For its fiscal year ended October 31, 1998, Developing Markets Fund
Class A shares had total operating expenses of 1.93% (2.34% before a contractual
fee cap) of average daily net assets. The Board noted that Developing Markets
Fund's operating expenses included interest expenses of 0.20% of average daily
net assets. The Board was advised by AIM that, during the first six months of
the current fiscal year, those interest expenses had decreased by approximately
0.19%. Accordingly, the Reorganization may result in an increase in total annual
operating expenses for Eastern Europe Fund shareholders, but those expenses may
be slightly lower if interest expenses continue to be lower following the
Reorganization. For more information on the comparative fees and expenses of
Developing Markets Fund and Eastern Europe Fund, see "Comparison of the
Funds -- Fees and Expenses," below.
The Board noted that no initial sales charges would be imposed on the
Developing Markets Fund Class A shares issued to Eastern Europe Fund
shareholders in connection with the Reorganization. However, those shares will
be subject to a redemption fee equal to 2% of the NAV of the shares being
redeemed, which would apply to redemptions made during the first year following
the Reorganization. The fee would be payable to Developing Markets Fund. The
Board approved the temporary imposition of this redemption fee as reasonable in
light of Developing Markets Fund's anticipated expenses in connection with
post-Reorganization redemp-
4
<PAGE> 11
tions of those shares. These expenses include brokerage and other costs of
selling portfolio securities to raise cash for redemption requests and transfer
agency and other administrative expenses caused by redeeming shareholders. The
redemption fee will decrease the likelihood that these expenses would be borne
by present Developing Markets Fund shareholders. The Board also noted that
imposition of the redemption fee may deter some redemptions of Developing
Markets Fund Class A shares immediately following the Reorganization,
particularly with respect to investors who purchased Eastern Europe Fund shares
just prior to the Reorganization. In this regard, the Board considered the
detrimental effect that such short-term trading would have on Developing Markets
Fund.
The Board also considered that, although AIM will effectively bear
Developing Markets Fund's portion of the Reorganization-related expenses, it may
also receive an indirect benefit from the Reorganization. To the extent that
Developing Markets Fund's operating expenses decrease as a result of the
Reorganization, there could be a reduction in payment by AIM to cover its
reimbursement obligation to limit the expenses of Developing Markets Fund Class
A shares to 2.00% of average net assets. Further, the obligation of AIM to
reimburse the expenses of Eastern Europe Fund will terminate with the close of
the Reorganization.
Finally, the Board reviewed the principal terms of the Plan and noted that
Eastern Europe Fund would be provided with an opinion of counsel that the
Reorganization would be tax-free to it and its shareholders.
On the basis of the information provided to the Board and on its evaluation
of that information, the Board determined that the proposed Reorganization will
not dilute the interests of shareholders of Eastern Europe Fund and is in the
best interest of Eastern Europe Fund. Therefore, the Board recommended the
approval of the Plan by the shareholders of Eastern Europe Fund at the Meeting.
SYNOPSIS
THE REORGANIZATION
The Plan provides for the acquisition by Developing Markets Fund of all of
Eastern Europe Fund's assets in exchange solely for Developing Markets Fund
Class A shares and the assumption by Developing Markets Fund of all of Eastern
Europe Fund's liabilities. Those transactions will occur at 4:00 p.m., Central
time, on August 27, 1999, or on such later date as the conditions to the closing
are satisfied ("Closing Date"). Eastern Europe Fund will then distribute the
Developing Markets Fund Class A shares to its shareholders so that each Eastern
Europe Fund shareholder will receive full and fractional Developing Markets Fund
Class A shares equal in aggregate value to the NAV of the shareholder's shares
of Eastern Europe Fund as of the Closing Date. Eastern Europe Fund will be
liquidated as soon as is practicable thereafter.
Eastern Europe Fund and the Trust will receive an opinion of Kirkpatrick &
Lockhart LLP, their counsel, to the effect that the Reorganization will
constitute a tax-free reorganization within the meaning of section 368(a)(1)(C)
of the Internal Revenue Code of 1986, as amended ("Code"). Accordingly, neither
Fund nor any of their shareholders will recognize any gain or loss as a result
of the Reorganization. See "Additional Information About the
Reorganization -- Federal Income Tax Considerations," below.
COMPARISON OF THE FUNDS
Forms of Organization
Developing Markets Fund is an open-end fund organized as a series of the
Trust, a Delaware business trust, whose shares are continuously sold and
redeemed at NAV. Eastern Europe Fund is a closed-end "interval" fund organized
as a Massachusetts business trust whose shares are traded on the New York Stock
Exchange ("NYSE") and are subject to annual repurchase offers pursuant to Rule
23c-3 under the 1940 Act. Open-end funds such as Developing Markets Fund
continuously offer and redeem their shares, causing their total assets to
fluctuate. In contrast, most closed-end funds make a single offering of
non-redeemable shares and thus retain a stable pool of assets, which changes
only upon appreciation or depreciation of their portfolio investments.
Closed-end interval funds, like Eastern Europe Fund, conduct periodic repurchase
offers, which
5
<PAGE> 12
result in some fluctuation in their assets, although generally less than that
experienced by open-end funds like Developing Markets Fund.
Investment Objectives
The investment objectives of Developing Markets Fund and Eastern Europe
Fund are similar. Developing Markets Fund's primary investment objective is
long-term growth of capital. Its secondary investment objective is income, to
the extent consistent with seeking growth of capital. Eastern Europe Fund's
investment objective is long-term capital appreciation.
Investment Policies
As described below, the primary difference in the investment policies of
Developing Markets Fund and Eastern Europe Fund is the geographic focus of their
investments. Developing Markets Fund invests in issuers in developing markets in
Asia, Europe, Latin America, and elsewhere. Eastern Europe Fund, in contrast,
invests primarily in issuers located in Eastern Europe.
Developing Markets Fund seeks its investment objectives by investing,
normally, substantially all of its assets in equity and debt securities of
issuers located in developing markets. A majority of the Developing Markets
Fund's assets ordinarily is invested in developing market equity securities.
Developing Markets Fund may invest up to 50% of its assets in developing market
debt securities, which are selected based on their potential to provide a
combination of capital appreciation and/or current income. There is no limit on
the percentage of assets that Developing Markets Fund may invest in
non-investment grade debt securities.
Eastern Europe Fund seeks its objective by investing, normally, at least
65% of its total assets in equity and debt securities of issuers (including
government issuers) located in Eastern Europe. "Eastern European" countries
include Albania, Bulgaria, the Czech Republic, Germany, Hungary, Poland,
Romania, Slovakia, all countries west of the Ural Mountains that were formerly a
part of the USSR (including Russia, Belarus, Estonia, Latvia, Lithuania, and the
Ukraine), and all countries that formerly constituted Yugoslavia. Eastern Europe
Fund normally invests at least 50% of its total assets in the developing markets
of Eastern Europe, which includes all of the countries listed above except
Germany. In addition, Eastern Europe Fund may invest up to 35% of its total
assets in equity and debt securities of issuers (including government issuers)
located elsewhere in Europe, most of which are developed countries. There is no
limit on the percentage of assets that Eastern Europe Fund may invest in
non-investment grade debt securities.
Portfolio Management
Closed-end interval funds such as Eastern Europe Fund generally have
greater freedom in managing their portfolios than open-end funds like Developing
Markets Fund. Because closed-end interval funds are not subject to forced sale
of portfolio securities at undesirable times or prices to meet redemption
requests (except to the extent that securities must be sold to meet the demands
of periodic repurchase offers), they have more freedom to invest in illiquid
securities and may keep a larger percentage of their assets fully invested in
equity or debt securities, rather than in cash. In addition, closed-end funds
have greater flexibility under the 1940 Act to leverage their portfolios by
borrowing. Despite having greater flexibility in portfolio management, Eastern
Europe Fund has generally not engaged in such leveraging. Moreover, as of April
30, 1999, only about 14% of Eastern Europe Fund's assets were invested in
illiquid securities.
6
<PAGE> 13
Performance
Set forth below are average annual total returns for the periods indicated
for Eastern Europe Fund and Developing Markets Fund. Average annual total return
figures do not take into account sales charges applicable to purchases of
Developing Markets Fund Class A shares.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION (DATE)
-------- -------- ------------------
<S> <C> <C> <C>
Eastern Europe Fund.......................... (51.49)% (7.66)% (4.44)% (3/29/90)
Developing Markets Fund(1) (Class A
Shares).................................... (35.32)% N/A (9.09)% (1/11/94)
MSCI Emerging Markets Free Index(2).......... (25.34)% (9.27)% 7.26 % (3/31/90)
(9.27)%(12/31/93)
</TABLE>
(1) Prior to November 1, 1997, Developing Markets Fund operated as a closed-end
fund and was subject to different fees and expenses.
(2) The Morgan Stanley Capital International ("MSCI") Emerging Markets Free
Index measures the performance of securities listed on the exchanges of 26
countries. The index excludes shares that are not readily purchased by
non-local investors. The "Since Inception" dates are based on the closest
month-end to the Funds' respective inception dates.
Fees and Expenses
These tables describe the fees and expenses that you may pay if you buy and
hold shares of Developing Markets Fund and Eastern Europe Fund. The pro forma
information reflects the effects of the Reorganization. The information set
forth below is based on the Funds' fees and expenses for the year ended October
31, 1998.
7
<PAGE> 14
<TABLE>
<CAPTION>
DEVELOPING MARKETS
DEVELOPING MARKETS FUND CLASS A
FUND CLASS A PRO FORMA
SHAREHOLDER FEES ------------------ ------------------
<S> <C> <C>
(fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases......... 4.75%(1) 4.75%(1)
(as a percentage of offering price)
Maximum Deferred Sales Charge (load)..................... None(2) None(2)
(as a percentage of original purchase price or redemption
proceeds, whichever is less)
Redemption Fee........................................... None None(3)
(as a percentage of amount redeemed)
</TABLE>
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<S> <C> <C>
(expenses that are deducted from fund assets)
Management Fees.......................................... 0.98% 0.98%
Distribution and/or Service (12b-1) Fees................. 0.32%(4) 0.32%
Other Expenses...........................................
Other.................................................. 0.91% 0.91%
Interest............................................... 0.20% 0.20%
----- -----
Total Annual Fund Operating Expenses..................... 2.41% 2.41%
Expense Reimbursement(4)................................. 0.39%(5) 0.39%(5)
----- -----
Net Expenses............................................. 2.02% 2.02%
</TABLE>
(1) Shares issued in connection with the Reorganization are not subject to the
sales charge.
(2) If you buy $1,000,000 or more of Developing Markets Fund Class A shares and
redeem these shares within 18 months from the date of purchase, you may pay
a 1% contingent deferred sales charge (CDSC) at the time of redemption.
(3) A 2% redemption fee applies for the first year following the Reorganization
to shares issued in connection with the Reorganization.
(4) Restated to reflect the reorganization of AIM Emerging Markets Fund into
Developing Markets Fund in February 1999.
(5) The investment advisor has contractually agreed to limit expenses.
As a result of Rule 12b-1 fees, long-term shareholders in Developing
Markets Fund may pay more than the maximum permitted initial sales charge.
Set forth below are the annual operating expenses as a percentage of net
assets for shares of Eastern Europe Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES EASTERN EUROPE FUND
<S> <C>
Sales Load (as a percentage of offering price).............. None(1)
Dividend Reinvestment and Cash Purchase Plan Fees........... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<S> <C>
Management Fees............................................. 1.25%
Administration Fees......................................... 0.20%
Other Expenses.............................................. 0.38%
-----
Total Annual Fund Operating Expenses........................ 1.83%
Expense Reimbursement(2).................................... 0.05%
-----
Net Expenses................................................ 1.78%
</TABLE>
(1) Eastern Europe Fund shares tendered in conjunction with an Annual Repurchase
Offer conducted by the Fund pursuant to Rule 23c-3 under the 1940 Act are
subject to a repurchase fee that does not exceed 2%.
(2) AIM has voluntarily undertaken to reduce the administration fee that Eastern
Europe Fund pays by 0.05%.
8
<PAGE> 15
Expense Example
The example is intended to help you compare the costs of investing in Class
A shares of Developing Markets Fund, both before and after the Reorganization,
with the costs of investing in shares of Eastern Europe Fund.
The example assumes that you invest $10,000 in each Fund for the time
periods indicated. The example also assumes that your investments each have 5%
return each year and that each Fund's operating expenses remain the same. To the
extent fees are waived, the expenses will be lower. Although your actual returns
and costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Developing Markets Fund Class A shares................... $708 $1,191 $1,699 $3,091
Eastern Europe Fund...................................... $186 $ 576 $ 990 $2,148
Combined Fund Pro Forma Class A shares................... $708 $1,191 $1,699 $3,091
</TABLE>
Sales Charges
Developing Markets Fund Class A shares received in connection with the
Reorganization are not subject to the customary initial sales charge of 4.75%.
However, those shares will be subject to a 2% redemption fee for the first year
following the Reorganization. Shares received in connection with the
Reorganization and exchanged for shares in other AIM Funds will be subject to
the 2% redemption fee upon the exchange. Any new purchases of Developing Markets
Fund Class A shares will be subject to the initial sales charge but not the
redemption fee.
Distribution, Purchase, Exchange, and Redemption
Shares of Developing Markets Fund are available through A I M Fund
Services, Inc. ("Transfer Agent") or through any dealer authorized by A I M
Distributors, Inc. ("AIM Distributors") to sell shares of the AIM Funds. The
minimum initial investment in Developing Markets Fund is $500; each additional
investment must be $50 or more. These minimums may be waived or reduced for
investments by employees of AIM or its affiliates, certain pension plans and
retirement accounts, and participants in an AIM Fund's automatic investment
plan.
Developing Markets Fund Class A shares pay a fee in the amount of up to
0.50% of average daily net assets to AIM Distributors for distribution and
shareholder services pursuant to a Rule 12b-1 plan (the "12b-1 fee"). As noted
above, Developing Markets Fund Class A shares are generally subject to an
initial sales charge of 4.75%. Shares of Developing Markets Fund may be
exchanged for shares of other AIM Funds of the corresponding class and may be
acquired through exchange of the corresponding Class of shares of other AIM
Funds, as described in Developing Markets Fund's prospectus. No initial sales
charge is imposed on the shares acquired through an exchange. Exchanges are
subject to minimum investment and other requirements of the AIM Fund into which
exchanges are made. Developing Markets Fund Class A shares may be redeemed by
the Fund at NAV and are generally not subject to a CDSC.
Shares of Eastern Europe Fund are listed and publicly traded on the NYSE
under the symbol "GTF" and are not subject to distribution fees. The Developing
Markets Fund Class A shares that would be issued to Eastern Europe Fund
shareholders in connection with the Reorganization are subject to the 12b-1 fee.
Eastern Europe Fund shares were issued in a public offering completed on March
29, 1990. Shareholders of Eastern Europe Fund currently do not have an exchange
privilege. Upon completion of the Reorganization, however, former Eastern Europe
Fund shareholders would hold Developing Markets Fund Class A shares and would
enjoy the same exchange privileges as other Developing Markets Fund Class A
shareholders, although such exchanges would be subject to the one-year
redemption fee described above. Although Eastern Europe Fund shares are
non-redeemable, shareholders of Eastern Europe Fund may sell their shares on the
NYSE or participate in one of the Fund's annual repurchase offers. As noted
above, the Developing Markets Fund
9
<PAGE> 16
Class A shares received by Eastern Europe Fund shareholders in the
Reorganization will be subject to a redemption fee in certain circumstances.
Operations of Developing Markets Fund Following the Reorganization
Although there are differences in the investment objectives and policies of
the Funds, it is not expected that Developing Markets Fund will revise its
investment objectives or any of its policies following the Reorganization to
reflect those of Eastern Europe Fund. Rather, because Eastern Europe Fund's
assets are predominantly equity securities of Eastern European issuers, all of
which are consistent with Developing Markets Fund's investment policies, AIM and
IAML, Eastern Europe Fund's investment advisor and sub-advisor, respectively,
believe that substantially all of Eastern Europe Fund's assets could be
transferred to and held by Developing Markets Fund if the Reorganization is
approved. Upon such approval of the Reorganization, Eastern Europe Fund will
sell any assets that are inconsistent with Developing Markets Fund's investment
policies prior to the effective time of the Reorganization, and the proceeds
thereof will be held in temporary investments or reinvested in assets that
qualify to be held by Developing Markets Fund. The need, if any, for Eastern
Europe Fund to dispose of assets prior to the effective time of the
Reorganization may result in selling securities at a disadvantageous time and
could result in Eastern Europe Fund's realizing gains or losses that would not
otherwise have been realized.
Investment Advisors and Portfolio Management
AIM serves as investment advisor, and INVESCO Asset Management Limited
("IAML") serves as investment sub-advisor, to both Eastern Europe Fund and
Developing Markets Fund. AIM and IAML use a team approach to managing the Funds'
respective investment portfolios. The individual members of the team who are
responsible for the day-to-day management of Eastern Europe Fund's portfolio
are:
- Peter Jarvis, Portfolio Manager for Eastern Europe Fund since 1998 and a
Fund Manager with IAML since 1993. Also since 1998, he has been a member
of the INVESCO Central and Eastern Europe Asset Management Group
specializing in Eastern Europe.
- Jonathan Brock, Portfolio Manager for Eastern Europe Fund since 1998 and
a Senior Investment Manager with IAML since 1994. Also since 1994, he has
been a member of the INVESCO Central and Eastern Europe Asset Management
Group. From 1991 to 1994, he was a Chartered Accountant with Price
Waterhouse in London.
- Nadya Wells, Portfolio Manager for Eastern Europe Fund since 1998 and an
Investment Manager with IAML since 1995. Also since 1995, she has been a
member of the INVESCO Central and Eastern Europe Asset Management Group.
From 1993 to 1995 she was with Ernst & Young Management Consultancy in
London.
The individual members of the team who are responsible for the day-to-day
management of Developing Markets Fund's portfolio are:
- Francesco Bertoni, Portfolio Manager for Developing Markets Fund since
1998 and Head of Global Emerging Markets for IAML since 1995. Mr. Bertoni
was, from 1994 to 1999, Investment Director for IAML, from 1990 to 1995,
a Portfolio Manager for IAML and, from June to December 1998, a Portfolio
Manager for INVESCO (NY), Inc., an indirect wholly owned subsidiary of
AMVESCAP PLC.
- Craig Munro, Portfolio Manager of Developing Markets Fund since 1999 and
Head of Emerging Markets Fixed Income and a Portfolio Manager for IAML
since December 1998. Prior to this, Mr. Munro was, from August 1997 to
December 1998, a Portfolio Manager for INVESCO (NY), Inc. and, from 1993
to August 1997, Vice President and Senior Analyst in the Emerging Markets
Group of the Global Fixed Income Division of Merrill Lynch Asset
Management.
- Christine Rowley, Portfolio Manager of Developing Markets Fund since 1999
and a Portfolio Manager for IAML since December 1998. Prior to this, Ms.
Rowley was, from January 1991 to December 1998,
10
<PAGE> 17
a Portfolio Manager for INVESCO (NY), Inc., GT Asset Management PLC
(London) and INVESCO GT Asset Management Asia Ltd. (Hong Kong), all
indirect wholly owned subsidiaries of AMVESCAP PLC.
COMPARISON OF PRINCIPAL RISK FACTORS
PRIMARY DIFFERENCES IN RISKS OF THE FUNDS
Developing Markets Fund and Eastern Europe Fund are subject to
substantially the same investment risks arising out of investing in foreign
securities generally and developing markets specifically. However, Eastern
Europe Fund is subject to additional risk arising out of its narrower geographic
focus. Eastern Europe Fund focuses its investments in a small number of
countries, many of which are either involved in, or may be affected by, the
current instability in that region. By contrast, Developing Markets Fund may
invest in developing markets around the world, and thus has greater latitude to
limit its investments in countries that are undergoing political or economic
upheaval. On the other hand, some of the non-European countries and regions in
which Developing Markets Fund invests, such as Latin America and the Pacific
Region, have recently experienced substantial economic difficulties.
Investments in Latin American countries involve special risks. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years, which have had, and may continue to
have, very negative effects on the economies and securities markets of Latin
American countries. Certain Latin American countries are among the largest
debtors to commercial banks and foreign governments. At times, some of these
countries have suspended payments of principal and/or interest on external debt.
Some Latin American securities markets have experienced high volatility in
recent years. Latin American countries may close certain sectors of their
economies to equity investments by foreigners. Due to these and other
restrictions on direct investment by foreign entities, and to the absence of
securities markets and publicly owned corporations in certain Latin American
countries, investments may be made solely or primarily through governmentally
approved investment vehicles or companies. Certain Latin American countries may
have managed currencies that are maintained at artificially high levels to the
U.S. dollar rather than at market determined levels. 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.
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
currency exchange constraints. Territorial disputes exist between North Korea
and South Korea. Developing Markets Fund may invest in Hong Kong, which reverted
to Chinese administration on July 1, 1997. Investments in Hong Kong may be
subject to expropriation, nationalization, or confiscation, in which case
Developing Markets Fund could lose its entire investment in Hong Kong. In
addition, reversion of Hong Kong also presents a risk that the Hong Kong dollar
will be devalued and a risk of possible loss of investor confidence in Hong
Kong's currency, stock market, and assets.
RISKS COMMON TO BOTH FUNDS
Investing in Securities Generally
Investing in either Developing Markets Fund or Eastern Europe Fund entails
a risk that you could lose all or a portion of your investment. The value of
your investment in either Fund goes up and down with the prices of the
securities in which the Fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions, and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. When
interest rates rise, bond prices fall; the longer the bond's duration, the more
sensitive it is to this risk.
11
<PAGE> 18
Investing in Foreign Securities and Developing Markets
Investments in foreign securities may be affected by, among others, the
following factors:
- Currency exchange rates -- The dollar value of the Funds' foreign
investments will be affected by changes in the exchange rates between the
dollar and the currencies in which those investments are traded.
- Political and economic conditions -- The value of the Funds' foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies
in those countries.
- Regulations -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available
information about foreign companies than about U.S. companies.
