<PAGE> 1
AIM EMERGING MARKETS DEBT FUND
A PORTFOLIO OF AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
May 2, 2000
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval
of a proposed combination of AIM Emerging Markets Debt Fund ("Emerging Markets
Debt Fund") with AIM Developing Markets Fund ("Developing Markets Fund") (each a
"Fund"). Each Fund is a series of AIM Investment Funds (the "Trust"), an
open-end management investment company organized as a Delaware business trust.
If the proposal is approved and implemented, each shareholder of Emerging
Markets Debt Fund automatically would become a shareholder of Developing Markets
Fund.
Emerging Markets Debt Fund currently seeks to achieve its objectives by
investing all of its investable assets in the Emerging Markets Debt Portfolio
(the "Portfolio"). The Trust's Board of Trustees believes that combining the two
Funds will benefit Emerging Markets Debt Fund's shareholders by providing them
with a portfolio that has a broader investment mandate than the Portfolio. To
achieve its primary investment objective of long-term growth of capital and
secondary objective of income, to the extent consistent with seeking growth of
capital, Developing Markets Fund may invest more extensively in equity
securities than may the Portfolio. As a result, Developing Markets Fund
possesses greater flexibility than the Portfolio to respond effectively to
opportunities in the equity markets. A I M Advisors, Inc. serves as investment
adviser, and INVESCO Asset Management Limited serves as investment sub-adviser
to Developing Markets Fund and the Portfolio. The portfolio management team for
Developing Markets Fund is experienced and has a recent performance record that
is superior to that of the portfolio management team for Emerging Markets Debt
Fund. The accompanying document describes the proposed transaction and compares
the investment policies, operating expenses, and performance histories of the
Funds.
Shareholders of Emerging Markets Debt Fund are being asked to approve a
Plan of Reorganization and Termination that will govern the reorganization of
Emerging Markets Debt Fund into Developing Markets Fund. After careful
consideration, the Board of Trustees of the Trust has unanimously approved the
proposal and recommends that you read the enclosed materials carefully and then
vote FOR the proposal.
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. You may also vote your shares on the Internet at the Fund's website
at http://www.aimfunds.com by following the instructions that appear on the
enclosed proxy insert.
Thank you for your cooperation and continued support.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
<PAGE> 2
AIM EMERGING MARKETS DEBT FUND
A PORTFOLIO OF AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 31, 2000
TO THE SHAREHOLDERS OF AIM EMERGING MARKETS DEBT FUND:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders ("Meeting")
of AIM Emerging Markets Debt Fund ("Emerging Markets Debt Fund"), an investment
portfolio of AIM Investment Funds (the "Trust"), will be held at 11 Greenway
Plaza, Suite 100, Houston, TX 77046-1173, on May 31, 2000, at 3:00 p.m., Central
time, for the following purposes:
1. To approve a Plan of Reorganization and Termination (the "Plan") that
provides for the combination of Emerging Markets Debt Fund and AIM Developing
Markets Fund ("Developing Markets Fund") (the "Reorganization"). Pursuant to the
Plan, all of the assets of Emerging Markets Debt Fund will be transferred to
Developing Markets Fund, Developing Markets Fund will assume all of the
liabilities of Emerging Markets Debt Fund, and the Trust will issue to each
shareholder a number of full and fractional shares of the applicable class 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 of beneficial interest in the corresponding class of
Emerging Markets Debt Fund. The value of each Emerging Markets Debt Fund
shareholder's account with Developing Markets Fund immediately after the
Reorganization will be the same as the value of such shareholder's account with
Emerging Markets Debt Fund immediately prior to the Reorganization. The
Reorganization has been structured as a tax-free transaction. No initial sales
charge will be imposed in connection with the Reorganization; and
2. To transact such other business, not currently contemplated, 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 April 24, 2000, are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
If you attend the Meeting, you may vote your shares in person. If you expect to
attend the Meeting in person, please notify the Trust by calling 1-800-952-3502.