- Markets -- The securities markets of other countries are smaller than
U.S. securities markets. As a result, many foreign securities may be less
liquid and their prices may be more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign
companies located in developing countries more than those in countries with
mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
Lower Quality Debt
Both Developing Markets Fund and Eastern Europe Fund may invest up to 100%
of their respective total assets in debt securities rated below investment grade
or, if unrated, deemed by AIM or IAML to be of comparable quality ("junk
bonds"). Compared to higher-quality debt securities, junk bonds involve greater
risk of default or price changes due to changes in the credit quality of the
issuer because they are generally unsecured and may be subordinated to other
creditors' claims. The value of junk bonds often fluctuates in response to
issuer, political, or economic developments and can decline significantly over
short periods of time or during periods of general or regional economic
difficulty. During those times, the bonds may be difficult to value or sell at a
fair price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Sovereign Debt
Both Developing Markets Fund and Eastern Europe Fund may invest in
sovereign debt securities of developing country governments, including Brady
Bonds. Brady Bonds are debt restructurings that provide for the exchange of cash
and loans for newly issued bonds. Investments in sovereign debt securities of
developing countries involve special risks. Sovereign debt securities of
developing countries are generally lower-quality debt securities, equivalent to
junk bonds. Accordingly, they are subject to many of the same risks as junk
bonds, detailed above. In addition, sovereign debt securities are subject to the
risk that, under certain political, diplomatic, social, or economic
circumstances, some developing countries that issue sovereign debt securities
may be unable or unwilling to make principal or interest payments as they come
due.
Illiquid Securities
Developing Markets Fund may invest up to 15% of its net assets in illiquid
securities. Eastern Europe Fund may invest without restriction (consistent with
its obligation to maintain adequate liquidity to satisfy its annual repurchase
offers) in certain restricted or otherwise illiquid securities. Any limitations
on resale and marketability of such securities may have the effect of preventing
the Funds from disposing of such securities at the time desired or at a
reasonable price. In addition, in order to resell restricted securities, the
Funds might have to bear the expense and incur the delays associated with
registering such securities.
12
<PAGE> 19
Non-Diversified Classification
Both Developing Markets Fund and Eastern Europe Fund are classified under
the 1940 Act as "non-diversified" funds. Non-diversified funds may invest in
fewer issuers than diversified funds. As a result, each Fund may be subject to
greater investment and credit risk, than if it invested more broadly.
Year 2000
The value of shares in both Developing Markets Fund and Eastern Europe Fund
could be adversely affected if the computer systems used by the Funds'
investment advisors or other service providers are unable to distinguish the
year 2000 from the year 1900.
The Funds' investment advisors and independent technology consultants are
working to avoid Year 2000-related problems in their systems and to obtain
assurances that other service providers are taking similar steps.
Year 2000 problems may also affect issuers in whose securities the Funds
invest. AIM considers the Year 2000 preparedness of the companies in which the
Funds invest as one factor among many in deciding whether to purchase or sell a
security.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of Developing Markets Fund's Class A shares. Certain
information reflects financial results for a single Developing Markets Fund
Class A share.
The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in Developing Markets Fund Class A shares
(assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose
report, along with Developing Markets Fund's financial statements, is included
in Developing Markets Fund's Annual Report to Shareholders, which is available
upon request.
13
<PAGE> 20
On October 31, 1997, Developing Markets 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 whose single class of shares traded on the NYSE. The fees and
expenses of Developing Markets Fund differ from those of the Predecessor Fund.
Developing Markets Fund's fiscal year ends October 31, rather than December 31,
which was the Predecessor Fund's fiscal year-end.
<TABLE>
<CAPTION>
DEVELOPING MARKETS FUND: CLASS A(A)
---------------------------------------------------------------------------
TEN
YEAR MONTHS
ENDED ENDED YEAR ENDED JANUARY 11, 1994
OCTOBER 31, OCTOBER 31, DECEMBER 31, TO DECEMBER 31,
1998(b) 1997(c) 1996(c) 1995(c) 1994(c)
----------- ----------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of
period.................... $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
Income From Investment
operations:
Net investment income....... 0.39(d)(e) 0.25 0.53 0.72 0.35
Net realized and
unrealized gain (loss)
on investments.......... (5.10) (1.53) 2.19 (0.84) (2.46)
------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations.............. (4.71) (1.28) 2.72 (0.12) (2.11)
------- -------- -------- -------- --------
Redemption fees
retained................ 0.28 -- -- -- --
-------
Distributions to
shareholders:
From net investment
income.................. (0.60) -- (0.48) (0.72) (0.35)
From net realized gain on
investments............. -- -- -- -- (0.10)
------- -------- -------- -------- --------
Total distributions....... (0.60) -- (0.48) (0.72) (0.45)
------- -------- -------- -------- --------
Net asset value, end of
period.................... $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
======= ======== ======== ======== ========
Market value, end of
period.................... N/A $ 11.81 $ 11.63 $ 9.75 $ 9.75
======= ======== ======== ======== ========
Total investment return
(based on market value)... N/A 1.62%(f) 24.18% 6.60% (32.16)%(f)
Total investment return
(based on net asset
value).................... (37.09)%(g) (9.25)%(f) 23.59% (0.95)% (14.07)%(f)
Ratios and supplemental
data:
Net assets, end of period
(in 000's)................ $87,517 $457,379 $504,012 $422,348 $452,872
Ratio of net investment
income to average net
assets:
With expense reductions
and reimbursement....... 3.84% 2.03%(h) 4.07% 6.33% 2.75%(h)
Without expense reductions
and reimbursement....... 3.43% 1.95%(h) 4.04% 6.30% 2.75%(h)
Ratio of expenses to average
net assets excluding
interest expense:
With expense reductions
and reimbursement....... 1.73% 1.75%(h) 1.82% 1.77% 2.01%(h)
Without expense reductions
and reimbursement....... 2.14% 1.83%(h) 1.85% 1.80% 2.01%(h)
Ratio of interest expense to
average net assets(i)..... 0.20% N/A N/A N/A N/A
Portfolio turnover
rate(i)................... 111% 184%(h) 138% 75% 56%
</TABLE>
- ---------------
(a) All capital shares of the Predecessor Fund issued and outstanding on
October 31, 1997 were reclassified as Class A shares.
14
<PAGE> 21
(b) These selected per share data were calculated based upon average shares
outstanding during the period.
(c) These financial highlights provide per share information of the
Predecessor Fund for the period January 11, 1994 (commencement of
operations) up to and including October 31, 1997.
(d) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(e) Before reimbursement, the net investment income per share would have been
reduced by $0.04.
(f) Not annualized.
(g) Total investment return does not include sales charges.
(h) Annualized.
(i) Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of Developing Markets Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable.
15
<PAGE> 22
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Plan. Significant provisions of the Plan are summarized
below; however, this summary is qualified in its entirety by reference to the
Plan, a form of which is attached as Appendix A to this Proxy
Statement/Prospectus.
The Plan contemplates (a) Developing Markets Fund acquiring on the Closing
Date all the assets of Eastern Europe Fund in exchange solely for Developing
Markets Fund Class A shares and Developing Markets Fund's assumption of all of
Eastern Europe Fund's liabilities and (b) the distribution of those shares to
Eastern Europe Fund shareholders. Eastern Europe Fund's assets include all cash,
cash equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on its books, and other property owned by it as of the close of
regular trading on the NYSE on the Closing Date ("Valuation Time")
(collectively, the "Assets"). Developing Markets Fund will assume from Eastern
Europe Fund all its liabilities, debts, obligations, and duties of whatever kind
or nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Valuation Time, and whether or not referred to in the Plan (collectively, the
"Liabilities"); provided, however, that Eastern Europe Fund will use its best
efforts to discharge all of its known Liabilities prior to the Valuation Time.
Developing Markets Fund will deliver its Class A shares to Eastern Europe Fund,
which then will be distributed to Eastern Europe Fund's shareholders.
The value of the Assets to be acquired, and the amount of the Liabilities
to be assumed, by Developing Markets Fund and the NAV of a Class A share of
Developing Markets Fund will be determined as of the Valuation Time. Where
market quotations are readily available, portfolio securities will be valued
based upon the quotations, provided they adequately reflect, in AIM's judgment,
the fair value of the security. Where market quotations are not readily
available, securities will be valued based upon appraisals received from a
pricing service using a computerized matrix system or appraisals derived from
information concerning the security or similar securities received from
recognized dealers in those securities. The amortized cost method of valuation
generally will be used to value debt instruments with 60 days or less remaining
to maturity, unless a Fund's Board of Trustees determines that this method does
not represent fair value. All other securities and assets will be valued at fair
value as determined in good faith by or under the direction of each Fund's Board
of Trustees.
On, or as soon as practicable after, the Closing Date, Eastern Europe Fund
will distribute to its shareholders of record the Developing Markets Fund Class
A shares it receives so that each Eastern Europe Fund shareholder will receive a
number of full and fractional Class A shares of Developing Markets Fund equal in
aggregate NAV to the shareholder's shares in Eastern Europe Fund. Such
distribution will be accomplished by opening accounts on the books of Developing
Markets Fund in the names of Eastern Europe Fund's shareholders and crediting
such accounts with Developing Markets Fund Class A shares equal in aggregate NAV
to the shareholders' shares in Eastern Europe Fund. Fractional shares of
Developing Markets Fund will be rounded to the third decimal place.
Immediately after the Reorganization, each former shareholder of Eastern
Europe Fund will own Class A shares of Developing Markets Fund equal in NAV to
the aggregate NAV of that shareholder's shares in Eastern Europe Fund
immediately prior to the Reorganization. The NAV per share of Developing Markets
Fund will not be changed as a result of the Reorganization. Thus, the
Reorganization will not result in a dilution of any shareholder interest.
DESCRIPTION OF SECURITIES TO BE ISSUED
The Trust is registered with the SEC as an open-end management investment
company. Pursuant to the Trust's Agreement and Declaration of Trust, the Trust
may issue an unlimited number of shares. The Trust's Board of Trustees (the
"Trust's Board") has established Developing Markets Fund as a series of the
Trust and has authorized the public offering of four classes of shares of that
Fund, designated Class A, Class B, Class C,
16
<PAGE> 23
and Advisor Class shares. Only Class A shares will be issued in connection with
the Reorganization. Although Class A shares are generally subject to an initial
sales charge of 4.75%, this sales charge will be waived for the shares issued in
connection with the Reorganization. As noted above, those shares will be subject
to a 2% redemption fee for the first year following the Reorganization.
Each share of Developing Markets Fund represents an equal proportionate
interest with other shares in that Fund, has a par value of $0.01 per share, has
equal earnings, assets, and voting privileges, except as noted in the Developing
Markets Fund Statement of Additional Information, and is entitled to such
dividends and other distributions out of the income earned and gain realized on
the assets belonging to the Fund as may be declared by the Trust's Board. Each
share in a class represents an equal proportionate interest in Developing
Markets Fund's assets with each other share in that class. Shares of Developing
Markets Fund entitle their holders to one vote per full share and fractional
votes for fractional shares held, except that each Class has exclusive voting
rights on matters pertaining to its plan of distribution. Shares of Developing
Markets Fund, when issued, are fully paid and nonassessable.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from Developing Markets Fund's net investment income, if any, are
distributed at least annually. Any net capital gain (the excess of net long-term
capital gain over net short-term capital loss) and net short-term capital gain
realized from the sale of portfolio securities and net gains from foreign
currency transactions are also distributed at least annually. Shareholders of
Developing Markets Fund may reinvest dividends and other distributions in
additional Fund shares of the distributing class (or in shares of the
corresponding class of other AIM Funds) on the payment date at those shares' NAV
that day or receive the distribution amount in cash.
Dividends from Eastern Europe Fund's net investment income, if any, are
distributed at least annually. Any net capital gain and net short-term capital
gain realized from the sale of portfolio securities and net gains from foreign
currency transactions are also distributed at least annually. Shareholders of
Eastern Europe Fund may participate in the Fund's Dividend Reinvestment Plan,
under which dividends and capital gains distributions are automatically invested
in additional shares of the Fund at NAV. Alternatively, shareholders may elect
to receive dividends and other distributions in cash.
Each Fund may make additional distributions if necessary to avoid a 4%
excise tax on certain undistributed ordinary income and capital gains.
On or before the Closing Date, Eastern Europe Fund will declare as a
distribution substantially all of its undistributed net investment income, net
capital gain, net short-term capital gain, and net gains from foreign currency
transactions to maintain its tax status as a regulated investment company.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Plan, some of which may be waived by Eastern Europe Fund. In
addition, the Plan may be amended in any mutually agreeable manner, except that
no amendment may be made subsequent to the Meeting that would have a material
adverse effect on Eastern Europe Fund shareholders' interests.
POTENTIAL NET REDEMPTION
If a large percentage of Eastern Europe Fund shareholders redeem their
shares after the Reorganization, significant costs may be imposed on Developing
Markets Fund. The proposed redemption fee is intended to offset such costs, but,
to the extent those costs exceed the fees charged, those costs would be borne by
Developing Markets Fund shareholders. To meet redemption requests, Developing
Markets Fund may be required either to draw upon a line of credit, which would
impose some interest costs, or to sell portfolio securities, which would incur
brokerage costs and may result in capital gain or loss that would not otherwise
have been recognized. Any gain would, to the extent it is not otherwise offset
during the year, be distributed to shareholders. Recognition and distribution of
gain would have two negative consequences: first, non-redeeming shareholders
would be required to pay taxes on larger capital gain distributions than they
would
17
<PAGE> 24
otherwise; and second, Developing Markets Fund may need to sell additional
portfolio securities to raise cash to make the distributions, potentially
resulting in recognition of additional capital gain.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Developing Markets Fund of the Assets will
be the same as Eastern Europe Fund's book cost basis of the Assets.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of all of Eastern Europe Fund's assets solely for Developing
Markets Fund Class A shares and Developing Markets Fund's assumption of all the
liabilities of Eastern Europe Fund is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368 of the Code. Eastern
Europe Fund and the Trust will receive an opinion of Kirkpatrick & Lockhart LLP,
their counsel, substantially to the effect that:
(1) Developing Markets Fund's acquisition of the Assets in exchange
solely for Developing Markets Fund Class A shares and Developing Markets
Fund's assumption of the Liabilities, followed by Eastern Europe Fund's
distribution of those shares pro rata to its shareholders constructively in
exchange for their Eastern Europe Fund shares, will qualify as a
reorganization within the meaning of section 368(a)(1)(C) of the Code, and
each Fund will be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) Eastern Europe Fund will recognize no gain or loss on the transfer
of the Assets to Developing Markets Fund in exchange solely for Developing
Markets Fund Class A shares and Developing Markets Fund's assumption of the
Liabilities or on the subsequent distribution of those shares to Eastern
Europe Fund's shareholders in constructive exchange for their Eastern
Europe Fund shares;
(3) Developing Markets Fund will recognize no gain or loss on its
receipt of the Assets in exchange solely for Developing Markets Fund Class
A shares and its assumption of the Liabilities;
(4) Developing Markets Fund's basis for the Assets will be the same as
Eastern Europe Fund's basis therefor immediately before the Reorganization,
and Developing Markets Fund's holding period for the Assets will include
Eastern Europe Fund's holding period therefor;
(5) An Eastern Europe Fund shareholder will recognize no gain or loss
on the constructive exchange of all its Eastern Europe Fund shares solely
for Developing Markets Fund Class A shares pursuant to the Reorganization;
and
(6) An Eastern Europe Fund shareholder's aggregate basis for the
Developing Markets Fund Class A shares to be received by it in the
Reorganization will be the same as the aggregate basis for its Eastern
Europe Fund shares to be constructively surrendered in exchange for those
Developing Market Fund shares, and its holding period for those Developing
Market Fund Class A shares will include its holding period for those
Eastern Europe Fund shares, provided they are held as capital assets by the
shareholder on the Closing Date.
Notwithstanding the foregoing, however, the opinion will not express any
conclusion about the tax consequences of the Reorganization regarding the
treatment of unrealized gain or loss on Assets (such as certain futures and
foreign currency contracts) that is required to be recognized for federal income
tax purposes under a market-to-market system of accounting. The Funds do not
expect that the amount of such gain will be significant.
Utilization by Developing Markets Fund after the Reorganization of any
pre-Reorganization capital losses realized by Eastern Europe Fund would be
subject to limitation in future years under the Code.
Shareholders of Eastern Europe Fund should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the
18
<PAGE> 25
federal income tax consequences of the Reorganization, those shareholders also
should consult their tax advisers as to state and local tax consequences, if
any, of the Reorganization.
ORGANIZATION OF THE FUNDS
Developing Markets Fund is a non-diversified series of the Trust, an
open-end management investment company. Developing Markets Fund commenced
operations, as a series of AIM Investment Funds, Inc. ("Investment Funds,
Inc."), an open-end management investment company on November 1, 1997, as the
successor (in a reorganization) to G.T. Global Developing Markets Fund, Inc., a
closed-end investment company that had commenced operations on January 11, 1994.
The Trust was organized as a Delaware business trust on May 7, 1998, and on
September 8, 1998, it acquired the assets and assumed the liabilities of
Investment Funds, Inc. As a result of this acquisition, Developing Markets Fund
became a series of the Trust. The operations of the Trust, as a Delaware
business trust, are governed by its Agreement and Declaration of Trust, as
amended, and Delaware law. The overall direction and supervision of Developing
Markets Fund is the responsibility of the Trust's Board, which has the primary
duty of ensuring that the Fund's general investment policies and programs are
adhered to and the Fund is properly administered.
Eastern Europe Fund is a non-diversified closed-end management investment
company that was organized as a Massachusetts business trust under the name
"G.T. Greater Europe Fund" on December 6, 1989. On May 31, 1996, the Fund's
investment focus was narrowed and its name changed to "G.T. Global Eastern
Europe Fund." Concurrent with the name change, the Fund was converted to
"interval fund" status pursuant to Rule 23c-3 under the 1940 Act and has since
conducted annual repurchase offers for its shares. On May 29, 1998, the Fund was
renamed "AIM Eastern Europe Fund." Eastern Europe Fund shares have been listed
and publicly traded on the NYSE under the symbol "GTF" since March 29, 1990. The
operations of Eastern Europe Fund, as a Massachusetts business trust, are
governed by its Agreement and Declaration of Trust, as amended, and
Massachusetts law. The overall direction and supervision of Eastern Europe Fund
is the responsibility of its Board, which has the primary duty of ensuring that
the Fund's general investment policies and programs are adhered to and the Fund
is properly administered.
NAV, MARKET PRICE, AND DISCOUNT
OF EASTERN EUROPE FUND SHARES
Eastern Europe Fund shares trade on the NYSE. The following table sets
forth, on a quarterly basis, the high and low NAVs of the shares, the high and
low sales prices of the shares, and the discount to NAV that these figures
represent, since May 1, 1996, when Eastern Europe Fund was converted to
"interval fund" status pursuant to Rule 23c-3 under the 1940 Act.
<TABLE>
<CAPTION>
NAV MARKET PRICE (DISCOUNT)
------------- --------------- ----------------
HIGH LOW HIGH LOW HIGH LOW
----- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1996 to July 31, 1996............... 16.03 15.43 14.625 12.625 (24.55)% (5.64)%
August 1, 1996 to October 31, 1996......... 16.99 15.71 14.125 12.750 (25.20)% (19.49)%
November 1, 1996 to January 31, 1997....... 18.21 15.01 15.625 12.125 (24.90)% (13.63)%
February 1, 1997 to April 30, 1997......... 18.78 16.85 16.000 14.000 (22.00)% (13.38)%
May 1, 1997 to July 31, 1997............... 20.72 17.21 18.750 14.750 (21.82)% (10.27)%
August 1, 1997 to October 31, 1997......... 23.47 18.62 20.625 16.250 (34.83)% (8.20)%
November 1, 1997 to January 31, 1998....... 18.62 12.05 16.875 10.563 (40.85)% (5.56)%
February 1, 1998 to April 30, 1998......... 14.77 12.05 12.750 10.938 (20.21)% (5.93)%
May 1, 1998 to July 31, 1998............... 14.68 10.13 12.250 7.938 (31.91)% (17.33)%
August 1, 1998 to October 31, 1998......... 11.11 6.00 8.750 4.438 (61.53)% (20.91)%
November 1, 1998 to January 31, 1999....... 8.28 7.23 6.688 5.563 (33.11)% (16.08)%
February 1, 1999 to April 30, 1999......... 7.96 7.11 6.625 5.500 (30.91)% (15.92)%
</TABLE>
19
<PAGE> 26
CAPITALIZATION
The following table shows the capitalization of each Fund as of its fiscal
year ended October 31, 1998, and on a pro forma combined basis (unaudited) as of
that date, giving effect to the Reorganization.
<TABLE>
<CAPTION>
DEVELOPING MARKETS PRO FORMA CLASS A
EASTERN EUROPE FUND FUND: CLASS A COMBINED
------------------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets................................ $47,099,546 $87,517,225 $134,616,771
Shares Outstanding........................ 6,516,426 11,616,154 17,872,961
Net Asset Value Per Share................. $ 7.23 $ 7.53 $ 7.53
</TABLE>
The following table shows the capitalization of each Fund as of April 30,
1999, and on a pro forma combined basis (unaudited) as of that date, giving
effect to the Reorganization.
<TABLE>
<CAPTION>
DEVELOPING MARKETS PRO FORMA CLASS A
EASTERN EUROPE FUND FUND: CLASS A COMBINED
------------------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets.............................. $51,869,960(1) $138,271,639(2) $190,141,599(1)(2)
Shares Outstanding...................... 6,516,426(1) 14,529,141 19,977,749(1)
Net Asset Value Per Share............... $ 7.96 $ 9.52 $ 9.52
</TABLE>
- ---------------
(1) These figures do not reflect the payment made on May 7, 1999, in the amount
of $5,082,820.11 to Eastern Europe Fund shareholders participating in the
1999 repurchase offer, nor do they reflect the decrease in the number of
outstanding shares as a result of that repurchase offer.
(2) These figures reflect the addition of the assets of AIM Emerging Markets
Fund resulting from the reorganization of that fund into Developing Markets
Fund completed on February 12, 1999.
REQUIRED VOTE. The proposal to approve the Plan requires the affirmative
vote of a "majority of the outstanding voting securities" of Eastern Europe
Fund, which for this purpose means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of Eastern Europe Fund or (2) 67% or
more of the shares of Eastern Europe Fund present at the Meeting if more than
50% of the outstanding shares of Eastern Europe Fund are represented at the
Meeting in person or by proxy.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1
------------------------
PROPOSAL NO. 2:
ELECTION OF A TRUSTEE
The Board has nominated the individual identified below for election to the
Board at the Meeting. It is the intention of each proxyholder named on the
accompanying proxy card to vote FOR the election of the nominee listed below
unless the Eastern Europe Fund shareholder specifically indicates on his or her
proxy card a desire to withhold authority to vote for the nominee. The Board
does not contemplate that the nominee, who has consented to being nominated,
will be unable to serve as a Trustee for any reason but if that should occur
prior to the Meeting, the proxies will be voted for such other nominee as the
Board may recommend.
20
<PAGE> 27
INFORMATION REGARDING THE NOMINEE FOR ELECTION AT THE MEETING
<TABLE>
<CAPTION>
POSITION(S) WITH EASTERN
NAME, AGE, AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND OTHER DIRECTORSHIPS EUROPE FUND AND TENURE
- ------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C>
ROBERT H. GRAHAM, Age 52*............................................... Trustee, Since 1998
Mr. Graham is Director, President and Chief Executive Officer, A I M Management Group Chairman and
Inc.; Director and President, AIM; Director and Senior Vice President, A I M Capital President
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc. and Fund
Management Company; and Director, AMVESCAP PLC.
</TABLE>
INFORMATION REGARDING TRUSTEES WHOSE CURRENT TERMS CONTINUE
<TABLE>
<CAPTION>
POSITION(S) WITH EASTERN
NAME, AGE, AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND OTHER DIRECTORSHIPS EUROPE FUND AND TENURE
- ------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C>
C. DEREK ANDERSON, Age 57............................................... Trustee Since 1990
Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment
banking firm); Director, Anderson Capital Management, Inc., since 1988; Director,
PremiumWear, Inc. (formerly Munsingwear, Inc.) (a casual apparel company); and
Director, "R" Homes, Inc. and various other companies. Mr. Anderson is also a
director or trustee of several other investment companies registered under the 1940
Act that are managed or administered by AIM.
FRANK S. BAYLEY, Age 59................................................. Trustee Since 1990
Mr. Bayley is a partner of the law firm of Baker & Mackenzie; and Director and
Chairman of C.D. Stimpson Company (a private investment company). Mr. Bayley is also
a director or trustee of several other investment companies registered under the 1940
Act that are managed or administered by AIM.
ARTHUR C. PATTERSON, Age 55............................................. Trustee Since 1990
Mr. Patterson is a Managing Partner of Accel Partners (a venture capital firm). He
also serves as a director of Viasoft and Pagemart, Inc. (both publicly-traded
software companies), as well as several privately held software and communications
companies. Mr. Patterson is also a director or trustee of several other investment
companies registered under the 1940 Act that are managed or administered by AIM.
RUTH H. QUIGLEY, Age 64................................................. Trustee Since 1990
Ms. Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Friedlander & Co., Inc. (a financial advisory services firm). Ms. Quigley is also a
director or trustee of several other investment companies registered under the 1940
Act that are managed or administered by AIM.
</TABLE>
- ---------------
* Mr. Graham is deemed an "interested person" of Eastern Europe Fund, as defined
in the 1940 Act, by virtue both of his association with AIM and its
affiliates.
21
<PAGE> 28
INFORMATION REGARDING OTHER EXECUTIVE
OFFICERS OF EASTERN EUROPE FUND
<TABLE>
<CAPTION>
POSITION(S) WITH EASTERN
NAME, AGE, AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS EUROPE FUND AND TENURE
- ------------------------------------------------------------- ---------------------------
<S> <C> <C>
DANA R. SUTTON, Age 40...................................... Vice President Since 1999
Ms. Sutton is Vice President and Fund Controller, AIM and and Treasurer
Vice President and Assistant Treasurer, Fund Management
Company.
SAMUEL D. SIRKO, Age 39..................................... Vice President Since 1998
Mr. Sirko is Associate General Counsel and Assistant and Secretary
Secretary, A I M Management Group Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., and Fund Management Company; and Vice
President, Assistant General Counsel and Assistant Secretary
of AIM.
MELVILLE B. COX, Age 55..................................... Vice President Since 1998
Mr. Cox is Vice President and Chief Compliance Officer, AIM,
A I M Capital Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., and Fund Management Company.
GARY T. CRUM, Age 51........................................ Vice President Since 1998
Mr. Crum is Director and President, A I M Capital Management,
Inc.; Director and Senior Vice President, A I M and AIM
Management Group, Inc.; and Director, A I M Distributors,
Inc. and AMVESCAP.
CAROL F. RELIHAN, Age 44.................................... Vice President Since 1998
Ms. Relihan is Director, Senior Vice President, General
Counsel, and Secretary, AIM; Senior Vice President, General
Counsel, and Secretary, A I M Management Group Inc.;
Director, Vice President and General Counsel, Fund Management
Company; Vice President and General Counsel, A I M Fund
Services, Inc.; and Vice President, A I M Capital Management,
Inc. and A I M Distributors, Inc.
</TABLE>
To the knowledge of Eastern Europe Fund's management, as of the Record
Date, the Trustees and Officers of Eastern Europe Fund owned, as a group, less
than 1% of the outstanding shares of Eastern Europe Fund.
There were thirteen meetings of Eastern Europe Fund's Board held during the
Fund's fiscal year ended October 31, 1998. The Board has a Nominating and Audit
Committee composed of Miss Quigley (Chairman) and Messrs. Anderson, Bayley and
Patterson. The purpose of the Nominating and Audit Committee is to nominate
persons to serve as Trustees, review annual audits of Eastern Europe Fund, and
recommend firms to serve as independent auditors for Eastern Europe Fund. The
Nominating and Audit Committee does not normally consider nominees recommended
by security holders. During Eastern Europe Fund's last completed fiscal year,
the Nominating and Audit Committee met five times. During the fiscal year ended
October 31, 1998, each Trustee attended at least 75% of the total number of
meetings of the Board held during their tenure, and each member of the
Nominating and Audit Committee attended at least 75% of the meetings of that
committee.
All of Eastern Europe Fund's Trustees also serve as directors or trustees
of some or all of the other investment companies managed, administered or
advised by AIM. Eastern Europe Fund pays each Trustee, who is not a director,
officer or employee of AIM or any affiliated company, an annual retainer
component, plus a per-meeting fee component for each Board or committee meeting
attended by such Trustee and reimburses travel and other out-of-pocket expenses
incurred in connection with attending such meetings. The table below summarizes
the compensation of Eastern Europe Fund's Trustees for the fiscal year ended
October 31, 1998 and provides the total compensation of the Board members by the
Fund Complex for the fiscal year ended October 31, 1998.
22
<PAGE> 29
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM EASTERN EUROPE EASTERN EUROPE FUND AND
NAME OF PERSON, POSITION(2) FUND the Fund Complex(3)
- --------------------------- ---------------------- ------------------------
<S> <C> <C>
C. Derek Anderson.................................. $6,450 $ 97,600
Trustee
Frank S. Bayley.................................... $7,400 $ 97,500
Trustee
Arthur C. Patterson................................ $7,700 $105,450
Trustee
Ruth H. Quigley.................................... $7,700 $106,350
Trustee
</TABLE>
- ---------------
(1) The Trustees do not receive any pension or retirement benefits as
compensation for their services to Eastern Europe Fund.
(2) As an employee of AIM, Mr. Graham receives no additional compensation from
Eastern Europe Fund for serving as a Trustee.
(3) The "Fund Complex" includes all investment companies advised by AIM;
however, each of the Trustees listed above serves on the board of only 12 of
those investment companies.
REQUIRED VOTE. A plurality of all the votes cast at the Meeting is required
for the election of the Trustee.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2
------------------------
PROPOSAL NO. 3:
RATIFICATION OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
At a meeting called for the purpose of such selection, the firm of
PricewaterhouseCoopers LLP was selected by Eastern Europe Fund's Board,
including its trustees who are not "interested persons" of Eastern Europe Fund,
Developing Markets Fund, AIM or IAML, as the independent public accountants to
audit the books and accounts of Eastern Europe Fund for the fiscal year ending
October 31, 1999 and to include its opinion in financial statements filed with
the SEC. The Board has directed the submission of this selection to the Eastern
Europe Fund shareholders for ratification. PricewaterhouseCoopers LLP has
advised the Board that it has no financial interest in Eastern Europe Fund. For
the fiscal year ended October 31, 1998, the professional services rendered by
PricewaterhouseCoopers LLP included the issuance of an opinion on the financial
statements of Eastern Europe Fund and an opinion on other reports of Eastern
Europe Fund filed with the SEC. Representatives of PricewaterhouseCoopers LLP
are not expected to be present at the Meeting, but have been given the
opportunity to make a statement if they so desire and will be available should
any matter arise requiring their presence.
REQUIRED VOTE. Ratification of the selection of PricewaterhouseCoopers LLP
requires the affirmative vote of a majority of the votes cast thereon at the
Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 3
------------------------
LEGAL MATTERS
Certain legal matters concerning Eastern Europe Fund and the Trust and
their participation in the Reorganization, the issuance of Class A shares of
Developing Markets Fund in connection with the Reorganization, and the tax
consequences of the Reorganization will be passed upon by Kirkpatrick & Lockhart
LLP, 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036-1800, counsel to
Eastern Europe Fund and to the Trust.
23
<PAGE> 30
INFORMATION FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND NYSE
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which Eastern
Europe Fund has filed with the Securities and Exchange Commission ("SEC")
pursuant to the requirements of the Securities Act of 1933 Act and the 1940 Act,
to which reference is hereby made. The SEC file number for Eastern Europe Fund's
Annual Report to Shareholders dated October 31, 1998, is 811-5978. Such Annual
Report to Shareholders is incorporated herein by reference. The SEC file number
for the Trust's registration statement containing the Prospectus and Statement
of Additional Information relating to Developing Markets Fund is Registration
No. 33-19338. Such Prospectus and Statement of Additional Information are
incorporated herein by reference.
Eastern Europe Fund and the Trust are each subject to the informational
requirements of the 1940 Act and in accordance therewith each files reports and
other information with the SEC. Reports, proxy statements, registration
statements and other information filed by Eastern Europe Fund and the Trust
(including the Registration Statement of the Trust relating to the Developing
Markets Fund and Eastern Europe Fund on Form N-14 of which this Proxy
Statement/Prospectus is a part and which is hereby incorporated by reference)
may be inspected without charge and copied at the public reference facilities
maintained by the SEC at Room 1014, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, and at the following regional offices of the SEC: 7 World
Trade Center, New York, NY 10048; and 500 West Madison Street, 14th floor,
Chicago, IL 60661. Copies of such material may also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, DC 20549 at
the prescribed rates. The SEC maintains an internet web site at
http://www.sec.gov that contains information regarding the Trust, Eastern Europe
Fund, and other registrants that file electronically with the SEC.
Eastern Europe Fund shares are listed and publicly traded on the NYSE. If
the Reorganization is approved, Eastern Europe Fund will no longer be listed on
the NYSE. Reports, proxy statements and other information concerning Eastern
Europe Fund may be inspected at the offices of the NYSE, 20 Broad Street, New
York, NY 10005.
INFORMATION ABOUT THE FUNDS' ADVISOR AND SUB-ADVISOR,
AND DEVELOPING MARKETS FUND'S DISTRIBUTOR
AIM serves as investment advisor, and IAML serves as investment
sub-advisor, to both Eastern Europe Fund and Developing Markets Fund. AIM is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. IAML is
located at 11 Devonshire Square, London, EC2M 4YR, England. The advisors
supervise all aspects of the Funds' respective operations and provide investment
advisory services to each Fund, including obtaining and evaluating economic,
statistical, and financial information to formulate and implement investment
programs for the Funds. AIM has acted as an investment advisor since its
organization in 1976, and IAML has acted as an investment advisor since 1967.
Today, AIM, together with its subsidiaries, advises or manages over 110
investment portfolios, including Eastern Europe Fund and Developing Markets
Fund, encompassing a broad range of investment objectives. AIM Distributors acts
as Developing Markets Fund's distributor. AIM Distributors is located at 11
Greenway Plaza, Suite 100, Houston, Texas, 77046-1173.
AIM, IAML, and AIM Distributors are each indirect wholly-owned subsidiaries
of AMVESCAP PLC, which is 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.
24
<PAGE> 31
ADDITIONAL INFORMATION ABOUT EASTERN
EUROPE FUND AND DEVELOPING MARKETS FUND
For more information with respect to Eastern Europe Fund concerning the
following topics, please refer to the Eastern Europe Fund Annual Report to
Shareholders, dated October 31, 1998, as indicated: (i) see "Related Parties"
for further information regarding Eastern Europe Fund's investment advisor,
investment sub-advisor, and administrator; (ii) see discussion in "About the
Portfolio Managers" for further information regarding management of Eastern
Europe Fund; (iii) see "Capital Shares" and "Portfolio Valuation" for further
information regarding the shares of Eastern Europe Fund; (iv) see "Dividend
Reinvestment Plan" for further information regarding the reinvestment of
dividends paid by Eastern Europe Fund; and (v) see "Fundamental Periodic
Repurchase Policy," for further information regarding participation in annual
repurchase offers conducted by the Fund pursuant to Rule 23c-3.
For more information with respect to the Trust and Developing Markets Fund
concerning the following topics, please refer to Developing Markets Fund
Prospectus, dated March 1, 1999 and attached as Appendix B to this Proxy
Statement/Prospectus, as indicated: (i) see "Investment Objectives and
Strategies," and "Fund Management" for further information regarding Developing
Market Fund; (ii) see discussion in "Fund Management" and "Investment Objectives
and Strategies" for further information regarding management of Developing
Markets Fund; (iii) see "Shareholder Information," and "Other Information" for
further information regarding the shares of Developing Markets Fund; (iv) see
"Shareholder Information" for further information regarding the purchase,
redemption and repurchase of shares of Developing Markets Fund.
EXPERTS
The audited financial statements of Eastern Europe Fund and Developing
Markets Fund are incorporated by reference herein and are included in Eastern
Europe Fund's Annual Report to Shareholders for the fiscal year ended October
31, 1998 and Developing Markets Fund's Statement of Additional Information dated
March 1, 1999, respectively, which have each been audited by
PricewaterhouseCoopers LLP, independent accountants, whose reports thereon are
included in the Funds' respective Annual Reports to Shareholders for the fiscal
year ended October 31, 1998. The financial statements audited by
PricewaterhouseCoopers LLP have been incorporated herein by reference in
reliance on its reports given on its authority as experts in auditing and
accounting.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for consideration at
Eastern Europe Fund's next annual shareholder meeting (which will not be held if
the Reorganization is approved and Eastern Europe Fund is liquidated) should
submit such proposal to the Fund no later than February 1, 2000. Shareholder
proposals that are submitted in a timely manner will not necessarily be included
in Eastern Europe Fund's proxy materials. Inclusion of such proposals is subject
to limitations under federal securities laws.
25
<PAGE> 32
OWNERSHIP OF EASTERN EUROPE FUND
AND DEVELOPING MARKETS FUND SHARES
Listed below is the name, address and percent ownership of each person who
as of June 21, 1999, to the knowledge of the Trust or Eastern Europe Fund, owned
beneficially 5 percent or more of the outstanding shares of Eastern Europe Fund
or owned beneficially 5 percent or more of the outstanding Class A shares of
Developing Markets Fund:
EASTERN EUROPE FUND
<TABLE>
<CAPTION>
PERCENT
NUMBER OF BENEFICIAL
NAME AND ADDRESS SHARES OWNED OWNERSHIP
- ---------------- ------------ ----------
<S> <C> <C>
CEDE & Co. FAST 5,659,605 96.5%
P.O. Box 20
Bowling Green Station
New York, NY 10274-0020
</TABLE>
DEVELOPING MARKETS FUND: CLASS A
<TABLE>
<CAPTION>
PERCENT
NUMBER OF BENEFICIAL
NAME AND ADDRESS SHARES OWNED OWNERSHIP
- ---------------- ------------ ----------
<S> <C> <C>
None
</TABLE>
26
<PAGE> 33
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of May 13, 1999, between AIM Investment Funds, a Delaware business trust
("Trust"), on behalf of AIM Developing Markets Fund, a segregated portfolio of
assets ("series") thereof ("Acquiring Fund"), and AIM Eastern Europe Fund, a
Massachusetts business trust ("Target"). (Acquiring Fund and Target are
sometimes referred to herein individually as a "Fund" and collectively as the
"Funds," and Trust and Target are sometimes referred to herein individually as
an "Investment Company" and collectively as the "Investment Companies.") All
agreements, representations, actions, and obligations described herein made or
to be taken or undertaken by Acquiring Fund are made and shall be taken or
undertaken by Trust.
The Investment Companies wish to effect a reorganization described in
section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
The reorganization will involve the transfer of Target's assets to Acquiring
Fund in exchange solely for voting shares of beneficial interest ("shares") in
Acquiring Fund and the assumption by Acquiring Fund of Target's liabilities,
followed by the constructive distribution of those shares pro rata to the
holders of shares in Target ("Target Shares") in exchange therefor, all on the
terms and conditions set forth in this Agreement (which is intended to be, and
is adopted as, a "plan of reorganization" within the meaning of the regulations
under the Code). The foregoing transactions are referred to herein collectively
as the "Reorganization."
Acquiring Fund is an open-end management investment company. Its shares are
divided into four classes, designated Class A, Class B, Class C, and Advisor
Class shares; only Acquiring Fund's Class A shares ("Acquiring Fund Shares") are
involved in the Reorganization.
Target is a closed-end management investment company that has only a single
class of shares. Target Shares can be purchased and sold only on the New York
Stock Exchange ("NYSE"), except for purchases by Target through periodic
repurchase offers pursuant to Rule 23c-3 under the Investment Company Act of
1940, as amended ("1940 Act").
In consideration of the mutual promises contained herein, the parties agree
as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) Acquiring Fund Shares, determined by
dividing the net value of Target (computed as set forth in paragraph 2.1)
by the net asset value ("NAV") of an Acquiring Fund Share (computed as set
forth in paragraph 2.2), and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph
3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement.
Notwithstanding the foregoing, Target agrees to use its best efforts to
discharge all its known Liabilities before the Effective Time.
<PAGE> 34
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and substantially all of its realized net
capital gain, if any, for the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by Trust's transfer agent's opening accounts on Acquiring Fund's
share transfer books in the Shareholders' names and transferring such Acquiring
Fund Shares thereto. Each Shareholder's account shall be credited with the
respective pro rata number of full and fractional (rounded to the third decimal
place) Acquiring Fund Shares due that Shareholder. All outstanding Target
Shares, including any represented by certificates, shall simultaneously be
canceled on Target's share transfer books. Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the Effective Time, Target shall be terminated and any further actions shall be
taken in connection therewith as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the NYSE on
the date of the Closing ("Valuation Time"), using the valuation procedures set
forth in Target's most recent annual report to its shareholders, less (b) the
amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current prospectus relating to Acquiring Fund
Shares ("Prospectus") and statement of additional information ("SAI").
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of A I M Advisors, Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on August 27,
1999, or at such other place and/or on such other date as to which the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the date thereof or at such other
time as to which the parties may agree ("Effective Time"). If, immediately
before the Valuation Time, (a) the NYSE is closed to trading or trading thereon
is restricted or (b) trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of the net value of Target
and the NAV of an Acquiring Fund Share is impracticable, the Effective Time
shall be postponed until the first business day after the day when such trading
shall have been fully resumed and such reporting shall have been restored.
3.2. Target's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund, as
reflected on Acquiring Fund's books immediately following the Closing, does or
will conform to such information on Target's books
A-2
<PAGE> 35
immediately before the Closing. Target's custodian shall deliver at the Closing
a certificate of an authorized officer stating that (a) the Assets held by the
custodian will be transferred to Acquiring Fund at the Effective Time and (b)
all necessary taxes in conjunction with the delivery of the Assets, including
all applicable federal and state stock transfer stamps, if any, have been paid
or provision for payment has been made.
3.3. Target shall deliver to Trust at the Closing a list of the names and
addresses of the Shareholders and the number of outstanding Target Shares owned
by each Shareholder, all as of the Effective Time, certified by Target's
Secretary or Assistant Secretary. Trust's transfer agent shall deliver at the
Closing a certificate as to the opening on Acquiring Fund's share transfer books
of accounts in the Shareholder's names. Trust shall issue and deliver a
confirmation to Target evidencing the Acquiring Fund Shares to be credited to
Target at the Effective Time or provide evidence satisfactory to Target that
such Acquiring Fund Shares have been credited to Target's account on Acquiring
Fund's books. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts, or other documents
as the other party or its counsel may reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 Target represents and warrants as follows:
4.1.1. Target is a trust operating under a written declaration of trust,
the beneficial interest in which is divided into transferable shares ("Business
Trust"), that is duly organized and validly existing under the laws of the
Commonwealth of Massachusetts; and a copy of its Agreement and Declaration of
Trust is on file with the Secretary of the Commonwealth of Massachusetts;
4.1.2. Target is duly registered as a closed-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.1.3. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances; and upon delivery
and payment for the Assets, Acquiring Fund will acquire good and marketable
title thereto;
4.1.4. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby will not
conflict with or violate, Massachusetts law or any provision of its Agreement
and Declaration of Trust or Amended and Restated By-Laws or of any agreement,
instrument, lease, or other undertaking to which Target is a party or by which
it is bound or result in the acceleration of any obligation, or the imposition
of any penalty, under any agreement, judgment, or decree to which Target is a
party or by which it is bound, except as previously disclosed in writing to and
accepted by Trust;
4.1.5. Except as otherwise disclosed in writing to and accepted by Trust,
all material contracts and other commitments of Target (other than this
Agreement and investment contracts, including options, futures, and forward
contracts) will be terminated, or provision for discharge of any liabilities of
Target thereunder will be made, at or prior to the Effective Time, without
either Fund's incurring any liability or penalty with respect thereto and
without diminishing or releasing any rights Target may have had with respect to
actions taken or omitted or to be taken by any other party thereto prior to the
Closing;
4.1.6. Except as otherwise disclosed in writing to and accepted by Trust,
no litigation, administrative proceeding, or investigation of or before any
court or governmental body is presently pending or (to Target's knowledge)
threatened against Target or any of its properties or assets that, if adversely
determined, would materially and adversely affect its financial condition or the
conduct of its business; and Target knows of no facts that might form the basis
for the institution of any such litigation, proceeding, or investigation and is
not a party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially or adversely affects its business
or its ability to consummate the transactions contemplated hereby;
A-3
<PAGE> 36
4.1.7. The execution, delivery, and performance of this Agreement have been
duly authorized as of the date hereof by all necessary action on the part of
Target's board of trustees, which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and, subject to approval by Target's shareholders,
this Agreement constitutes a valid and legally binding obligation of Target,
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws relating to or affecting creditors' rights and by general
principles of equity;
4.1.8. At the Effective Time, the performance of this Agreement shall have
been duly authorized by all necessary action by Target's shareholders;
4.1.9. No governmental consents, approvals, authorizations, or filings are
required under the Securities Act of 1933, as amended ("1933 Act"), the
Securities Exchange Act of 1934, as amended ("1934 Act"), or the 1940 Act for
the execution or performance of this Agreement by Target, except for (a) the
filing with the Securities and Exchange Commission ("SEC") of a registration
statement by Trust on Form N-14 relating to the Acquiring Fund Shares issuable
hereunder, and any supplement or amendment thereto ("Registration Statement"),
including therein a prospectus/proxy statement ("Proxy Statement"), and (b) such
consents, approvals, authorizations, and filings as have been made or received
or as may be required subsequent to the Effective Time;
4.1.10. On the effective date of the Registration Statement, at the time of
the shareholders' meeting referred to in paragraph 5.2, and at the Effective
Time, the Proxy Statement will (a) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the
rules and regulations thereunder and (b) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading; providing that the foregoing
shall not apply to statements in or omissions from the Proxy Statement made in
reliance on and in conformity with information furnished by Trust for use
therein;
4.1.11. The Liabilities were incurred by Target in the ordinary course of
its business; and there are no Liabilities other than liabilities disclosed or
provided for in its financial statements referred to in paragraph 4.1.17 and
liabilities incurred by Target in the ordinary course of its business and are
associated with the Assets subsequent to October 31, 1998, or otherwise
previously disclosed to Trust, none of which has been materially adverse to the
business, assets, or results of Target operations;
4.1.12. Target qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for such
qualification for its current taxable year; it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did not
apply to it; and the Assets will be invested at all times through the Effective
Time in a manner that ensures compliance with the foregoing;
4.1.13. Target is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the meaning of
section 368(a)(3)(A) of the Code;
4.1.14. Not more than 25% of the value of Target's total assets (excluding
cash, cash items, and U.S. government securities) is invested in the stock and
securities of any one issuer, and not more than 50% of the value of such assets
is invested in the stock and securities of five or fewer issuers;
4.1.15. Target will be terminated as soon as reasonably practicable after
the Effective Time, but in all events within six months thereafter;
4.1.16. Target's federal income tax returns, and all applicable state and
local tax returns, for all taxable years through and including the taxable year
ended October 31, 1998, have been timely filed and all taxes payable pursuant to
such returns have been timely paid; and
4.1.17. Target's financial statements for the year ended October 31, 1998,
to be delivered to Trust, fairly represent Target's financial position as of
that date and the results of its operations and changes in its net assets for
the year then ended.