If you do not expect to attend the meeting, please fill in, date, sign and
return the proxy card in the enclosed envelope which requires no postage if
mailed in the United States.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE MANAGEMENT OF
THE TRUST. YOU MAY ALSO VOTE YOUR SHARES THROUGH A WEB SITE ESTABLISHED FOR THAT
PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY INSERT. THIS IS
IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL MEETING. PROXIES
MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT EXECUTION
AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
TRUST AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN PERSON AT THE
SPECIAL MEETING.
/s/ SAMUEL D. SIRKO
Samuel D. Sirko
Vice President and Secretary
May 2, 2000
<PAGE> 3
AIM EMERGING MARKETS DEBT FUND
AIM DEVELOPING MARKETS FUND
PORTFOLIOS OF AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: MAY 2, 2000
This document is being furnished in connection with a special meeting of
shareholders of AIM Emerging Markets Debt Fund ("Emerging Markets Debt Fund"),
an investment portfolio of AIM Investment Funds (the "Trust"), a Delaware
business trust, to be held at 11 Greenway Plaza, Suite 100, Houston, TX 77046 on
May 31, 2000, at 3:00 p.m., Central time (such meetings and any adjournments
thereof are referred to as the "Meeting"). At the Meeting, the shareholders of
Emerging Markets Debt Fund are being asked to consider and approve a Plan of
Reorganization and Termination (the "Plan") that provides for the combination of
Emerging Markets Debt Fund with AIM Developing Markets Fund ("Developing Markets
Fund") (each a "Fund"), an investment portfolio of the Trust (the
"Reorganization"). The Plan is attached as Appendix I to this Combined Proxy
Statement and Prospectus ("Proxy Statement/Prospectus"). The Board of Trustees
of the Trust has unanimously approved the Plan as being in the best interest of
Emerging Markets Debt Fund's shareholders.
Pursuant to the Plan, all of the assets of Emerging Markets Debt Fund (its
interest in Emerging Markets Debt Portfolio (the "Portfolio")) will be
transferred to Developing Markets Fund, Developing Markets Fund will assume all
of the liabilities of Emerging Markets Debt Fund, and the Trust will issue a
number of full and fractional shares of the applicable class 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 of beneficial interest in the corresponding class of Emerging Markets
Debt Fund. Immediately thereafter, Developing Markets Fund will redeem in-kind
the interest it received in the Portfolio and hold directly the securities held
in the Portfolio.
The value of each Emerging Markets Debt Fund shareholder's account with
Developing Markets Fund immediately after the Reorganization will be the same as
the value of such shareholder's account with Emerging Markets Debt Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction. No initial sales charge will be imposed in connection
with 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 (including Developing Markets Fund and Emerging Markets Debt Fund).
Developing Markets 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. 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 Emerging Markets Debt Fund should know before voting on the Plan.
It should be read and retained for future reference.
The current Prospectus of Class A, Class B, and Class C shares of Emerging
Markets Debt Fund, dated February 28, 2000, and supplemented March 22, 2000,
together with the related Statement of Additional Information, dated February
28, 2000, and the Annual Report to Shareholders for the fiscal year ended
October 31, 1999, are on file with the Securities and Exchange Commission (the
"SEC") and are incorporated by reference into this Proxy Statement/Prospectus.