A-4
<PAGE> 37
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Trust is a business trust duly organized and validly existing under
the laws of the State of Delaware, and its Certificate of Trust has been duly
filed in the office of the Secretary of State thereof;
4.2.2. Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the Assets
in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued and
outstanding shares of Acquiring Fund, fully paid and non-assessable;
4.2.6. Acquiring Fund's current Prospectus and SAI conform in all material
respects to the applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate, Delaware law or any provision of
Trust's Agreement and Declaration of Trust or Amended and Restated Bylaws or of
any provision of any agreement, instrument, lesse, or other undertaking to which
Acquiring Fund is a party or by which it is bound or result in the acceleration
of any obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Acquiring Fund is a party or by which it is bound,
except as previously disclosed in writing to and accepted by Target;
4.2.8. Except as otherwise disclosed in writing to and accepted by Target,
no litigation, administrative proceeding, or investigation of or before any
court or governmental body is presently pending or (to Acquiring Fund's
knowledge) threatened against Trust with respect to Acquiring Fund or any of its
properties or assets that, if adversely determined, would materially and
adversely affect Acquiring Fund's financial condition or the conduct of its
business; and Acquiring Fund knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not a
party to or subject to the provisions of any order, decree, or judgment of any
court or governmental body that materially or adversely affects its business or
its ability to consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement have been
duly authorized as of the date hereof by all necessary action on the part of
Trust's board of trustees (together with Target's board of trustees, the
"Boards"), which has made the determinations required by Rule 17a-8(a) under the
1940 Act; and this Agreement constitutes a valid and legally binding obligation
of Acquiring Fund, enforceable in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and by
general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings are
required under the 1933 Act, the 1934 Act, or the 1940 Act for the execution or
performance of this Agreement by Trust, except for (a) the filing with the SEC
of the Registration Statement and (b) such consents, approvals, authorizations,
and filings as have been made or received or as may be required subsequent to
the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the time of
the shareholders' meeting referred to in paragraph 5.2, and at the Effective
Time, the Proxy Statement will (a) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the
rules and regulations thereunder and (b) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
A-5
<PAGE> 38
under which such statements were made, not misleading; provided that the
foregoing shall not apply to statements in or omissions from the Proxy Statement
made in reliance on and in conformity with information furnished by Target for
use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a RIC for each past taxable year since it
commenced operations and will continue to meet all the requirements for such
qualification for its current taxable year; Acquiring Fund intends to continue
to meet all such requirements for the next taxable year; and it has no earnings
and profits accumulated in any taxable year in which the provisions of
Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued in
the ordinary course of its business as a series of an open-end investment
company; nor does Acquiring Fund have any plan or intention to redeem or
otherwise reacquire any Acquiring Fund Shares issued to the Shareholders
pursuant to the Reorganization, except to the extent it is required by the 1940
Act to redeem any of its shares presented for redemption at NAV in the ordinary
course of that business;
4.2.14. Following the Reorganization, Acquiring fund (a) will continue
Target's "historic business" (within the meaning of section 1.368-1(d)(2) of the
Income Tax Regulations under the Code), (b) use a significant portion of
Target's historic business assets (within the meaning of section 1.3681(d)(3) of
those regulations) in a business, (c) has no plan or intention to sell or
otherwise dispose of any of the Assets, except for dispositions made in the
ordinary course of that business and dispositions necessary to maintain its
status as a RIC, and (d) expects to retain substantially all the Assets in the
same form as it receives them in the Reorganization, unless and until subsequent
investment circumstances suggest the desirability of change or it becomes
necessary to make dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be dissolved or
merged into another business trust or a corporation or any "fund" thereof
(within the meaning of section 851(g)(2) of the Code) following the
Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of the
value of Acquiring Fund's total assets (excluding cash, cash items, and U.S.
government securities) will be invested in the stock and securities of any one
issuer and (b) not more than 50% of the value of such assets will be invested in
the stock and securities of five or fewer issuers;
4.2.17. Acquiring Fund does not own, directly or indirectly, nor at the
Effective Time will it own, directly or indirectly, nor has it owned, directly
or indirectly, at any time during the past five years, any shares of Target;
4.2.18. Acquiring Fund's federal income tax returns, and all applicable
state and local tax returns, for all taxable years through and including the
taxable year ended October 31, 1998, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and
4.2.19. Trust's financial statements for the year ended October 31, 1998,
to be delivered to Target, fairly represent Acquiring Fund's financial position
as of that date and the results of its operations and changes in its net assets
for the year then ended.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares received by each
Shareholder will be approximately equal to the fair market value of its Target
Shares constructively surrendered in exchange therefor;
4.3.2. Its management is unaware of any plan or intention of Shareholders
to redeem, sell, or otherwise dispose of (a) any portion of their Target Shares
before the Reorganization to any person related (within the meaning of section
1.368-1(e)(3) of the Income Tax Regulations under the Code) to either Fund or
(b) any portion of the Acquiring Fund Shares to be received by them in the
Reorganization to any person related (within such meaning) to Acquiring Fund;
A-6
<PAGE> 39
4.3.3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4.3.4. The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those to
which the Assets are subject;
4.3.5. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
4.3.6 Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value of
the net assets, and at least 70% of the fair market value of the gross assets,
held by Target immediately before the Reorganization. For the purposes of this
representation, any amounts used by Target to pay its Reorganization expenses
and to make redemptions and distributions immediately before the Reorganization
(except (a) redemptions not made as part of the Reorganization and (b)
distributions made to conform to its policy of distributing all or substantially
all of its income and gains to avoid the obligation to pay federal income tax
and/or the excise tax under section 4982 of the Code) will be included as assets
held thereby immediately before the Reorganization;
4.3.7 None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration for, or
allocable to, any of the Target Shares held by such Shareholder, none of the
Acquiring Fund Shares received by any such Shareholder will be separate
consideration for, or allocable to, any employment agreement, investment
advisory agreement, or other service agreement; and the consideration paid to
any such Shareholder will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length for
similar services;
4.3.8 Immediately after the Reorganization, the Shareholders will not own
shares constituting "control" (within the meaning of section 304(c) of the Code)
of Acquiring Fund; and
4.3.9 Neither Fund will be reimbursed for any expenses incurred by it or on
its behalf in connection with the Reorganization unless those expenses are
solely and directly related to the Reorganization (determined in accordance with
the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187).
5. COVENANTS
5.1 Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that --
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and changes in operations contemplated by
each Fund's normal business activities, and
(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that (1) Target shall not dispose of
more than an insignificant portion of its historic business assets during
such period without Acquiring Fund's prior consent and (2) if Target's
shareholders approve this Agreement (and the transactions contemplated
hereby), then between the date of such approval and the Closing, the Funds
shall coordinate their respective portfolios so that the transfer of the
Assets to Acquiring Fund will not cause it to fail to be in compliance with
all of its investment policies and restrictions immediately after the
Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist Trust in obtaining information
Trust reasonably requests concerning the beneficial ownership of Target Shares.
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<PAGE> 40
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1993 Act, the 1940 Act, and such
state securities laws it may deem appropriate to continue its operations after
the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Boards and shall have been approved by
Target's shareholders in accordance with its Agreement and Declaration of Trust
and applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Target shall have received an opinion of Kirkpatrick & Lockhart LLP
("Counsel") substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of Trust, a
business trust duly organized and validly existing under the laws of the
State of Delaware with power under its Agreement and Declaration
A-8
<PAGE> 41
of Trust to own all its properties and assets and, to the knowledge of
Counsel, to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Target, is a
valid and legally binding obligation of Trust with respect to Acquiring
Fund, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized, validly issued and
outstanding, and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Trust's Agreement and Declaration of Trust or Amended and Restated
Bylaws or any provision of any agreement (known to Counsel, without any
independent inquiry or investigation) to which Trust (with respect to
Acquiring Fund) is a party or by which it is bound or (to the knowledge of
Counsel, without any independent inquiry or investigation) result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Trust (with respect to Acquiring
Fund) is a party or by which it is bound, except as set forth in such
opinion or as previously disclosed in writing to and accepted by Target;
6.4.5. To the knowledge of Counsel (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Trust on
behalf of Acquiring Fund of the transactions contemplated herein, except
those obtained under the 1933 Act, the 1934 Act, and the 1940 Act and those
that may be required under state securities laws;
6.4.6. Trust is registered with the SEC as an investment company, and
to the knowledge of Counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of Counsel (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Trust (with respect to Acquiring Fund) or any of its
properties or assets attributable or allocable to Acquiring Fund and (b)
Trust (with respect to Acquiring Fund) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Acquiring Fund's business,
except as set forth in such opinion or as otherwise disclosed in writing to
and accepted by Target.
In rendering such opinion, Counsel may (1) rely, as to matters governed by the
laws of the State of Delaware, on an opinion of competent Delaware counsel, (2)
make assumptions regarding the authenticity, genuineness, and/or conformity of
documents and copies thereof without independent verification thereof, (3) limit
such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with
Counsel who have devoted substantive attention to matters directly related to
this Agreement and the Reorganization.
6.5. Trust shall have received an opinion of Counsel substantially to the
effect that:
6.5.1. Target is a Business Trust duly organized and validly existing
under the laws of the Commonwealth of Massachusetts with power under its
Agreement and Declaration of Trust to own all its properties and assets
and, to the knowledge of Counsel, to carry on its business as presently
conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target and (b) assuming due authorization, execution, and
delivery of this Agreement by Trust on behalf of Acquiring Fund, is a valid
and legally binding obligation of Target, enforceable in accordance with
its
A-9
<PAGE> 42
terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Target's Agreement and Declaration of Trust or Amended and Restated
By-Laws or any provision of any agreement (known to Counsel, without any
independent inquiry or investigation) to which Target is a party or by
which it is bound or (to the knowledge of Counsel, without any independent
inquiry or investigation) result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, judgment, or decree to
which Target is a party or by which it is bound, except as set forth in
such opinion or as previously disclosed in writing to and accepted by
Trust;
6.5.4. To the knowledge of Counsel (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Target of the
transactions contemplated herein, except those obtained under the 1933 Act,
the 1934 Act, and the 1940 Act and those that may be required under state
securities laws;
6.5.5. Target is registered with the SEC as an investment company, and
to the knowledge of Counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of Counsel (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target or any of its properties or assets and (b) Target
is not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and adversely
affects Target's business, except as set forth in such opinion or as
otherwise disclosed in writing to and accepted by Trust.
In rendering such opinion, Counsel may (1) rely, as to matters governed by the
laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (2) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with Counsel have devoted substantive attention to
matters directly related to this Agreement and the Reorganization.
6.6. Each Investment Company shall have received an opinion of Counsel,
addressed to and in form and substance satisfactory to it, as to the federal
income tax consequences mentioned below ("Tax Opinion"). In rendering the Tax
Opinion, Counsel may rely as to factual matters, exclusively and without
independent verification, on the representations made in this Agreement (or in
separate letters addressed to Counsel) and the certificates delivered pursuant
to paragraph 3.4. The Tax Opinion shall be substantially to the effect that,
based on the facts and assumptions stated therein and conditioned on
consummation of the Reorganization in accordance with this Agreement, for
federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares pro rata to
the Shareholders constructively in exchange for their Target Shares, will
qualify as a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer of the
Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its receipt of
the Assets in exchange solely for Acquiring Fund Shares and its assumption
of the Liabilities;
A-10
<PAGE> 43
6.6.4. Acquiring Fund's basis for the Assets will be the same as
Target's basis therefor immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's aggregate basis for the Acquiring Fund Shares
to be received by it in the Reorganization will be the same as the
aggregate basis for its Target Shares to be constructively surrendered in
exchange for those Acquiring Fund Shares, and its holding period for those
Acquiring Fund Shares will include its holding period for those Target
Shares, provided they are held as capital assets by the Shareholder at the
Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Each Fund will bear its own Reorganization expenses.
8. ENTIRE AGREEMENT: NO SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before December 31, 1999; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees or officers of
either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
A-11
<PAGE> 44
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. The parties acknowledge that Target is a Business Trust. This
Agreement is executed on behalf of Target and by its trustees and/or officers in
their capacities as such, and not individually. Target's obligations under this
Agreement are not binding on or enforceable against any of its trustees,
officers, or shareholders but are only binding on and enforceable against
Target's assets and property. Acquiring Fund agrees that, in asserting any
rights or claims under this Agreement, it shall look only to Target's assets and
property in settlement of such rights or claims and not to such trustees,
officers, or shareholders.
11.4. A trustee of Trust shall not be personally liable hereunder to Target
or its trustees or shareholders for any act, omission, or obligation of Trust or
any other trustee thereof. Target agrees that, in asserting any claim against
Trust or its trustees, it shall look only to Acquiring Fund's assets for payment
under such claim; and neither the shareholders nor the trustees of Trust, nor
any of their agents, whether past, present, or future, shall be personally
liable therefor.
11.5. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
<TABLE>
<S> <C>
ATTEST: AIM EASTERN EUROPE FUND
- ----------------------------------------------------- By: -------------------------------------------------
Secretary President
ATTEST: AIM INVESTMENT FUNDS,
on behalf of its series,
AIM Developing Markets Fund
- ----------------------------------------------------- By: -------------------------------------------------
Secretary President
</TABLE>
A-12
<PAGE> 45
APPENDIX B
AIM DEVELOPING
MARKETS FUND
--------------
AIM Developing Markets Fund primarily seeks to provide long-term growth
of capital with a secondary objective of income, to the extent
consistent with seeking growth of capital.
PROSPECTUS
MARCH 1, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
B-1
<PAGE> 46
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
B-2
<PAGE> 47
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is long-term growth of capital and its
secondary investment objective is income, to the extent consistent with seeking
growth of capital.
The fund seeks to meet these objectives by investing substantially all of its
assets in issuers in developing countries, i.e., those that are in the initial
stages of their industrial cycles. The fund will invest a majority of its assets
in equity securities, and may also invest in debt securities, of developing
countries. The fund considers issuers in "developing countries" to be those (1)
organized under the laws of a developing country or have a principal office in a
developing country; (2) that derive 50% or more, alone or on a consolidated
basis, of their total revenues from business in developing countries; or (3)
whose securities are trading principally on a stock exchange, or in an over-the-
counter market, in a developing country. The fund will normally invest in
issuers in at least four countries, but it will invest no more than 25% of its
assets in issuers in any one country. The fund also may hold no more than 40% of
its assets in any one foreign currency and securities denominated in or indexed
to such currency. The fund may invest in debt securities when economic and other
factors appear to favor such investments. The fund may also invest up to 100% of
its assets in lower-quality debt securities, i.e., "junk bonds."
The fund may invest up to 50% of its total assets in the following types of
developing market debt securities: (1) debt securities issued or guaranteed by
governments, their agencies, instrumentalities or political subdivisions, or by
government owned, controlled or sponsored entities, including central banks
(sovereign debt), and "Brady Bonds"; (2) interests in issuers organized and
operated for the purpose of restructuring the investment characteristics of
sovereign debt; (3) debt securities issued by banks and other business entities;
and (4) debt securities denominated in or indexed to the currencies of emerging
markets. Brady Bonds are debt restructurings that provide for the exchange of
cash and loans for newly issued bonds. There is no requirement with respect to
the maturity or duration of debt securities in which the fund may invest.
The portfolio managers focus on companies that have experienced above-average,
long-term growth in earnings and have excellent prospects for future growth. In
selecting countries in which the fund will invest, the portfolio managers also
consider such factors as the prospect for relative economic growth among
countries or regions, economic or political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is
permitted to invest more than 5% of its assets in the securities of any one
issuer.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments or high-quality debt securities. As a result, the fund may not
achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions, and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. When
interest rates rise, bond prices fall; the longer a bond's duration, the more
sensitive it is to this risk.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
B-3
<PAGE> 48
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social or economic
circumstances, some developing countries that issue lower-quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. The value of the fund's shares may vary more widely,
and the fund may be subject to greater investment and credit risk, than if the
fund invested more broadly.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
B-4
<PAGE> 49
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1995 ....................................... -0.95%
1996 ....................................... 23.59%
1997 ....................................... -8.49%
1998 ....................................... -35.32%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
15.38% (quarter ended June 30, 1995) and the lowest quarterly return was -27.81%
(quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (38.38)% (9.98)% 1/11/94
Class B (38.96) (35.70) 11/3/97
Class C -- -- 03/01/99
MSCI Emerging Markets Free Index(1) (25.34) (9.27)(2) 12/31/93(2)
- --------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Emerging Markets Free Index
measures the performance of securities listed on the exchanges of 26
countries. The index excludes shares that are not readily purchased by
non-local investors.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
B-5
<PAGE> 50
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00 1.00
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are
deducted from
fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses
Other 0.91 0.91 0.91
Interest 0.20 0.20 0.20
Total Other Expenses 1.11 1.11 1.11
Total Annual Fund
Operating Expenses 2.34 3.09 3.09
Expense
Reimbursement(2) 0.39 0.39 0.39
Net Expenses 1.95 2.70 2.70
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to limit net expenses for
Class A, B and C shares of the fund to 2.00%, 2.50% and 2.50%, respectively,
not including interest expenses.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $701 $1,171 $1,666 $3,024
Class B 812 1,254 1,820 3,228
Class C 412 954 1,620 3,402
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $701 $1,171 $1,666 $3,024
Class B 312 954 1,620 3,228
Class C 312 954 1,620 3,402
- ----------------------------------------------
</TABLE>
B-6
<PAGE> 51
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Limited (the subadvisor), an affiliate of the advisor,
is the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London, EC2M 4YR, England.
The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1967. Today, the
advisor, together with its subsidiaries, advises or manages over 110 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1998, the advisor and Chancellor LGT
Asset Management, Inc. (the advisor for the period November 1, 1997 through May
28, 1998) together received compensation of 0.616% of average daily net assets,
consisting of a management and administrative fee of 0.59% and an accounting fee
of 0.026%.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - Francesco Bertoni, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1990.
- - Craig Munro, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1997. From 1993 to 1997, he was Vice President and Senior Analyst in the
Emerging Markets Group of the Global Fixed Income Division of Merrill Lynch
Asset Management.
- - Christine Rowley, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Developing Markets Fund are subject to the
maximum of 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
B-7
<PAGE> 52
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A(a)
----------------------------------------------------------------------
YEAR TEN MONTHS
ENDED ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, DECEMBER 31, JANUARY 11, TO
1998(b) 1997(c) 1996(c) 1995(c) DECEMBER 31, 1994(c)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
Income from investment operations:
Net investment income 0.39 (d)(e) 0.25 0.53 0.72 0.35
Net realized and unrealized gain (loss) on
investments (5.10) (1.53) 2.19 (0.84) (2.46)
Net increase (decrease) from investment
operations (4.71) (1.28) 2.72 (0.12) (2.11)
Redemption fees retained 0.28 -- -- -- --
Distributions to shareholders:
From net investment income (0.60) -- (0.48) (0.72) (0.35)
From net realized gain on investments -- -- -- -- (0.10)
Total distributions (0.60) -- (0.48) (0.72) (0.45)
Net asset value, end of period $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
Market value, end of period N/A $ 11.81 $ 11.63 $ 9.75 $ 9.75
Total investment return (based on market value) N/A 1.62 %(f) 24.18% 6.60% (32.16)%(f)
Total investment return (based on net asset
value) (37.09)%(g) (9.25)%(f) 23.59% (0.95)% (14.07)%(f)
- ------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (in 000s) $87,517 $457,379 $504,012 $422,348 $452,872
Ratio of net investment income to average net
assets:
With expense reductions and reimbursement 3.84% 2.03%(h) 4.07% 6.33% 2.75%(h)
Without expense reductions and reimbursement 3.43% 1.95%(h) 4.04% 6.30% 2.75%(h)
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and reimbursement 1.73% 1.75%(h) 1.82% 1.77% 2.01%(h)
Without expense reductions and reimbursement 2.14% 1.83%(h) 1.85% 1.80% 2.01%(h)
Ratio of interest expense to average net
assets(i) 0.20% N/A N/A N/A N/A
Portfolio turnover rate(i) 111% 184%(h) 138% 75% 56%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) All capital shares issued and outstanding of the predecessor fund on October
31, 1997 were reclassified as Class A shares.
(b) These selected per share data were calculated based upon average shares
outstanding during the period.
(c) These financial highlights provide per share information of G.T. Global
Developing Markets Fund, Inc. ("predecessor fund") for the period
January 11, 1994 (commencement of operations) up to and including
October 31, 1997. The fees and expenses of the fund differ from those of the
predecessor fund.
(d) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(e) Before reimbursement the net investment income per share would have been
reduced by $0.04.
(f) Not annualized.
(g) Total investment return does not include sales charges.
(h) Annualized.
(i) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the fund as whole without distinguishing
between the classes of shares issued.
N/A Not applicable.
B-8
<PAGE> 53
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B(a)
----------------------
YEAR ENDED OCTOBER 31,
1998(b)
- ------------------------------------------------------------------------------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 12.56
Income from investment operations:
Net investment income 0.31(c)(d)
Net realized and unrealized gain (loss) on investments (5.07)
Net increase (decrease) from investment operations (4.76)
Redemption fees retained 0.28
Distributions to shareholders:
From net investment income (0.59)
From net realized gain on investments --
Total distributions (0.59)
Net asset value, end of period $ 7.49
Total investment return (based on net asset value) (39.76)%(e)
- ------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (in 000s) $ 154
Ratio of net investment income to average net assets:
With expense reductions and reimbursement 3.09%
Without expense reductions and reimbursement 2.68%
Ratio of expenses to average net assets excluding interest
expense:
With expense reductions and reimbursement 2.48%
Without expense reductions and reimbursement 2.89%
Ratio of interest expense to average net assets(f) 0.20%
Portfolio turnover rate(f) 111%
- ------------------------------------------------------------------------------------
</TABLE>
(a) Commencing November 1, 1997, the fund began offering Class B shares.
(b) These selected per share data were calculated based upon the average shares
outstanding during the period.
(c) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(d) Before reimbursement the net investment income per share would have been
reduced by $0.04.
(e) Total investment return does not include sales charges.
(f) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the fund as whole without distinguishing
between the classes of shares issued.
B-9
<PAGE> 54
[THIS PAGE INTENTIONALLY LEFT BLANK]
B-10
<PAGE> 55
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with shares
a pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after your date of purchase. If you exchange
those shares for Class B shares of another AIM Fund, the shares into
which you exchanged will not convert to Class A shares until eight
years after your date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
B-11 MCF--03/99
<PAGE> 56
-------------
THE AIM FUNDS
-------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--03/99 B-12
<PAGE> 57
-------------
THE AIM FUNDS
-------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
B-13 MCF--03/99
<PAGE> 58
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/99 B-14
<PAGE> 59
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
B-15 MCF--03/99
<PAGE> 60
-------------
THE AIM FUNDS
-------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--03/99 B-16
<PAGE> 61
-------------
THE AIM FUNDS
-------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- ------------------------------------------------------------------------------
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
- ------------------------------------------------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
B-17 MCF--03/99
<PAGE> 62
-------------
THE AIM FUNDS
-------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/99 B-18
<PAGE> 63
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
- --Registered Trademark-- or your account, or wish to obtain free copies of the
fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, DC 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Developing Markets Fund
SEC 1940 Act file number: 811-05426
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com DVM-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
B-19 MCF--03/99
<PAGE> 64
APPENDIX C
AIM DEVELOPING MARKETS FUND
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND ENDURES TUMULTUOUS YEAR IN EMERGING MARKETS
Global market volatility dominated financial news in 1998. How did the Fund
perform in this environment?
We have been in a very challenging environment over the last year. The Fund
has suffered from the particular crises hitting individual countries, but it has
also been hurt by the increasingly negative perception of the riskiness of
emerging market investing.
Results for the fiscal year ended October 31, 1998 were quite
disappointing. Total return was -37.09% for Class A shares. In comparison, the
MSCI Emerging Markets Free Index had a return of -30.98%.
Since their inception on November 3, 1997, Class B shares had a cumulative
total return of -39.76%.
Why was market turmoil so pervasive?
The chain reaction started in Asia. Devalued currencies plus billions in
bad loans curtailed the region's ability to purchase goods and raw materials
from the world's sellers. When Asian companies flooded global commodities
markets with their inventories to produce desperately needed revenues, the
combination of oversupply and weakened demand caused prices to plummet,
contributing to worldwide deflation.
Meanwhile, investors worried over news of Russia's overwhelming government
debt and the speculative borrowing practiced by its private banks. The situation
was especially troubling because it was set against a backdrop of weakening oil
and commodity prices. In August, Russia attempted to stabilize the banking
system by floating the ruble and suspending repayment of much of its foreign
debt. These events spurred a worldwide flight to quality, resulting in a
broad-based selloff. Even though Russia has a relatively small economy and
engages in just a tiny portion of world trade, many investors sustained millions
of dollars in losses from their exposure to both its debt and its equity
markets.
In the wake of the Asian and Russian crises, investors began to reduce
their exposure to emerging markets. Latin America as well as the more open
markets in the Emerging EMEA (Europe, Middle East, and Africa) region suffered
both from investor flight and from the associated rising interest rates.
What is your overall strategy in managing the Fund?
First we determine the portfolio's target country allocations through a
top-down process that evaluates and scores countries based on their economic
growth, monetary cycle, government policy, and overall earnings growth. Our
stock research and selection process identifies stocks demonstrating growth, but
at a reasonable price. We then adjust our top-down allocation depending on the
availability of stocks suitable for investment in a particular country or
sector.
What are the most significant changes you've made in the portfolio recently?
The most important strategy we've taken in the last few months has been to
concentrate the portfolio in the markets and stocks where we are most confident
about the growth and valuation outlook. We've deliberately reduced the breadth
of holdings, and we've eliminated exposure to such highly unstable markets as
Pakistan, Sri Lanka, the Philippines, Thailand, and Malaysia. We've also
virtually eliminated the Fund's exposure to Russia. We don't expect to invest in
the Russian market until the political and economic environment has stabilized.
Your largest country allocations are in latin america. Why did you favor this
region?
Despite recent market turbulence, we still believe in Latin America's
long-term potential. Relative to Asia, Latin America stands to perform much
better because of its more favorable trade ties to the United
C-1
<PAGE> 65
States. The governments of the major economies in Latin America continue to
emphasize responsible fiscal and monetary policies. We feel that many are truly
committed to reform and deregulation. In fact, we've already witnessed important
restructuring efforts in the banking industries of several Latin American
countries and the first stages of fiscal reform in Brazil.
Which stocks did you like?
In Brazil, we own a number of privatization candidates. Many of the larger
utilities in Brazil appear undervalued given the strong medium-term growth
prospects for the economy. We emphasized oil and natural resource stocks because
they benefit from U.S. dollar revenues and from privatization efforts, which
should encourage greater operating efficiency. We also liked Brazil's utilities
such as Companhia Energetica de Minas Gerais (CEMIG), provider of electric power
to the Brazilian state of Minas Gerais. With political uncertainties now
reduced, such stocks have attracted investor interest once again.
Our largest country allocation was in Mexico, which we believe will show
relatively stable economic growth into 1999. We've focused on blue chips as well
as stocks that stand to benefit from the large devaluation of the peso. Although
earnings will certainly be affected this year by the monetary correction, it
should help the competitive position of companies like Fomento Economico
Mexicano, S.A. de C.V., a soft-drink producer that exports to 63 countries
around the world.
Where else did you find opportunities?
One of the advantages of a global emerging markets portfolio is its
diversity. We have found a number of investments that were relatively sheltered
from global economic difficulties. For example, Hindustan Lever, one of the
largest low-end consumer good manufacturers in India, has announced
better-than-anticipated earnings expectations. The company makes soap,
toothpaste, and other personal care products.
Global volatility has created good buying opportunities in such smaller
markets as Egypt and Morocco, which have demonstrated relatively strong growth,
falling interest rates, a decline in inflation, and attractive valuations.
Similarly, problems in Russia have affected the prices of some of Eastern
Europe's more attractive stocks. For instance, Magyar Olaj-es Gazipari
(MOL) -- the gas distributor in Hungary, and KREDYT BANK of Poland are both
strong stocks that we believe are trading at a discount.
We've raised our weighting in Greece, which is committed to joining
Europe's Economic and Monetary Union (EMU). In anticipation of that goal, the
country has made major strides in economic and fiscal reform. An example of a
Greek company we liked is Stet Hellas, a cellular company that has shown very
strong earnings growth in recent quarters.
What about emerging-markets debt?
Political and currency instabilities have kept us in a cautious mode with
this asset class. At the end of the reporting period, just over 11% of the
portfolio was in foreign government and government agency obligations. The
largest allocation went to Mexican government debt; the remainder was spread
across several Eastern European and Latin American countries. We have very
limited exposure to corporate bonds, with a scattering of holdings in Argentina,
Brazil, and a few other countries.
What is your outlook for emerging markets and for the Fund?
Although we expect growth to be disappointing over the next year, we
believe that emerging markets continue to offer a long-term investment option
for the most aggressive investors. The fundamentals driving growth in emerging
markets are still there: consumption, industrialization, a maturing financial
services industry, and continuing investment in infrastructure.
C-2
<PAGE> 66
Emerging markets potentially can offer earnings growth rates that exceed
those in developed countries; however, there are also many more risks associated
with this type of investment. We urge you to read your prospectus for more
information about the Fund's objectives, strategies, and risks.
PORTFOLIO COMPOSITION
AS OF OCTOBER 31, 1998, BASED ON TOTAL NET ASSETS
<TABLE>
<CAPTION>
TOP 10 PORTFOLIO HOLDINGS
- -------------------------
<S> <C> <C>
1. Telecomunicacoes Brasileiras S.A. (Telebras)
Preferred -- ADR.......................................... (Brazil) 4.3%
2. Telefonos de Mexico, S.A. de C.V. "L" -- ADR............ (Mexico) 3.0
3. Merrill Lynch -- Kospi 200 Call Warrants, due 9/9/99.... (United States) 2.9
4. Petroleo Brasileiro, S.A. (Petrobras) Preferred......... (Brazil) 2.3
5. Companhia Energetica de Minas Gerais (CEMIG) -- ADR..... (Brazil) 2.2
6. South African Breweries Ltd............................. (South Africa) 2.0
7. Hellenic Telecommunication Organization S.A. (OTE)...... (Greece) 1.9
8. Magyar Tavkozlesi Rt. -- ADR............................ (Hungary) 1.8
9. Grupo Carso, S.A. de C.V. "A1".......................... (Mexico) 1.8
10. MISR Elgadida for Housing and Reconstruction............ (Egypt) 1.8
</TABLE>
<TABLE>
<CAPTION>
TOP 10 INDUSTRIES TOP 10 COUNTRIES
- ----------------- ----------------
<S> <C> <C> <C>
1. Services........................... 20.2% 1. Mexico............................. 16.3%
2. Finance............................ 15.0 2. Brazil............................. 16.1
3. Energy............................. 9.7 3. South Africa....................... 6.9
4. Consumer Non-Durables.............. 9.5 4. Argentina.......................... 6.9
5. Materials/Basic Industry........... 8.3 5. India.............................. 6.2
6. Multi-Industry/Miscellaneous....... 6.7 6. Taiwan............................. 5.9
7. Technology......................... 4.3 7. Greece............................. 5.8
8. Capital Goods...................... 2.9 8. Egypt.............................. 5.7
9. Health Care........................ 1.9 9. United States...................... 5.3
10. Consumer Durables.................. 0.6 10. Israel............................. 4.2
</TABLE>
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
C-3
<PAGE> 67
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM DEVELOPING MARKETS FUND VS. BENCHMARK INDEXES
1/11/94--10/31/98
<TABLE>
<CAPTION>
AIM Developing MSCI Emerging IFC Investable
Markets Fund Markets Free Index Composite Index
<S> <C> <C> <C>
1/11/94 $9,524 $10,000 $10,000
4/30/94 7,943 8,922 8,601
10/31/94 9,314 10,641 10,176
4/30/95 7,250 8,494 7,776
10/31/95 7,664 8,573 7,782
4/30/96 9,036 9,716 8,963
10/31/96 9,581 9,130 8,598
4/30/97 10,511 10,133 9,433
10/31/97 9,092 8,356 7,735
4/30/98 9,427 8,660 8,018
10/31/98 5,720 5,767 5,503
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98, including sales charges
<TABLE>
<CAPTION>
CLASS A SHARES
<S> <C>
Inception (1/11/94) -10.98%
1 year -40.09*
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES
<S> <C>
Inception (11/3/97) -42.63%**
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES
(sales charges do not apply)
<S> <C>
Inception (11/3/97) -39.21%***
</TABLE>
*-37.09%, excluding sales charges
**-39.76%, excluding CDSC. Total return provided is cumulative total return
that has not been annualized.
***Total return provided is cumulative total return that has not been
annualized.
Sources: Towers Data Systems Hypo-Registered Trademark- and Bloomberg.
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of the Fund's Class B and Advisor Class shares will
differ from Class A shares due to differing fees and expenses. For Fund data
performance calculations and descriptions of indexes cited on this page,
please refer to the inside front cover.
On October 31, 1997, shareholders of record as of a certain date of GT Global
Developing Markets Fund, Inc., a closed-end fund, became Class A shareholders
of the Fund, an open-end fund. Performance of Class A shares prior to
November 1, 1997 reflects the different fees and expenses of the closed-end
fund.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
The chart above compares your Fund's Class A shares to benchmark indexes. Use
of these indexes is intended to give you a general idea of your Fund's
comparative performance. It is important to understand the differences
between your Fund and these indexes. An index measures performance of a
hypothetical portfolio.
A market index such as the MSCI Emerging Markets Free Index is not managed
and incurs no sales charges, expenses, or fees. If you could buy all the
securities that make up a market index, you would incur expenses that would
affect your investment's return.
Since the last reporting period, AIM Developing Markets Fund has elected to
use the MSCI Emerging Markets Free Index as one of its benchmarks. This index
more closely reflects the performance of the securities in which the Fund
invests. The Fund will no longer be measured against the IFC Investable
Composite Index, the index published in previous reports to shareholders.
Because this is the first reporting period since we have adopted the new
index, SEC guidelines require that we compare the Fund's performance to both
the old and the new index.
C-4
<PAGE> 68
AIM DEVELOPING MARKETS FUND
(A PORTFOLIO OF AIM INVESTMENT FUNDS)
AIM EASTERN EUROPE FUND
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby AIM Developing Markets Fund ("Developing Markets
Fund"), a portfolio of AIM Investment Funds, would acquire all of the assets of
AIM Eastern Europe Fund ("Eastern Europe Fund") in exchange solely for shares
of Developing Markets Fund and the assumption by Developing Markets Fund of all
of Eastern Europe Fund's liabilities. This Statement of Additional Information
consists of this cover page, the pro forma financial statements of Developing
Markets Fund (giving effect to the Reorganization) for the fiscal year ended
October 31, 1998, and the following described documents, each of which is
incorporated by reference herein:
(1) The Statement of Additional Information of Developing Markets Fund,
dated March 1, 1999.
(2) The Annual Report to Shareholders of Developing Markets Fund for
the fiscal year ended October 31, 1998.
(3) The Annual Report to Shareholders of Eastern Europe Fund for the
fiscal year ended October 31, 1998.
This Statement of Additional Information is not a prospectus and
should be read only in conjunction with the Proxy Statement/Prospectus dated
July 1, 1999 relating to the above-referenced matter. A copy of the Proxy
Statement/Prospectus may be obtained without charge by writing to A I M
Distributors, Inc., P.O. Box 4739, Houston, Texas 77210-4739 or by calling
toll-free 1-800-347-4246. This Statement of Additional Information is dated
July 1, 1999.
<PAGE> 69
AIM Developing Markets Fund
AIM Eastern Europe Fund
Notes to Pro Forma Combining Financial Statements
October 31, 1998
(Unaudited)
Note 1 - Basis of Pro Forma Presentation
The pro forma financial statements and the accompanying pro forma schedule of
investments give effect to the proposed Agreement and Plan of Reorganization and
Termination between AIM Eastern Europe Fund and AIM Developing Markets Fund, a
portfolio of AIM Investment Funds, Inc., and the consummation of the
transactions contemplated therein to be accounted for as a tax-free
reorganization of investment companies, and the transaction of the tax-free
reorganization of AIM Emerging Markets Fund and AIM Developing Markets Fund,
both portfolios of AIM Investment Funds, Inc., transacted on February 18, 1999.
The Agreement and Plan of Reorganization and Termination would be accomplished
by an exchange of Class A shares of AIM Developing Markets Fund for the net
assets of AIM Eastern Europe Fund and the distribution of AIM Developing Markets
Fund Class A shares to AIM Eastern Europe Fund shareholders. If the Agreement
and Plan of Reorganization and Termination had taken place at October 31, 1998,
AIM Eastern Europe Fund shareholders would have received 6,256,807 shares of AIM
Developing Markets Fund - Class A shares.
Note 2 - Pro Forma Adjustments
Pro forma adjustments have been made to reflect the contractual expenses of the
surviving entity.
<PAGE> 70
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
AIM Developing AIM Emerging
Markets Markets Adjustments
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 5,875,109 $ 250,454
------------ ------------ -----------
Dividends 4,212,609 4,700,768
(net of $263,295 foreign withholding tax-AIM Developing Markets Fund)
(net of $75,619 foreign withholding tax-AIM Eastern Europe Fund)
------------ ------------ -----------
Securities lending income 241,088 186,080
------------ ------------ -----------
Total investment income 10,328,806 5,137,302
============ ============ ===========
EXPENSES:
Investment management and administration fees 1,740,733 1,660,548
------------ ------------ -----------
Administration fees --
------------ ------------ -----------
Transfer agent fees 538,250 1,069,500
------------ ------------ -----------
Service and distribution expenses: Class A 454,554 406,198
------------ ------------ -----------
Service and distribution expenses: Class B 1,576 871,360
------------ ------------ -----------
Professional fees 360,255 122,310
------------ ------------ -----------
Interest expense 359,635 447,556
------------ ------------ -----------
Printing and postage expenses 312,740 219,000
------------ ------------ -----------
Custodian fees 155,690 160,000
------------ ------------ -----------
Registration and filing fees 96,900 74,900
------------ ------------ -----------
Amortization of organization costs 70,755
------------ ------------ -----------
Fund accounting fees 53,782 45,603
------------ ------------ -----------
Trustees' fees and expenses 30,660 13,870
------------ ------------ -----------
Other expenses 17,000 10,950
------------ ------------ -----------
Total expenses 4,192,530 5,101,795
============ ============ ===========
Less Expense reimbursement by AIM Advisors, Inc. (691,157) (821,992)
------------ ------------ -----------
Expense reductions (41,663) (39,255)
------------ ------------ -----------
Net expenses 3,459,710 4,240,548
============ ============ ===========
Net investment income 6,869,096 896,754
============ ============ ===========
Net realized and unrealized gain (loss) on investments and foreign currencies:
Net realized loss on investments (81,224,308) (72,668,661)
------------ ------------ -----------
Net realized loss on foreign currency transactions (2,134,815) (2,512,849)
------------ ------------ -----------
Net realized loss during the year (83,359,123) (75,181,510)
============ ============ ===========
Net change in unrealized appreciations (depreciation) on
translation of assets and liabilities in foreign currencies 197,153 601,285
------------ ------------ -----------
Net change in unrealized appreciation (depreciation) of investments 13,544,276 5,031,551
------------ ------------ -----------
Net unrealized appreciation (depreciation) during the year 13,741,429 5,632,836
============ ============ ===========
Net realized and unrealized loss on investments and foreign currencies (69,617,694) (69,548,674)
============ ============ ===========
Net decrease in net assets resulting from operations ($62,748,598) ($68,651,920)
============ ============ ===========
<CAPTION>
Pro Forma AIM Eastern
Combining Europe
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 6,125,563 $ 840,587
------------- -------------
Dividends 8,913,377 497,178
(net of $263,295 foreign withholding tax-AIM Developing Markets Fund)
(net of $75,619 foreign withholding tax-AIM Eastern Europe Fund)
------------- -------------
Securities lending income 427,168 --
------------- -------------
Total investment income 15,466,108 1,337,765
============= =============
EXPENSES:
Investment management and administration fees 3,401,281 1,017,796
------------- -------------
Administration fees 0 162,844
------------- -------------
Transfer agent fees 1,607,750 29,713
------------- -------------
Service and distribution expenses: Class A 860,752 --
------------- -------------
Service and distribution expenses: Class B 872,936 --
------------- -------------
Professional fees 482,565 59,412
------------- -------------
Interest expense 807,191 --
------------- -------------
Printing and postage expenses 531,740 73,465
------------- -------------
Custodian fees 315,690 42,988
------------- -------------
Registration and filing fees 171,800 --
------------- -------------
Amortization of organization costs 70,755 --
------------- -------------
Fund accounting fees 99,385 --
------------- -------------
Trustees' fees and expenses 44,530 34,432
------------- -------------
Other expenses 27,950 54,438
------------- -------------
Total expenses 9,294,325 1,475,088
============= =============
Less Expense reimbursement by AIM Advisors, Inc. (1,513,149) (40,711)
------------- -------------
Expense reductions (80,918) --
------------- -------------
Net expenses 7,700,258 1,434,377
============= =============
Net investment income 7,765,850 (96,612)
============= =============
Net realized and unrealized gain (loss) on investments and foreign currencies:
Net realized loss on investments (153,892,969) (7,904,517)
------------- -------------
Net realized loss on foreign currency transactions (4,647,664) (194,719)
------------- -------------
Net realized loss during the year (158,540,633) (8,099,236)
============= =============
Net change in unrealized appreciations (depreciation) on
translation of assets and liabilities in foreign currencies 798,438 (49,219)
------------- -------------
Net change in unrealized appreciation (depreciation) of investments 18,575,827 (38,905,480)
------------- -------------
Net unrealized appreciation (depreciation) during the year 19,374,265 (38,954,699)
============= =============
Net realized and unrealized loss on investments and foreign currencies (139,166,368) (47,053,935)
============= =============
Net decrease in net assets resulting from operations $(131,400,518) $ (47,150,547)
============= =============
<CAPTION>
Pro Forma
Adjustments Combining
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 6,966,150
--------- -------------
Dividends 9,410,555
(net of $263,295 foreign withholding tax-AIM Developing Markets Fund)
(net of $75,619 foreign withholding tax-AIM Eastern Europe Fund)
--------- -------------
Securities lending income 427,168
--------- -------------
Total investment income 16,803,873
========= =============
EXPENSES:
Investment management and administration fees (260,627) 4,158,450
--------- -------------
Administration fees (162,844) 0
--------- -------------
Transfer agent fees 1,637,463
--------- -------------
Service and distribution expenses: Class A 202,330 1,063,082
--------- -------------
Service and distribution expenses: Class B 872,936
--------- -------------
Professional fees 541,977
--------- -------------
Interest expense 807,191
--------- -------------
Printing and postage expenses 605,205
--------- -------------
Custodian fees 358,678
--------- -------------
Registration and filing fees 171,800
--------- -------------
Amortization of organization costs 70,755
--------- -------------
Fund accounting fees 24,835 124,220
--------- -------------
Trustees' fees and expenses 78,962
--------- -------------
Other expenses 82,388
--------- -------------
Total expenses (196,306) 10,573,107
========= =============
Less Expense reimbursement by AIM Advisors, Inc. (1,553,860)
--------- -------------
Expense reductions (80,918)
========= =============
Net expenses (196,306) 8,938,329
========= =============
Net investment income 196,306 7,865,544
========= =============
Net realized and unrealized gain (loss) on investments and foreign currencies:
Net realized loss on investments (161,797,486)
--------- -------------
Net realized loss on foreign currency transactions (4,842,383)
--------- -------------
Net realized loss during the year (166,639,869)
========= =============
Net change in unrealized appreciations (depreciation) on
translation of assets and liabilities in foreign currencies 749,219
--------- -------------
Net change in unrealized appreciation (depreciation) of investments (20,329,653)
--------- -------------
Net unrealized appreciation (depreciation) during the year (19,580,434)
========= =============
Net realized and unrealized loss on investments and foreign currencies (186,220,303)
========= =============
Net decrease in net assets resulting from operations $ 196,306 $(178,354,759)
========= =============
</TABLE>
See Accompanying Notes to Pro Forma Combining Financial Statements.