The current Prospectus of Class A, Class B, and Class C shares of Developing
Markets Fund, dated February 28, 2000, together with the related Statement of
Additional Information, dated February 28, 2000, and the Annual Report to
Shareholders for the
<PAGE> 4
fiscal year ended October 31, 1999, are on file with the SEC and are
incorporated by reference into this Proxy Statement/Prospectus. A copy of the
Prospectus of Class A, Class B, and Class C shares of Developing Markets Fund is
attached as Appendix II to this Proxy Statement/Prospectus. Such documents are
available without charge by writing to A I M Fund Services, 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 prospectuses and statements
of additional information described above, material incorporated by reference,
and other information about the Trust. Additional information about Emerging
Markets Debt Fund and Developing Markets Fund may also be obtained on the web at
http://www.aimfunds.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(ii)
<PAGE> 5
[AIM LOGO APPEARS HERE]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- ------------- ----
<S> <C>
INTRODUCTION................................................ 1
REASONS FOR THE REORGANIZATIONS............................. 2
Board Considerations...................................... 2
SYNOPSIS.................................................... 3
The Reorganization........................................ 3
Comparison of Emerging Markets Debt Fund and Developing
Markets Fund........................................... 4
Management Discussion and Analysis of Performance......... 8
RISK FACTORS................................................ 8
Non-Diversified Classification............................ 8
Investing in Emerging Markets............................. 8
Lower Quality Debt........................................ 9
Sovereign Debt............................................ 9
Currency Risk............................................. 10
Options, Futures, and Foreign Currency Transactions....... 10
FINANCIAL HIGHLIGHTS........................................ 11
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION............. 13
Terms of the Reorganization............................... 13
The Reorganization........................................ 13
Description of Securities to be Issued.................... 14
Purchases, Redemptions, and Exchanges of Shares........... 14
Dividends and Other Distributions......................... 14
Accounting Treatment...................................... 15
Federal Tax Considerations................................ 15
ORGANIZATION OF THE FUNDS................................... 16
OWNERSHIP OF EMERGING MARKETS DEBT FUND AND DEVELOPING
MARKETS FUND SHARES....................................... 16
CAPITALIZATION.............................................. 17
LEGAL MATTERS............................................... 17
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 17
ADDITIONAL INFORMATION ABOUT EMERGING MARKETS DEBT FUND AND
DEVELOPING MARKETS FUND................................... 18
EXPERTS..................................................... 18
</TABLE>
APPENDIX I................................Plan of Reorganization and Termination
APPENDIX II............Prospectus of Class A, Class B, and Class C shares of AIM
Developing Markets Fund
APPENDIX III............Discussion of Performance of AIM Developing Markets Fund
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, La Familia AIM de Fondos and
Design, Invierta con DISCIPLINA, AIM Funds, AIM Funds and Design and AIM
Investor are registered service marks and AIM Bank Connection and AIM Internet
Connect are service marks of A I M Management Group Inc.
(iii)
<PAGE> 6
INTRODUCTION
This Proxy Statement/Prospectus is furnished to shareholders of Emerging
Markets Debt Fund, a series of the Trust, 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 the proposal to approve the Plan and in accordance
with management's recommendation on other matters. The presence in person or by
proxy of one-third of the outstanding shares of beneficial interest in Emerging
Markets Debt Fund at the Meeting will constitute a quorum ("Quorum"). If a
Quorum is not present at the Meeting or a Quorum is present but sufficient votes
to approve the proposal described herein ("Proposal") 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 the Proposal in favor of such an adjournment and
will vote those proxies required to be voted AGAINST the Proposal against such
adjournment. In addition, if you sign, date, and return the proxy card, but give
no voting instructions, the duly appointed proxies may, in their discretion,
vote upon such other matters as may come before the Meeting.
Approval of the Plan requires the affirmative vote of a majority of shares
cast by shareholders of each class of shares. 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. 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 the Trust. To be effective, such revocation must be received by
the Secretary of the Trust 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 April 24, 2000 (the
"Record Date"), are entitled to vote at the Meeting. On the Record Date, there
were 5,804,460.751 Class A shares, 10,036,473.51 Class B shares, and 46,058.016
Class C shares of Emerging Markets Debt Fund outstanding. Each share is entitled
to one vote for each full share held, and a fractional vote for a fractional
share held. To the knowledge of the Trust's management, as of the Record Date,
there were no beneficial owners of 5% or more of the outstanding shares of any
class of Emerging Markets Debt Fund, except as indicated below in "Ownership of
Emerging Markets Debt Fund and Developing Markets Fund Shares."
The Trust has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Meeting.