<PAGE> 71
AIM DEVELOPING MARKETS FUND
AIM EMERGING MARKETS
AIM EASTERN EUROPE FUND
Pro Forma Combining Statements of Assets and Liabilities
October 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
AIM Developing AIM Emerging Pro Forma
Markets Markets Combining
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments, at market value $ 90,220,411 $ 95,678,089 $185,898,500
------------ ------------ ------------
(cost $117,236,708-AIM Developing Markets Fund)
(cost $73,141,633-AIM Eastern Europe Fund)
------------ ------------ ------------
Repurchase agreement, at value and cost -- 0
------------ ------------ ------------
U.S. currency 895 827 1,722
------------ ------------ ------------
Foreign currencies 723,408 1,235,418 1,958,826
------------ ------------ ------------
(cost $730,519-AIM Developing Markets Fund)
(cost $99,392-AIM Eastern Europe Fund)
------------ ------------ ------------
Receivable for Securities Sold 903,099 66,130 969,229
------------ ------------ ------------
Receivable for Fund shares sold 5,619 413,554 419,173
------------ ------------ ------------
Dividends and foreign withholding taxes receivable 268,551 320,223 588,774
------------ ------------ ------------
Prepaid expenses -- 0
------------ ------------ ------------
Interest receivable 424,599 2,692 427,291
------------ ------------ ------------
Unamortized organizational costs 14,557 14,557
------------ ------------ ------------
Total assets 92,561,139 97,716,933 190,278,072
============ ============ ============
LIABILITIES:
Payables for:
------------ ------------ ------------
Securities purchased 3,823,511 3,143,073 6,966,584
------------ ------------ ------------
Fund shares repurchased 394,946 288,586 683,532
------------ ------------ ------------
Investment management and administration fees 356,752 394,425 751,177
------------ ------------ ------------
Service and distribution expenses 96,087 147,714 243,801
------------ ------------ ------------
Professional fees 49,710 43,949 93,659
------------ ------------ ------------
Transfer agent fees 30,788 136,937 167,725
------------ ------------ ------------
Trustees' fees and expenses 25,309 4,101 29,410
------------ ------------ ------------
Custodian 10,081 8,199 18,280
------------ ------------ ------------
Registration and filing fees 7,596 24,709 32,305
------------ ------------ ------------
Printing and postage expenses 6,093 102,809 108,902
------------ ------------ ------------
Open forward foreign currency contracts 950 950
------------ ------------ ------------
Fund Accounting fees 883 4,847 5,730
------------ ------------ ------------
Administration fees -- 0
------------ ------------ ------------
Other accrued expenses 57,979 15,003 72,982
------------ ------------ ------------
Total liabilities 4,860,685 4,314,352 9,175,037
============ ============ ============
Net assets applicable to shares outstanding 87,700,454 93,402,581 181,103,035
============ ============ ============
NET ASSETS:
Class A $ 87,517,225 $ 43,925,435 $131,442,660
============ ============ ============
Class B $ 153,941 $ 49,439,410 $ 49,593,351
============ ============ ============
Advisor Class $ 29,288 $ 37,736 $ 67,024
============ ============ ============
SHARES OUTSTANDING:
Class A 11,616,154 5,964,824 17,446,312
------------ ------------ ------------
Class B 20,565 6,894,258 6,620,273
------------ ------------ ------------
Class C 3,877 5,067 8,877
------------ ------------ ------------
Class A:
Net asset value and redemption price per share $ 7.53 $ 7.36 $ 7.53
------------ ------------ ------------
Offering price per share:
(Net asset value of $7.53/95.25%)-AIM Developing Markets Fund) $ 7.91
============ ============ ============
Class B:
Net asset value and offering price per share $ 7.49 $ 7.17 $ 7.49
============ ============ ============
Class C:
Net asset value and offering price per share $ 7.55 $ 7.45 $ 7.55
============ ============ ============
<CAPTION>
AIM Eastern Pro Forma
Europe Combining
------------ ------------
<S> <C> <C>
ASSETS:
Investments, at market value $ 41,708,968 $227,607,468
------------ ------------
(cost $117,236,708-AIM Developing Markets Fund)
(cost $73,141,633-AIM Eastern Europe Fund)
------------ ------------
Repurchase agreement, at value and cost 5,036,000 5,036,000
------------ ------------
U.S. currency 685 2,407
------------ ------------
Foreign currencies 97,972 2,056,798
------------ ------------
(cost $730,519-AIM Developing Markets Fund)
(cost $99,392-AIM Eastern Europe Fund)
------------ ------------
Receivable for Securities Sold 635,491 1,604,720
------------ ------------
Receivable for Fund shares sold -- 419,173
------------ ------------
Dividends and foreign withholding taxes receivable 132,076 720,850
------------ ------------
Prepaid expenses 4,905 4,905
------------ ------------
Interest receivable 741 428,032
------------ ------------
Unamortized organizational costs -- 14,557
------------ ------------
Total assets 47,616,838 237,894,910
============ ============
LIABILITIES:
Payables for:
------------ ------------
Securities purchased 310,383 7,276,967
------------ ------------
Fund shares repurchased -- 683,532
------------ ------------
Investment management and administration fees 38,395 789,572
------------ ------------
Service and distribution expenses -- 243,801
------------ ------------
Professional fees 53,350 147,009
------------ ------------
Transfer agent fees -- 167,725
------------ ------------
Trustees' fees and expenses 10,400 39,810
------------ ------------
Custodian 2,500 20,780
------------ ------------
Registration and filing fees -- 32,305
------------ ------------
Printing and postage expenses 75,000 183,902
------------ ------------
Open forward foreign currency contracts -- 950
------------ ------------
Fund Accounting fees -- 5,730
------------ ------------
Administration fees 7,132 7,132
------------ ------------
Other accrued expenses 20,132 93,114
------------ ------------
Total liabilities 517,292 9,692,329
============ ============
Net assets applicable to shares outstanding 47,099,546 228,202,581
============ ============
NET ASSETS:
Class A $ 47,099,546 $178,542,206
============ ============
Class B -- $ 49,593,351
============ ============
Advisor Class -- $ 67,024
============ ============
SHARES OUTSTANDING:
Class A 6,516,426 23,703,119
============ ============
Class B -- 6,620,273
============ ============
Class C -- 8,877
============ ============
Class A:
Net asset value and redemption price per share $ 7.23 $ 7.53
Offering price per share:
(Net asset value of $7.53/95.25%)-AIM Developing Markets Fund) -- --
============ ============
Class B:
Net asset value and offering price per share -- $ 7.49
============ ============
Class C:
Net asset value and offering price per share -- $ 7.55
============ ============
</TABLE>
See Accompanying Notes to Pro Forma Combining Financial Statements.
<PAGE> 72
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
EQUITY INVESTMENTS (81.9%)
SERVICES (20.4%)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
Telecomunicacoes Brasileiras S.A. (Telebras)
49,291 59,262 108,553 108,553 Preferred - ADR (a)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
50,583 48,027 98,610 98,610 Telefonos de Mexico, S.A. de C.V. "L" - ADR (a)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
74,322 57,266 131,588 131,588 Hellenic Telecommunication Organization S.A. (OTE)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
59,100 67,990 127,090 202,700 329,790 Magyar Tavkozlesi Rt. - ADR (a)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
64,000 64,000 Julius Meinl International AG
(Retailers - Food)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
80,900 81,400 162,300 162,300 Telefonica del Peru S.A. - ADR (a)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
748,662 995,730 1,744,392 1,744,392 Cifra, S.A. de C.V. "V" (b)
(Retailers - Other)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
27,528 30,983 58,511 58,511 Telefonica de Argentina S.A. - ADR (a)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
Telecomunicacoes de Sao Paulo S.A. (TELESP):
(Telephone Regional/Local)
7,001,000 10,859,000 17,860,000 17,860,000 Common (b)
150,157 185,406 335,563 335,563 Preferred
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
26,700 35,100 61,800 61,800 Grupo Televisa, S.A. de C.V. - GDR (a)(b)
(Broadcasting & Publishing)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
24,976 24,829 49,805 49,805 STET Hellas Telecommunications S.A. - ADR (a)(b)
(Wireless Communications)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
Mahanagar Telephone Nigam Ltd. (a)(b)(c)
(Telecom - Other)
43,300 43,300 43,300 GDR
143,500 84,400 227,900 227,900 Common
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
37,000 37,000 Danubius Hotels and Spa Rt. (b)
(Leisure & Tourism)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
7,132,127 10,607,155 17,739,282 17,739,282 Companhia de Saneamento Basico do Estado de Sao Paulo
(Business & Public Services)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
37,000 37,000 74,000 74,000 Videsh Sanchar Nigam Ltd. - Reg S GDR (a)(b)(c)
(Telecom - Other)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
15,500 27,900 43,400 43,400 Nortel Inversora S.A. - ADR (a)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
10,300 19,400 29,700 29,700 Telecom Argentina S.A. - ADR (a)
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
2,320 2,809 5,129 5,129 ONA (Omnium Nord Africain) S.A. "A"
(Business & Public Services)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
86,900 108,700 195,600 195,600 Bezeq Israeli Telecommunication Corporation Ltd.
(Telephone Networks)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
295,000 295,000 Nizhny Novgorod Sviazinform (a)
(Telecom - Other)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
14,898 18,591 33,489 33,489 Blue Square Chain Investments & Properties Ltd. (b)
(Retailers - Food)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
Russian Telecommunication Development Corp.
(Telephone Networks)
52,600 52,600 Non-Voting (a)(b)(d)(e)
38,400 38,400 Voting (a)(b)(d)(e)
--------- ---------- ---------- --------- ---------- -----------------------------------------------------
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
EQUITY INVESTMENTS (81.9%)
SERVICES (20.4%)
Telecomunicacoes Brasileiras S.A. (Telebras)
Preferred - ADR (a) BRZL 3,743,034 4,500,208 8,243,242 8,243,242
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Telefonos de Mexico, S.A. de C.V. "L" - ADR (a) MEX 2,671,415 2,536,426 5,207,841 5,207,841
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Hellenic Telecommunication Organization S.A. (OTE) GREC 1,690,938 1,302,888 2,993,826 2,993,826
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Magyar Tavkozlesi Rt. - ADR (a) HGRY 1,588,313 1,827,231 3,415,544 5,447,562 8,863,106
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Julius Meinl International AG ASTRI 1,319,248 1,319,248
(Retailers - Food)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Telefonica del Peru S.A. - ADR (a) PERU 1,051,700 1,058,200 2,109,900 2,109,900
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Cifra, S.A. de C.V. "V" (b) MEX 1,015,210 1,350,243 2,365,453 2,365,453
(Retailers - Other)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Telefonica de Argentina S.A. - ADR (a) ARG 910,145 1,024,375 1,934,520 1,934,520
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Telecomunicacoes de Sao Paulo S.A. (TELESP): BRZL
(Telephone Regional/Local)
Common (b) 760,144 1,179,032 1,939,176 1,939,176
Preferred 25,177 31,088 56,265 56,265
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Grupo Televisa, S.A. de C.V. - GDR (a)(b) MEX 724,238 952,088 1,676,326 1,676,326
(Broadcasting & Publishing)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
STET Hellas Telecommunications S.A. - ADR (a)(b) GREC 655,620 651,761 1,307,381 1,307,381
(Wireless Communications)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Mahanagar Telephone Nigam Ltd. (a)(b)(c) IND
(Telecom - Other)
GDR 465,475 465,475 465,475
Common 620,816 365,135 985,951 985,951
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Danubius Hotels and Spa Rt. (b) HGRY 597,159 597,159
(Leisure & Tourism)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Companhia de Saneamento Basico do Estado de Sao Paulo BRZL 574,014 853,695 1,427,709 1,427,709
(Business & Public Services)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Videsh Sanchar Nigam Ltd. - Reg S GDR (a)(b)(c) IND 388,500 388,500 777,000 777,000
(Telecom - Other)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Nortel Inversora S.A. - ADR (a) ARG 344,875 620,775 965,650 965,650
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Telecom Argentina S.A. - ADR (a) ARG 332,175 625,650 957,825 957,825
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
ONA (Omnium Nord Africain) S.A. "A" MOR 301,551 365,111 666,662 666,662
(Business & Public Services)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Bezeq Israeli Telecommunication Corporation Ltd. ISRL 249,999 312,714 562,713 562,713
(Telephone Networks)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Nizhny Novgorod Sviazinform (a) RUS 247,800 247,800
(Telecom - Other)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Blue Square Chain Investments & Properties Ltd. (b) ISRL 190,525 237,753 428,278 428,278
(Retailers - Food)
- ----------------------------------------------------- ---- --------- --------- --------- --------- ---------
Russian Telecommunication Development Corp. RUS
(Telephone Networks)
Non-Voting (a)(b)(d)(e) 129,396 129,396
Voting (a)(b)(d)(e) 94,464 94,464
</TABLE>
<PAGE> 73
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
Samara Svyazinform
(Telephone - Regional/Local)
4,600 4,600 Common (a)(e)
8,900 8,900 Preferred (a)(e)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
14,109 14,109 Chelyabinsk Svyazinform (a)
(Telecom - Other)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
1,400 1,400 Technoimpex (a)(b)(d)(e)
(Wholesale & International Trade)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
50 50 50 Indian Hotels Co., Ltd.
(Leisure & Tourism)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
FINANCE (16.3%)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
88,250 91,470 179,720 179,720 Liberty Life Association of Africa Ltd.
(Insurance - Life)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
Bank Handlowy W. Warszawie
(Banks - Money Center)
70,000 70,000 Common
47,139 47,139 Reg S GDR (a)(c)
2,590 2,590 GDR (f)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
63,120 63,120 Bank Rozwoju Eksportu S.A.
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
26,059 26,059 Bank Slaski S.A.
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
301,200 382,800 684,000 684,000 Cathay Life Insurance Co., Ltd.
(Insurance - Life)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
28,000 28,000 OTP Bank Reg S GDR (a)(c)
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
6,520 8,845 15,365 15,365 National Bank of Greece S.A.
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
11,255 14,955 26,210 26,210 Alpha Credit Bank
(Banks - Regional)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
797,733 797,733 Big Bank Gdanski S.A.
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
Uniao de Bancos Brasileiros S.A. (Unibanco)
(Banks - Money Center)
14,649,042 16,569,429 31,218,471 31,218,471 Units (g)
18,510 21,670 40,180 40,180 GDR (a)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
440,500 642,510 1,083,010 1,083,010 Bank Hapoalim Ltd.
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
691,100 1,007,400 1,698,500 1,698,500 Grupo Financiero Banamex Accival, S.A. de
C.V. "B" (b)
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
43,000 46,000 89,000 89,000 BIG Bank Gdanski S.A. - Reg S GDR (a)(c)
(Banks - Regional)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
519,768 768,745 1,288,513 1,288,513 Bank Leumi Le - Israel
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
69,400 95,500 164,900 164,900 MISR International Bank - Reg S GDR (a)(c)
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
23,068,549 34,305,200 57,373,749 57,373,749 Turkiye Is Bankasi (Isbank) "C"
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
28,872 28,226 57,098 57,098 Banco de Galicia y Buenos Aires, S.A. de
C.V. - ADR (a)
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
5,800 7,460 13,260 13,260 Commercial Bank of Greece S.A.
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
104,591 104,591 Vilniaus Bankas AB Reg S GDR (a)(c)
(Banks - Money Center)
- ---------- ---------- ---------- ------- ---------- -------------------------------------------
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Samara Svyazinform RUS
(Telephone - Regional/Local)
Common (a)(e) 94,300 94,300
Preferred (a)(e) 91,225 91,225
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Chelyabinsk Svyazinform (a) RUS 93,472 93,472
(Telecom - Other)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Technoimpex (a)(b)(d)(e) HGRY
(Wholesale & International Trade)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Indian Hotels Co., Ltd. IND 484 484 484
(Leisure & Tourism)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
17,838,873 20,648,348 38,487,221 8,114,626 46,601,847
FINANCE (16.3%)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Liberty Life Association of Africa Ltd. SAFR 1,515,564 1,570,862 3,086,426 3,086,426
(Insurance - Life)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Bank Handlowy W. Warszawie POL
(Banks - Money Center)
Common 772,807 772,807
Reg S GDR (a)(c) 537,384 537,384
GDR (f) 29,576 29,576
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Bank Rozwoju Eksportu S.A. 1,320,349 1,320,349
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Bank Slaski S.A. POL 1,302,193 1,302,193
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Cathay Life Insurance Co., Ltd. TWN 1,065,248 1,353,841 2,419,089 2,419,089
(Insurance - Life)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
OTP Bank Reg S GDR (a)(c) HGRY 1,015,000 1,015,000
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
National Bank of Greece S.A. GREC 927,124 1,257,732 2,184,856 2,184,856
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Alpha Credit Bank GREC 900,040 1,195,922 2,095,962 2,095,962
(Banks - Regional)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Big Bank Gdanski S.A. POL 822,764 822,764
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Uniao de Bancos Brasileiros S.A. (Unibanco) BRZL
(Banks - Money Center)
Units (g) 480,810 543,841 1,024,651 1,024,651
GDR (a) 323,925 379,225 703,150 703,150
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Bank Hapoalim Ltd. ISRL 796,944 1,162,416 1,959,360 1,959,360
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Grupo Financiero Banamex Accival, S.A. de
C.V. "B" (b) MEX 718,257 1,046,986 1,765,243 1,765,243
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
BIG Bank Gdanski S.A. - Reg S GDR (a)(c) POL 692,300 740,600 1,432,900 1,432,900
(Banks - Regional)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Bank Leumi Le - Israel ISRL 664,712 983,119 1,647,831 1,647,831
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
MISR International Bank - Reg S GDR (a)(c) EGPT 654,095 900,088 1,554,183 1,554,183
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Turkiye Is Bankasi (Isbank) "C" TRKY 633,157 941,566 1,574,723 1,574,723
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Banco de Galicia y Buenos Aires, S.A. de
C.V. - ADR (a) ARG 492,629 481,606 974,235 974,235
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Commercial Bank of Greece S.A. GREC 491,753 632,496 1,124,249 1,124,249
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
Vilniaus Bankas AB Reg S GDR (a)(c) LIT 483,733 483,733
(Banks - Money Center)
- ------------------------------------------- ------- ----------- ----------- ---------- --------- ----------
</TABLE>
<PAGE> 74
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
5,360 7,170 12,530 1 12,531 Ergo Bank S.A.
(Banks - Regional)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
41,379,593 48,631,340 90,010,933 90,010,933 Yapi ve Kredi Bankasi AS
(Banks - Regional)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
56,220 77,770 133,990 133,990 Credicorp Ltd. - ADR (a)
(Banks - Money Center)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
2,900 3,500 6,400 6,400 Wafabank
(Banks - Money Center)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
14,680 22,010 36,690 34,770 71,460 Kredyt Bank S.A. Reg S GDR (a)(b)(c)
(Banks - Money Center)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
19,162,500 22,711,500 41,874,000 41,874,000 Akbank T.A.S.
(Banks - Regional)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
26,900 32,100 59,000 59,000 Banco Rio de La Plata S.A. - ADR (a)
(Banks - Money Center)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
9,000 10,750 19,750 19,750 Inversiones y Representaciones S.A. (IRSA) - GDR (a)
(Real Estate)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
70,000 68,000 138,000 138,000 National Development Bank
(Banks - Regional)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
12,700 12,610 25,310 25,310 Kazkommertsbank Co. - GDR (a)(b)
(Banks - Regional)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
5,820 5,820 Zagrebacka Banka d.d. GDR (a)(b)
(Banks - Money Center)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
4,200 4,200 4,200 Commercial National Bank
(Banks - Money Center)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
3,000 1,650 4,650 4,650 State Bank of India Ltd.
(Banks - Money Center)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
5 5 5 Housing Development Finance Corp.
(Other - Financial)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
ENERGY (12.1%)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
16,207,398 16,324,080 32,531,478 32,531,478 Petroleo Brasileiro S.A. (Petrobras) Preferred
(Oil)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
97,731 96,750 194,481 194,481 Companhia Energetica de Minas Gerais (CEMIG) - ADR (a)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
68,330 72,410 140,740 218,800 359,540 MOL Magyar Olaj-es Gazipari RT - Reg S GDR (a)(c)
(Gas Production & Distribution)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
130,000 130,000 Gazprom Reg S ADR (a)(c)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
70,958 110,068 181,026 181,026 Huaneng Power International, Inc. - ADR (a)(b)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
30,728 44,268 74,996 74,996 Enersis S.A. - ADR (a)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
Unified Energy Systems
(Electrical & Gas Utilities)
88,500 88,500 Reg S GDR (a)(c)
6,920,000 6,920,000 Common (a)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
208,480 208,480 Mosenergo (a)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
516,295 516,295 Bitech Pertoleum Corp. (b)
(Oil)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
15,600 15,600 Ceske Energeticke Zavody AS (b)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
12,500,000 15,100,000 27,600,000 27,600,000 Companhia de Electricidade do Estado da Bahia
(Electrical & Gas Utilities)
- ---------- ---------- ---------- --------- ---------- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Ergo Bank S.A GREC 476,360 637,220 1,113,580 89 1,113,669
(Banks - Regional)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Yapi ve Kredi Bankasi AS TRKY 467,233 549,115 1,016,348 1,016,348
(Banks - Regional)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Credicorp Ltd. - ADR (a) PERU 379,485 524,948 904,433 904,433
(Banks - Money Center)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Wafabank MOR 378,516 456,830 835,346 835,346
(Banks - Money Center)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Kredyt Bank S.A. Reg S GDR (a)(b)(c) POL 292,866 439,100 731,966 693,661 1,425,627
(Banks - Money Center)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Akbank T.A.S TRKY 282,947 335,350 618,297 618,297
(Banks - Regional)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Banco Rio de La Plata S.A. - ADR (a) ARG 242,100 288,900 531,000 531,000
(Banks - Money Center)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Inversiones y Representaciones S.A. (IRSA) - GDR (a) ARG 232,875 278,156 511,031 511,031
(Real Estate)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
National Development Bank SLNKA 80,910 78,598 159,508 159,508
(Banks - Regional)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Kazkommertsbank Co. - GDR (a)(b) KAZ 70,485 69,986 140,471 140,471
(Banks - Regional)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Zagrebacka Banka d.d. GDR (a)(b) CRT 62,274 62,274
(Banks - Money Center)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Commercial National Bank EGPT 33,723 33,723 33,723
(Banks - Money Center)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
State Bank of India Ltd. IND 11,035 6,070 17,105 17,105
(Banks - Money Center)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Housing Development Finance Corp. IND 264 264 264
(Other - Financial)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
13,271,370 16,888,560 30,159,930 7,039,830 37,199,760
ENERGY (12.1%)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Petroleo Brasileiro S.A. (Petrobras) Preferred BRZL 2,038,154 2,052,827 4,090,981 4,090,981
(Oil)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Companhia Energetica de Minas Gerais (CEMIG) - ADR BRZL 1,893,538 1,874,531 3,768,069 3,768,069
(Electrical & Gas Utilities)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
MOL Magyar Olaj-es Gazipari RT - Reg S GDR (a)(c) HGRY 1,556,216 1,649,138 3,205,354 4,977,700 8,183,054
(Gas Production & Distribution)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Gazprom Reg S ADR (a)(c) RUS 1,212,250 1,212,250
(Electrical & Gas Utilities)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Huaneng Power International, Inc. - ADR (a)(b) CHNA 975,673 1,513,435 2,489,108 2,489,108
(Electrical & Gas Utilities)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Enersis S.A. - ADR (a) CHLE 641,447 924,095 1,565,542 1,565,542
(Electrical & Gas Utilities)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Unified Energy Systems RUS
(Electrical & Gas Utilities)
Reg S GDR (a)(c) 276,563 276,563
Common (a) 221,440 221,440
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Mosenergo (a) RUS 416,960 416,960
(Electrical & Gas Utilities)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Bitech Pertoleum Corp. (b) CAN 401,656 401,656
(Oil)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Ceske Energeticke Zavody AS (b) CZK 355,088 355,088
(Electrical & Gas Utilities)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
Companhia de Electricidade do Estado da Bahia BRZL 398,223 481,053 879,276 879,276
(Electrical & Gas Utilities)
- ---------------------------------------------------- ------ ---------- ---------- ---------- --------- ----------
</TABLE>
<PAGE> 75
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
163,020 225,855 388,875 743,500 1,132,375 Surgutneftegaz - ADR (a)
(Oil)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
7,843,375 9,317,824 17,161,199 17,161,199 Electropaulo Metropolitana Preferred
(Electrical & Gas Utilities)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
1,654,290 2,158,561 3,812,851 3,812,851 Light - Servicos de Electricidade S.A.
(Electrical & Gas Utilities)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
7,843,375 9,317,824 17,161,199 17,161,199 Empresa Bandeirante de Energia S.A. (b)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
12,154,000 14,418,000 26,572,000 26,572,000 Companhia Brasileira de Petroleo Ipiranga S.A. Preferred
(Gas)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
4,653 4,653 Elektrim Spolka Akcyjna S.A.
(Energy Sources)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
1,350 1,350 1,350 Bombay Suburban Electric Supply (BSES) Ltd. (b)
(Electrical & Gas Utilities)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
65 65 65 Pakistan State Oil., Ltd
(Oil)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
CONSUMER NON-DURABLES (9.0%)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
89,806 92,963 182,769 182,769 South African Breweries Ltd.
(Beverages - Alcoholic)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
40,650 51,000 91,650 91,650 Hindustan Lever Ltd.
(Personal Care/Cosmetics)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
79,900 92,128 172,028 172,028 ITC Ltd.
(Tobacco)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
44,311 64,322 108,633 108,633 Fomento Economico Mexicano, S.A. de C.V. - ADR (a)
(Beverages - Non-alcoholic)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
34,000 50,000 84,000 84,000 Panamerican Beverages, Inc. "A" (a)
(Beverages - Non-alcoholic)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
82,626 82,626 Okocimskie Zaklady Piwowarskie S.A. (b)
(Beverage - Alcoholic)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
38,500 38,500 Pick Szeged Rt. - Reg S GDR (a)(c)
(Food)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
A-Ahram Beverages Co. S.A.E. - 144A GDR (a)(h)
(Beverages - Alcoholic)
15,814 21,235 37,049 37,049 144A GDR
11,000 11,000 11,000 GDR
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
18,100 36,546 54,646 54,646 Compania Cervecerias Unidas S.A. - ADR (a)
(Beverages - Alcoholic)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
2,747,000 5,002,000 7,749,000 7,749,000 Companhia de Tecidos Norte de Minas Preferred
(Textiles & Apparel)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
563,721 663,129 1,226,850 1,226,850 Companhia Cervejaria Brahma Preferred
(Beverages - Alcoholic)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
11,400 12,000 23,400 23,400 Oriental Weavers "C"
(Textiles & Apparel)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
1,243 1,560 2,803 2,168 4,971 Zaklady Piwowarskie w Zywcu S.A. (Zywiec)
(Beverages - Alcoholic)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
50,000 50,000 Russkie Samotsvety (a)(b)
(Other Consumer Goods)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
47,740 58,916 106,656 106,656 Truworths International Ltd.
(Textiles & Apparel)
- ---------- ---------- ---------- ------- ---------- --------------------------------------------------------
MATERIALS/BASIC INDUSTRY (7.9%)
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Surgutneftegaz - ADR (a) RUS 326,040 451,710 777,750 1,579,937 2,357,687
(Oil)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Electropaulo Metropolitana Preferred BRZL 264,339 314,031 578,370 578,370
(Electrical & Gas Utilities)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Light - Servicos de Electricidade S.A. BRZL 205,261 267,830 473,091 473,091
(Electrical & Gas Utilities)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Empresa Bandeirante de Energia S.A. (b) BRZL 76,211 90,538 166,749 166,749
(Electrical & Gas Utilities)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Companhia Brasileira de Petroleo Ipiranga S.A. Preferred BRZL 65,213 77,360 142,573 142,573
(Gas)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Elektrim Spolka Akcyjna S.A. POL 55,425 55,425
(Energy Sources)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Bombay Suburban Electric Supply (BSES) Ltd. (b) IND 4,774 4,774 4,774
(Electrical & Gas Utilities)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Pakistan State Oil., Ltd PAK 64 64 64
(Oil)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
8,445,089 9,696,612 18,141,701 9,497,019 27,638,720
CONSUMER NON-DURABLES (9.0%)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
South African Breweries Ltd. SAFR 1,747,924 1,809,369 3,557,293 3,557,293
(Beverages - Alcoholic)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Hindustan Lever Ltd. IND 1,540,472 1,932,695 3,473,167 3,473,167
(Personal Care/Cosmetics)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
ITC Ltd. IND 1,321,750 1,524,032 2,845,782 2,845,782
(Tobacco)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Fomento Economico Mexicano, S.A. de C.V. - ADR (a) MEX 1,154,855 1,676,392 2,831,247 2,831,247
(Beverages - Non-alcoholic)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Panamerican Beverages, Inc. "A" (a) MEX 688,500 1,012,500 1,701,000 1,701,000
(Beverages - Non-alcoholic)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Okocimskie Zaklady Piwowarskie S.A. (b) POL 535,317 535,317
(Beverage - Alcoholic)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Pick Szeged Rt. - Reg S GDR (a)(c) HGRY 332,063 332,063
(Food)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
A-Ahram Beverages Co. S.A.E. - 144A GDR (a)(h) EGPT
(Beverages - Alcoholic)
144A GDR 443,583 595,642 1,039,225 1,039,225
GDR 308,550 308,550 308,550
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Compania Cervecerias Unidas S.A. - ADR (a) CHLE 325,800 657,828 983,628 983,628
(Beverages - Alcoholic)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Companhia de Tecidos Norte de Minas Preferred BRZL 317,812 578,702 896,514 896,514
(Textiles & Apparel)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Companhia Cervejaria Brahma Preferred BRZL 264,658 311,328 575,986 575,986
(Beverages - Alcoholic)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Oriental Weavers "C" EGPT 245,974 258,920 504,894 504,894
(Textiles & Apparel)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) POL 169,369 212,562 381,931 295,407 677,338
(Beverages - Alcoholic)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Russkie Samotsvety (a)(b) RUS 252,500 252,500
(Other Consumer Goods)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
Truworths International Ltd. SAFR 36,381 44,898 81,279 81,279
(Textiles & Apparel)
- -------------------------------------------------------- ------- --------- --------- ---------- --------- ----------
8,257,078 10,923,418 19,180,496 1,415,287 20,595,783
MATERIALS/BASIC INDUSTRY (7.9%)
</TABLE>
<PAGE> 76
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
47,673 47,673 Pannonplast Rt.
(Plastics & Rubber)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
95,195 109,535 204,730 204,730 Suez Cement Co. - Reg S GDR (a)(c)
(Cement)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
87,900 90,800 178,700 178,700 Anglo American Platinum Corporation Ltd.
(Metals - Non-Ferrous)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
31,500 34,370 65,870 65,870 Sociedad Quimica y Minera de Chile S.A. - ADR (a)
(Chemicals)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
55,700 54,200 109,900 109,900 Companhia Vale do Rio Doce "A" Preferred
(Metals - Steel)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
161,674 161,674 Stomil Olsztyn S.A.
(Plastics & Rubber)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
47,792 54,606 102,398 102,398 Compania de Minas Buenaventura S.A. - ADR (a)
(Gold)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
Cemex, S.A. de C.V. "CPO"
(Cement)
238,120 349,153 587,273 587,273 "CPO"
43,400 43,400 43,400 "A"
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
115,233 147,781 263,014 263,014 Apasco, S.A. de C.V. "A"
(Cement)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
Hindalco Industries Ltd.:
(Metals - Non-Ferrous)
26,200 34,200 60,400 60,400 GDR (a)
1,634 1,802 3,436 3,436 Common
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
144,665 142,780 287,445 287,445 Makhteshim-Agan Industries Ltd. (b)
(Chemicals)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
118,000 187,600 305,600 305,600 Siderca S.A. "A"
(Metals - Steel)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
283,300 537,100 820,400 820,400 Grupo Cementos de Chihuahua, S.A. de C.V. "B"
(Cement)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
69,370 72,711 142,081 142,081 Engro Chemicals Pakistan Ltd.
(Chemicals)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
35,360 43,350 78,710 78,710 Nan Ya Plastics Corp. (b)
(Plastics & Rubber)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
16 16 16 Associated Cement Cos., Ltd.
(Cement)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
4 4 4 Dewan Salman Fibre Ltd. (b)
(Chemicals)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
MULTI-INDUSTRY/MISCELLANEOUS (5.5%)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
452,400 664,600 1,117,000 1,117,000 Grupo Carso, S.A. de C.V. "A1"
(Multi-Industry)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
220,610 228,160 448,770 448,770 Rembrandt Group Ltd.
(Conglomerate)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
43,775,250 57,726,250 101,501,500 101,501,500 Haci Omer Sabanci Holding AS
(Conglomerate)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
288,900 380,700 669,600 669,600 China Development Corp.
(Conglomerate)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
175,000 156,000 331,000 331,000 Central Asia Regional Growth Fund (a)(b)(e)
(Country Funds)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
5,220,550 3,488,650 8,709,200 8,709,200 Koc Holding AS
(Conglomerate)
- ---------- ---------- ----------- -------- ----------- -------------------------------------------------
24,643 31,615 56,258 56,258 Koor Industries Ltd. - ADR (a)
(Conglomerate)
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Pannonplast Rt. HGRY 1,472,882 1,472,882
(Plastics & Rubber)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Suez Cement Co. - Reg S GDR (a)(c) EGPT 1,404,126 1,615,641 3,019,767 3,019,767
(Cement)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Anglo American Platinum Corporation Ltd. SAFR 1,336,583 1,380,680 2,717,263 2,717,263
(Metals - Non-Ferrous)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Sociedad Quimica y Minera de Chile S.A.
- ADR (a) CHLE 1,047,375 1,142,803 2,190,178 2,190,178
(Chemicals)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Companhia Vale do Rio Doce "A" Preferred BRZL 840,543 817,907 1,658,450 1,658,450
(Metals - Steel)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Stomil Olsztyn S.A. POL 821,992 821,992
(Plastics & Rubber)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Compania de Minas Buenaventura S.A. - ADR (a) PERU 585,452 668,924 1,254,376 1,254,376
(Gold)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Cemex, S.A. de C.V. "CPO" MEX
(Cement)
"CPO" 568,019 832,880 1,400,899 1,400,899
"A" 104,387 104,387 104,387
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Apasco, S.A. de C.V. "A" MEX 422,015 541,215 963,230 963,230
(Cement)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Hindalco Industries Ltd.: IND
(Metals - Non-Ferrous)
GDR (a) 307,195 400,995 708,190 708,190
Common 19,759 21,790 41,549 41,549
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Makhteshim-Agan Industries Ltd. (b) ISRL 256,973 253,624 510,597 510,597
(Chemicals)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Siderca S.A. "A" ARG 165,250 262,719 427,969 427,969
(Metals - Steel)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Grupo Cementos de Chihuahua, S.A. de C.V. "B" MEX 151,983 288,140 440,123 440,123
(Cement)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Engro Chemicals Pakistan Ltd. PAK 63,948 67,027 130,975 130,975
(Chemicals)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Nan Ya Plastics Corp. (b) TWN 44,780 54,899 99,679 99,679
(Plastics & Rubber)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Associated Cement Cos., Ltd. IND 356 356 356
(Cement)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Dewan Salman Fibre Ltd. (b) PAK - 1 1 1
(Chemicals)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
7,214,001 8,453,988 15,667,989 2,294,874 17,962,863
MULTI-INDUSTRY/MISCELLANEOUS (5.5%)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Grupo Carso, S.A. de C.V. "A1" MEX 1,567,257 2,302,385 3,869,642 3,869,642
(Multi-Industry)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Rembrandt Group Ltd. SAFR 1,472,049 1,522,427 2,994,476 2,994,476
(Conglomerate)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Haci Omer Sabanci Holding AS TRKY 661,579 872,422 1,534,001 1,534,001
(Conglomerate)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
China Development Corp. TWN 571,107 752,581 1,323,688 1,323,688
(Conglomerate)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Central Asia Regional Growth Fund (a)(b)(e) IRE 525,000 468,000 993,000 993,000
(Country Funds)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Koc Holding AS TRKY 480,647 321,194 801,841 801,841
(Conglomerate)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
Koor Industries Ltd. - ADR (a) ISRL 398,909 511,768 910,677 910,677
(Conglomerate)
- --------------------------------------------- ------- --------- --------- --------- --------- ---------
</TABLE>
<PAGE> 77
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
17,000 3,800 20,800 20,800 John Keells Holdings Ltd.
(Conglomerate)
- ------- ------- --------- ------- --------- -------------------------------------------------
75,800 75,800 75,800 Romanian Growth Fund (a) (b)
(Country Funds)
- ------- ------- --------- ------- --------- -------------------------------------------------
200 200 200 KEC International (b)
(Miscellaneous)
- ------- ------- --------- ------- --------- -------------------------------------------------
TECHNOLOGY (3.7%)
- ------- ------- --------- ------- --------- -------------------------------------------------
597,950 667,450 1,265,400 1,265,400 Taiwan Semiconductor Manufacturing Co. (b)
(Semiconductors)
- ------- ------- --------- ------- --------- -------------------------------------------------
96,862 127,997 224,859 224,859 Asustek Computer Inc. - Reg S GDR (a)(b)(c)
(Computers & Peripherals)
- ------- ------- --------- ------- --------- -------------------------------------------------
112,000 141,960 253,960 253,960 Hon Hai Precision Industry
(Computers & Peripherals)
- ------- ------- --------- ------- --------- -------------------------------------------------
160,000 212,000 372,000 372,000 Compal Electronics, Inc. (b)
(Computers & Peripherals)
- ------- ------- --------- ------- --------- -------------------------------------------------
153,600 196,800 350,400 350,400 Delta Electronics, Inc.
(Computers & Peripherals)
- ------- ------- --------- ------- --------- -------------------------------------------------
16,505 21,505 38,010 38,010 Formula Systems Ltd. (b)
(Software)
- ------- ------- --------- ------- --------- -------------------------------------------------
INVESTMENT FUNDS (.8%)
- ------- ------- --------- ------- --------- -------------------------------------------------
9,000 9,000 Baltic Republics Fund Ltd. (a)(b)(d)
(Country Fund)
- ------- ------- --------- ------- --------- -------------------------------------------------
15,000 15,000 Romania Fund Ltd. (a)(b)
(Country Fund)
- ------- ------- --------- ------- --------- -------------------------------------------------
15,000 15,000 Ladenburg Thalmann Ukraine Fund Ltd. (a)(b)
(Country Fund)
- ------- ------- --------- ------- --------- -------------------------------------------------
75,000 75,000 Romanian Growth Fund PLC (a)(b)
(Country Fund)
- ------- ------- --------- ------- --------- -------------------------------------------------
CAPITAL GOODS (3.0%)
- ------- ------- --------- ------- --------- -------------------------------------------------
17,100 20,165 37,265 37,265 MISR Elgadida for Housing and Reconstruction
(Construction)
- ------- ------- --------- ------- --------- -------------------------------------------------
330,000 330,000 Uralmash Zavody (a)(b)(e)
(Machinery & Engineering)
- ------- ------- --------- ------- --------- -------------------------------------------------
23,005 27,170 50,175 50,175 NASR (E1) City Company For Housing & Construction
(Construction)
- ------- ------- --------- ------- --------- -------------------------------------------------
165,800 214,600 380,400 380,400 Corporacion GEO, S.A. de C.V. "B" (b)
(Construction)
- ------- ------- --------- ------- --------- -------------------------------------------------
41,822 41,822 41,822 Arabian International Construction (b)
(Construction)
- ------- ------- --------- ------- --------- -------------------------------------------------
HEALTH CARE (2.2%)
- ------- ------- --------- ------- --------- -------------------------------------------------
81,000 81,000 Pliva d.d. Reg S GDR (a)(c)
(Pharmaceuticals)
- ------- ------- --------- ------- --------- -------------------------------------------------
79,850 75,000 154,850 154,850 Ranbaxy Laboratories Ltd.
(Medical Technology & Supplies)
- ------- ------- --------- ------- --------- -------------------------------------------------
18,700 29,600 48,300 48,300 Teva Pharmaceutical Industries Ltd.
(Pharmaceuticals)
- ------- ------- --------- ------- --------- -------------------------------------------------
CONSUMER DURABLES (1.0%)
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
John Keells Holdings Ltd. SLNKA 48,173 10,768 58,941 58,941
(Conglomerate)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Romanian Growth Fund (a) (b) ROM 94,750 94,750 94,750
(Country Funds)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
KEC International (b) IND 113 113 113
(Miscellaneous)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
5,724,721 6,856,408 12,581,129 -- 12,581,129
TECHNOLOGY (3.7%)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Taiwan Semiconductor Manufacturing Co. (b) TWN 1,209,752 1,350,362 2,560,114 2,560,114
(Semiconductors)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Asustek Computer Inc. - Reg S GDR (a)(b)(c) TWN 743,416 982,377 1,725,793 1,725,793
(Computers & Peripherals)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Hon Hai Precision Industry TWN 539,676 684,039 1,223,715 1,223,715
(Computers & Peripherals)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Compal Electronics, Inc. (b) TWN 499,151 661,375 1,160,526 1,160,526
(Computers & Peripherals)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Delta Electronics, Inc. TWN 443,602 568,364 1,011,966 1,011,966
(Computers & Peripherals)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Formula Systems Ltd. (b) ISRL 353,214 460,212 813,426 813,426
(Software)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
3,788,811 4,706,729 8,495,540 -- 8,495,540
INVESTMENT FUNDS (.8%)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Baltic Republics Fund Ltd. (a)(b)(d) IRE 720,000 720,000
(Country Fund)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Romania Fund Ltd. (a)(b) ROM 562,500 562,500
(Country Fund)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Ladenburg Thalmann Ukraine Fund Ltd. (a)(b) UKR 525,000 525,000
(Country Fund)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Romanian Growth Fund PLC (a)(b) ROM 93,750 93,750
(Country Fund)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
-- -- -- 1,901,250 1,901,250
CAPITAL GOODS (3.0%)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
MISR Elgadida for Housing and Reconstruction EGPT 1,563,864 1,844,170 3,408,034 3,408,034
(Construction)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Uralmash Zavody (a)(b)(e) RUS 825,000 825,000
(Machinery & Engineering)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
NASR (E1) City Company For Housing & Construction EGPT 713,659 842,865 1,556,524 1,556,524
(Construction)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Corporacion GEO, S.A. de C.V. "B" (b) MEX 287,192 371,721 658,913 658,913
(Construction)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Arabian International Construction (b) EGPT 303,927 303,927 303,927
(Construction)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
2,564,715 3,362,683 5,927,398 825,000 6,752,398
HEALTH CARE (2.2%)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Pliva d.d. Reg S GDR (a)(c) CRT 1,190,700 1,190,700
(Pharmaceuticals)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Ranbaxy Laboratories Ltd. IND 942,438 885,195 1,827,633 1,827,633
(Medical Technology & Supplies)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
Teva Pharmaceutical Industries Ltd. ISRL 737,188 1,166,886 1,904,074 1,904,074
(Pharmaceuticals)
------------------------------------------------- ------ --------- --------- ---------- --------- ----------
1,679,626 2,052,081 3,731,707 1,190,700 4,922,407
CONSUMER DURABLES (1.0%)
</TABLE>
<PAGE> 78
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
40,000 40,000 Mezogazdasagi Gepgyarto (b)(d)
(Auto Parts)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
50,000 50,000 North American Business Industries (b)
(Auto Parts)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
100,000 100,000 Nizhnekamskshina (a)(b)
(Auto Parts)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
29,300 29,300 29,300 Bajaj Auto Ltd.
(Automobiles)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
100 100 100 Tata Engineering and Locomotive Co., Ltd.
(Automobiles)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
1,022,000 1,475,000 2,497,000 2,497,000 Qingling Motors Co., Ltd. (i)
(Automobiles)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
TOTAL EQUITY INVESTMENTS (COST $92,943,216)
FIXED INCOME INVESTMENTS (9.5%)
GOVERNMENT AGENCY OBLIGATIONS (7.8%)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
Algeria (0.2%)
1,050,000 1,050,000 1,050,000 Algeria Tranche 1 Loan Assignment, 6.625% due 9/4/06 (j)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
Argentina (0.8%)
Republic of Argentina:
1,425,000 1,425,000 1,425,000 Discount Bond, 6.625% due 3/31/23 (j)
875,000 875,000 875,000 Par Bond Series 1, 5.75%(6% at 3/31/99) due 3/31/23 (k)
350,000 350,000 350,000 I.O. Strip, 12.11% due 4/10/05
- --------- --------- --------- ------- --------- ----------------------------------------------------------
Brazil (0.2%)
845,000 845,000 845,000 Brazil Floating Rate Discount Note, 6.125% due 4/15/24 (j)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
Bulgaria (0.4%)
Republic of Bulgaria:
771,000 771,000 771,000 Discount Bond Series A, 6.6875% due 7/28/24 - Euro (j)
760,000 760,000 760,000 Front Loaded Interest Reduction Bond Series A, 2.5%
(2.75% at 7/99) due 7/28/12 (k)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
Colombia (0.2%)
Republic of Colombia:
472,000 472,000 472,000 8.625% due 4/1/08 (l)
59,000 59,000 59,000 7.27% due 6/15/03 - 144A (h)
- --------- --------- --------- ------- --------- ----------------------------------------------------------
Mexico (1.7%)
United Mexican States:
1,570,000 1,570,000 1,570,000 Discount Bond Series D, 6.6016% due 12/31/19 (j)
1,353,000 1,353,000 1,353,000 Discount Bond Series C, 6.6172% due 12/31/19 (j)(m)
575,000 575,000 575,000 9.875% due 1/15/07
3,000,000 3,000,000 3,000,000 6.63% due 12/31/19
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combing Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Mezogazdasagi Gepgyarto (b)(d) HGRY 580,097 580,097
(Auto Parts)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
North American Business Industries (b) HGRY 417,320 417,320
(Auto Parts)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Nizhnekamskshina (a)(b) RUS 407,500 407,500
(Auto Parts)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Bajaj Auto Ltd. IND 383,567 383,567 383,567
(Automobiles)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Tata Engineering and Locomotive Co., Ltd. IND 267 267 267
(Automobiles)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Qingling Motors Co., Ltd. (i) CHNA 188,709 272,355 461,064 461,064
(Automobiles)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
572,276 272,622 844,898 1,404,917 2,249,815
TOTAL EQUITY INVESTMENTS (COST $92,943,216) 69,356,560 83,861,449 153,218,009 33,683,503 186,901,512
FIXED INCOME INVESTMENTS (9.5%)
GOVERNMENT AGENCY OBLIGATIONS (7.8%)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Algeria (0.2%)
Algeria Tranche 1 Loan Assignment, 6.625% due 9/4/06 (j) USD 535,500 535,500 535,500
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Argentina (0.8%)
Republic of Argentina:
Discount Bond, 6.625% due 3/31/23 (j) USD 970,781 970,781 970,781
Par Bond Series 1, 5.75%(6% at 3/31/99) due 3/31/23 (k) USD 608,125 608,125 608,125
I.O. Strip, 12.11% due 4/10/05 USD 308,000 308,000 308,000
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Brazil (0.2%)
Brazil Floating Rate Discount Note, 6.125% due
4/15/24 (j) USD 502,247 502,247 502,247
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Bulgaria (0.4%)
Republic of Bulgaria:
Discount Bond Series A, 6.6875% due 7/28/24 - Euro (j) USD 541,628 541,628 541,628
Front Loaded Interest Reduction Bond Series A, 2.5% USD 419,900 419,900 419,900
(2.75% at 7/99) due 7/28/12 (k)
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Colombia (0.2%)
Republic of Colombia:
8.625% due 4/1/08 (l) USD 370,520 370,520 370,520
7.27% due 6/15/03 - 144A (h) USD 48,085 48,085 48,085
- ------------------------------------------------------- ------- ---------- ---------- ----------- ---------- -----------
Mexico (1.7%)
United Mexican States:
Discount Bond Series D, 6.6016% due 12/31/19 (j) USD 1,225,581 1,225,581 1,225,581
Discount Bond Series C, 6.6172% due 12/31/19 (j)(m) USD 1,056,186 1,056,186 1,056,186
9.875% due 1/15/07 USD 546,969 546,969 546,969
6.63% due 12/31/19 FRF 420,666 420,666 420,666
</TABLE>
<PAGE> 79
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
412,000 412,000 412,000 Discount Bond Series A, 6.1156% due 12/31/19 (j)(m)
375,000 375,000 375,000 Discount Bond Series B, 6.47656% due 12/31/19 (j)(m)
- --------- --------- ---------- ---------- -----------------------------------------------------------
Panama (0.2%)
Republic of Panaman:
370,000 370,000 370,000 Interest Reduction Bond, 4% (4.25% at 7/99) due 7/17/14 (k)
67,000 67,000 67,000 8.875% due 9/30/27
- --------- --------- ---------- ---------- -----------------------------------------------------------
Peru (0.3%)
Republic of Peru:
1,116,000 1,116,000 1,116,000 Past Due Interest Bond, 4% (4.5% at 3/8/99) due 3/7/17 (k)
- --------- --------- ---------- ---------- -----------------------------------------------------------
Poland (0.2%)
685,000 685,000 685,000 3% (3.5% at 10/28/99) due 10/27/24 -Euro (k)
2,000 2,000 2,000 Past Due Interest Bond, 5% (6% at 10/28/99)
due 10/27/14 - Euro (k)
- --------- --------- ---------- ---------- -----------------------------------------------------------
Russia (0.1%)
2,717,360 2,717,360 2,717,360 Bank for Foreign Economic Affairs (Venesheconombank)
Principal Loans, 6.625% due 12/15/20 (j)
- --------- --------- ---------- ---------- -----------------------------------------------------------
United States (3.5%)
U.S. Treasury Bills:
4,050,000 4,050,000 5.00% due 1/7/99 (n)
4,020,000 4,020,000 5.00% due 11/27/98 (n)
- --------- --------- ---------- ---------- -----------------------------------------------------------
United Kingdom (0.0%)
14,652,000 14,652,000 Deutsche Bank AG London Note linked to Gosudarstvennyie
Kratkosrochynie Obligatsii 0.00% due 6/9/99 (b)(e)(o)
- --------- --------- ---------- ---------- -----------------------------------------------------------
TOTAL GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS (COST $11,677,186)
CORPORATE BONDS (1.5%)
- --------- --------- ---------- ---------- -----------------------------------------------------------
Argentina (0.6%)
1,504,000 1,504,000 1,504,000 Telefonica de Argentina, 9.125% due 5/7/08 - Reg S (c)
- --------- --------- ---------- ---------- -----------------------------------------------------------
Brazil (0.5%)
710,000 710,000 710,000 Banco Hipotecario Espana, 10% due 4/17/03 - 144A (h)
1,042,000 1,042,000 1,042,000 RBS Participacoes S.A., 11% due 4/1/07 - 144A (h)
125,000 125,000 125,000 Globo Comunicacoes Participacoes, 10.625% due 5/12/08
- 144A (h)
- --------- --------- ---------- ---------- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Discount Bond Series A, 6.1156% due 12/31/19 (j)(m) USD 321,618 321,618 321,618
Discount Bond Series B, 6.47656% due 12/31/19 (j)(m) USD 292,734 292,734 292,734
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
Panama (0.2%)
Republic of Panaman:
Interest Reduction Bond, 4% (4.25% at 7/99) due 7/17/14 (k) USD 270,794 270,794 270,794
8.875% due 9/30/27 USD 61,808 61,808 61,808
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
Peru (0.3%)
Republic of Peru:
Past Due Interest Bond, 4% (4.5% at 3/8/99) due 3/7/17 (k) USD 641,700 641,700 641,700
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
Poland (0.2%)
3% (3.5% at 10/28/99) due 10/27/24 -Euro (k) USD 455,525 455,525 455,525
Past Due Interest Bond, 5% (6% at 10/28/99) USD 1,819 1,819 1,819
due 10/27/14 - Euro (k)
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
Russia (0.1%)
Bank for Foreign Economic Affairs (Venesheconombank) USD 215,690 215,690 215,690
Principal Loans, 6.625% due 12/15/20 (j)
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
United States (3.5%)
U.S. Treasury Bills:
5.00% due 1/7/99 (n) USD 4,017,941 4,017,941
5.00% due 11/27/98 (n) USD 4,007,524 4,007,524
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
United Kingdom (0.0%)
Deutsche Bank AG London Note linked to Gosudarstvennyie RUR
Kratkosrochynie Obligatsii 0.00% due 6/9/99 (b)(e)(o)
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
TOTAL GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
(COST $11,677,186) 9,815,876 9,815,876 8,025,465 17,841,341
CORPORATE BONDS (1.5%)
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
Argentina (0.6%)
Telefonica de Argentina, 9.125% due 5/7/08 - Reg S (c) USD 1,305,649 1,305,649 1,305,649
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
Brazil (0.5%)
Banco Hipotecario Espana, 10% due 4/17/03 - 144A (h) USD 624,800 624,800 624,800
RBS Participacoes S.A., 11% due 4/1/07 - 144A (h) USD 468,900 468,900 468,900
Globo Comunicacoes Participacoes, 10.625% due 5/12/08 USD 71,563 71,563 71,563
- 144A (h)
- -------------------------------------------------------------- ------- --------- -------- --------- --------- ----------
</TABLE>
<PAGE> 80
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
Colombia (0.1%)
148,000 148,000 148,000 Financiera Energia Nacional, 9.375% due 6/15/06 - Reg S (c)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
Korea (0.0%)
5,500,000 5,500,000 5,500,000 Pohang Iron & Steel, 2% due 10/9/00
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
Mexico (0.2%)
360,000 360,000 360,000 Petroleos Mexicanos (PEMEX), 9.25% due 3/30/18 - 144A (h)
210,000 210,000 210,000 Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A (h)
97,000 97,000 97,000 Banco Nacional Comercio Exte., 8% due 7/18/02 - Reg S (c)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
Russia (0.1%)
851,000 851,000 851,000 Lukinter Finance BV Convertible, 3.5% due 5/6/02 - 144A (h)
5,000 5,000 5,000 Mosenergo Finance BV, 8.375% due 10/9/02 - 144A (h)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $4,998,295)
STRUCTURED NOTES (0.2%)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
Korea (0.2%)
470,000 470,000 470,000 Fixed Rate Trust Certificate 13.55% due 2/15/02 (p)
(Issued y a newly created Deleware Business Trust,
collateralized by triple A paper. This trust certificate has a
credit risk component linked to the value of a referenced
security. Korean Development Bonds, 1.875%
2002.) (Cost $470,000)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
TOTAL FIXED INCOME INVESTMENTS (COST $17,145,481)
WARRANTS (2.3%)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
765,294 765,294 796,274 1,561,568 Merrill Lynch - Kospi Call Warrants due 9/9/99
Performance linked to equity securities. Redemption amount
100% of the final closing price of the Korean Kospi 200 Index
converted to the prevailing foreign exchange rate.
(Cost $2,495,011)
(Investment Management)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
REPURCHASE AGREEMENTS (8.2%)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
4,653,000 4,653,000 4,653,000 Dated October 30,1998 with State Street Bank & Trust Co.,
due Novemeber 2,1998, for an effective yield of 5.30%,
collateralized by $4,145,000 U.S. Treasury Notes, 6.50%
due 5/15/05 (market value of collateral is $4,750,253,
including accrued interest.) (Cost $4,653,000)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
Dated October 30,1998 with State Street Bank & Trust Co.,
due Novemeber 2,1998, for an effective yield of 5.30%,
collateralized by $4,145,000 U.S. Treasury Notes, 6.50% due
5/15/05 (market value of collateral is $4,750,253,
9,141,000 9,141,000 9,141,000 including accrued interest.) (Cost $4,653,000)
- ----------- --------- --------- ------- --------- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Colombia (0.1%)
Financiera Energia Nacional, 9.375% due 6/15/06 - Reg S (c) USD 108,528 108,528 108,528
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
Korea (0.0%)
Pohang Iron & Steel, 2% due 10/9/00 JPY 40,886 40,886 40,886
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
Mexico (0.2%)
Petroleos Mexicanos (PEMEX), 9.25% due 3/30/18 - 144A (h) USD 293,400 293,400 293,400
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A (h) USD 165,900 165,900 165,900
Banco Nacional Comercio Exte., 8% due 7/18/02 - Reg S (c) USD 88,513 88,513 88,513
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
Russia (0.1%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 - 144A (h) USD 310,615 310,615 310,615
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A (h) USD 875 875 875
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
TOTAL CORPORATE BONDS (COST $4,998,295) 3,479,629 3,479,629 3,479,629
STRUCTURED NOTES (0.2%)
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
Korea (0.2%)
Fixed Rate Trust Certificate 13.55% due 2/15/02 (p) USD 343,805 343,805 343,805
(Issued y a newly created Deleware Business Trust,
collateralized by triple A paper. This trust certificate has
a credit risk component linked to the value of a referenced
security. Korean Development Bonds, 1.875%
2002.) (Cost $470,000)
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
TOTAL FIXED INCOME INVESTMENTS (COST $17,145,481) 13,639,310 13,639,310 8,025,465 21,664,775
WARRANTS (2.3%)
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
Merrill Lynch - Kospi Call Warrants due 9/9/99 US 2,571,541 2,675,640 5,247,181 5,247,181
Performance linked to equity securities. Redemption amount
100% of the final closing price of the Korean Kospi 200 Index
converted to the prevailing foreign exchange rate.
(Cost $2,495,011)
(Investment Management)
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
REPURCHASE AGREEMENTS (8.2%)
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
Dated October 30,1998 with State Street Bank & Trust Co., 4,653,000 4,653,000 4,653,000
due Novemeber 2,1998, for an effective yield of 5.30%,
collateralized by $4,145,000 U.S. Treasury Notes, 6.50%
due 5/15/05 (market value of collateral is $4,750,253,
including accrued interest.) (Cost $4,653,000)
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
Dated October 30,1998 with State Street Bank & Trust Co.,
due Novemeber 2,1998, for an effective yield of 5.30%,
collateralized by $4,145,000 U.S. Treasury Notes, 6.50% due
5/15/05 (market value of collateral is $4,750,253,
including accrued interest.) (Cost $4,653,000) 9,141,000 9,141,000 9,141,000
- -------------------------------------------------------------- ------- ---------- --------- ---------- --------- ----------
</TABLE>
<PAGE> 81
AIM DEVELOPING MARKETS FUND
AIM EASTERN EUROPE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Markets Markets Europe
<S> <C> <C> <C> <C> <C>
Dated October 30, 1998 with State Street
Bank & Trust Co., due November 2, 1998, for
an effective yield of 5.30%, collateralized
by $4,905,000 U.S. Treasury Bonds, 7.125%
due 2/29/00 (market value of collateral is
$5,136,832, including accrued interest.)
5,036,000 5,036,000 (Cost $5,036,000)
- ----------- --------- --------- --------- --------- -------------------------------------------
TOTAL INVESTMENTS (COST $117,236,708)- 101.9%
- ----------- --------- --------- ---------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.9)%
- ----------- --------- --------- ---------------------------------------------
NET ASSETS- 100.0%
=========== ========= ========= =============================================
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
AIM AIM Pro Forma AIM Pro Forma
Developing Emerging Combining Eastern Combining
Country Markets Markets Europe
<S> <C> <C> <C> <C> <C> <C>
Dated October 30, 1998 with State Street
Bank & Trust Co., due November 2, 1998, for
an effective yield of 5.30%, collateralized
by $4,905,000 U.S. Treasury Bonds, 7.125%
due 2/29/00 (market value of collateral is
$5,136,832, including accrued interest.)
(Cost $5,036,000) 5,036,000 5,036,000
- ------------------------------------------------ ------- ----------- ----------- ----------- ----------- ------------
TOTAL INVESTMENTS (COST $117,236,708)- 101.9% 90,220,411 95,678,089 185,898,500 46,744,968 232,643,468
- ------------------------------------------------ ------- ----------- ----------- ----------- ----------- ------------
LIABILITIES LESS OTHER ASSETS - (1.9)% (2,519,957) (2,275,508) (4,795,465) 354,578 (4,440,887)
- ------------------------------------------------ ------- ----------- ----------- ----------- ----------- ------------
NET ASSETS- 100.0% $87,700,454 $93,402,581 181,103,035 $47,099,546 $228,202,581
================================================ ======= =========== =========== =========== =========== ============
</TABLE>
Notes to Schedule of Investments:
(a) U.S. currency denominated.
(b) Non-income producing security.
(c) Security issued under Regulation S. Rule 144A and additional restrictions
may apply in the resale of such securities.
(d) At October 31, 1998, the Fund owned the following restriced securities
constituting 3.2% of net assets which may not be publicly sold without
registation under the Securites Act of 1933. Additional information on
restricted securities is as follows:
<TABLE>
<CAPTION>
Acquisition Value
Date Shares Cost Per Share
<S> <C> <C> <C> <C>
Baltic Republics Fund Ltd. 9/2/94 9,000 $900,000 $80.00
Mezogazdasagi Gepgyarto 2/26/97 40,000 572,188 14.50
Russian Telecommunications Development Corp.:
Non-Voting 12/20/93 52,600 526,000 2.46
Voting 12/20/93 38,400 384,000 2.46
Technoimpex 11/22/90 1,400 2,989,406 0.00
</TABLE>
(e) Valued in good faith at fair value using procedures approved by the Board
of Trustees.
(f) Denominated in Deutsche Marks.
(g) Each unit represents one preferred share of Unibanco and one preferred "B"
share of Unibanco Holdings.
(h) 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.
(i) Security denominated in Hong Kong Dollars.
(j) The coupon rate shown on floating rate note represents the rate at period
end.
(k) The coupon rate shown on step-up coupon bond represents the rate at period
end.
(l) All or part of the Fund's holdings in this security is segregated as
collateral for extended settlement of derivatvie instruments.
(m) Issued with detachable warrants or value recovery rights. The current
market value of each warrant or right is zero.
(n) These securities are traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase of the Fund.
(o) The issuer's obligation is limited to paying the holder a maturity value
based on the amounts that would have been paid to a direct holder of the
referenced zero coupon government security. In August 1998, the Russian
government announced a potential restructuring of its short-term debt. At
that time, interest accruals ceased due to this uncertainty. Details of the
restructuring have not been finalized.
(p) Certain events may cause the contract to terminate prior to date shown.
Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
See Accompanying Notes to Pro Forma Combining Financial Statements.
<PAGE> 82
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF
AIM EASTERN EUROPE FUND
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS OF
AIM EASTERN EUROPE FUND
AUGUST 25, 1999
The undersigned hereby appoints Samuel D. Sirko and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Annual
Meeting of Shareholders of AIM Eastern Europe Fund, to be held on August 25,
1999 at 3:00 p.m., Central time, and at any adjournment thereof, all of the
shares of AIM Eastern Europe Fund which the undersigned would be entitled to
vote if personally present.
IF THIS PROXY IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL
BE VOTED FOR THE APPROVAL OF ALL OF THE PROPOSALS AND FOR THE ELECTION OF ROBERT
H. GRAHAM TO THE BOARD OF TRUSTEES.
- -------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD. All joint
owners should sign. When signing as executor, administrator, attorney, trustee
or guardian or as custodian for a minor, please give full title as such. If a
corporation, please sign in full corporate name and indicate the signer's
office. If a partner, sign in the partnership name.
- -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- ----------------------------------
- --------------------------------- ----------------------------------
- --------------------------------- ----------------------------------
- -------------------------------------------------------------------------------
<PAGE> 83
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
- -------------------------------------------------------------------------------
AIM EASTERN EUROPE FUND
- -------------------------------------------------------------------------------
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
CONTROL NUMBER:
RECORD DATE SHARES:
Please be sure to sign and date this Date Proxy. [Date ]
- --------------------------------- ----------------------------------
Shareholder sign here Co-owner sign here
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING
FOR ALL OF THE PROPOSALS AND FOR THE ELECTION OF ROBERT H. GRAHAM TO THE BOARD
OF TRUSTEES.
1. Approval of an Agreement and Plan of Reorganization and Termination
providing for the reorganization of AIM Eastern Europe Fund into AIM
Developing Markets Fund, a series of AIM Investment Funds.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Election of Robert H. Graham to AIM Eastern Europe Fund's Board of
Trustees.
FOR WITHHOLD
[ ] [ ]
3. Ratification of the selection of PricewaterhouseCoopers LLP as AIM
Eastern Europe Fund's Independent Public Accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
DETACH CARD DETACH CARD
- -------------------------------------------------------------------------------