The Trust expects to solicit proxies principally by mail, but the Trust or SCC
may also solicit proxies by telephone, facsimile, telegraph, or personal
interview. The Trust officers and employees of AIM who assist in proxy
solicitation will not receive any additional or special compensation for any
such efforts. The cost of shareholder solicitation incurred in connection with
the Reorganization is anticipated to be approximately $13,500 and will be borne
by the Emerging Markets Debt Fund and Developing Markets Fund. However, because
both Emerging Markets Debt Fund and Developing Markets Fund are currently at
their expense limits, their expenses relating to the Reorganization will
effectively be borne by the A I M Advisors, Inc. ("AIM") through reimbursement
of expenses and waivers. The Trust 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. The Trust may reimburse such
brokers/dealer firms, custodians, nominees, and fiduciaries for their reasonable
expenses incurred in connection with such proxy solicitation.
The Trust intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about May 2, 2000.
1
<PAGE> 7
REASONS FOR THE REORGANIZATIONS
BOARD CONSIDERATIONS
The Board of Trustees of the Trust, including a majority of trustees who
are not "interested persons," as that term is defined in the 1940 Act
("Independent Trustees"), has determined that the Reorganization is in the best
interests of Emerging Markets Debt Fund and its shareholders, that the terms of
the Reorganization are fair and reasonable, and that the interests of Emerging
Markets Debt Fund's shareholders will not be diluted as a result of the
Reorganization.
At a meeting of the Board of Trustees held on March 22, 2000, AIM proposed
that the Board of Trustees approve the Reorganization of Emerging Markets Debt
Fund into Developing Markets Fund. The Board received from AIM written materials
that described the structure and tax consequences of the Reorganization and
contained information concerning Emerging Markets Debt Fund and Developing
Markets Fund, including comparative total return and fee and expense
information, a comparison of the investment objectives and primary investment
strategies of Emerging Markets Debt Fund (and the Portfolio) and Developing
Markets Fund, pro forma expense ratios and biographical information on the
portfolio managers of Developing Markets Fund.
The Board made an 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 capabilities, experience, and
performance of the portfolio management team for Developing Markets Fund; (3)
the Funds' respective investment performances; (4) the effect of the
Reorganization on the expense ratio of Developing Markets Fund and that expense
ratio relative to each Fund's current expense ratio; (5) the costs to be
incurred by each Fund as a result of the Reorganization; (6) the tax
consequences of the Reorganization; (7) possible alternatives to the
Reorganization, including continuing to operate Emerging Markets Debt Fund on a
stand-alone basis or liquidating Emerging Markets Debt Fund; and (8) the
potential benefits of the Reorganization to other persons, especially AIM and
its affiliates.
In considering the Reorganization, the Board considered the fact that
Developing Markets Fund has a broader investment mandate than Emerging Markets
Debt Fund (and the Portfolio) and can utilize equity securities more
extensively. AIM noted its belief that Developing Markets Fund's ability to
invest more extensively in equity securities gives it greater flexibility than
the Portfolio to effectively respond to opportunities in the markets. 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 investment objectives and policies are sufficiently
compatible to enable Developing Markets Fund to maintain its investment policies
without any material changes after the Reorganization. The Board noted that both
funds are exposed to the same foreign country and currency risks although as an
equity fund, Developing Markets Fund may have a higher risk profile. The Board
also considered the impact the Reorganization would have on expenses. The Board
was advised that although Developing Markets Fund's expense ratio is higher than
that of Emerging Markets Debt Fund, the expense ratio of Developing Markets Fund
is expected to decrease as a result of the Reorganization. AIM has agreed to
limit the expenses of Developing Markets Fund to 1.75% for Class A shares, 2.40%
for Class B shares, and 2.40% for Class C shares following the Reorganization,
the same limits on expenses currently applicable to Emerging Markets Debt Fund.
2
<PAGE> 8
The Board also considered the capabilities, experience, and performance of
the portfolio management team of Developing Markets Fund and the performance of
Emerging Markets Debt Fund in relation to the performance of Developing Markets
Fund. AIM advised the Board that, while past performance is no guarantee of
future results, the portfolio management team of Developing Markets Fund
produced superior recent investment performance than the portfolio management
team of Emerging Markets Debt Fund. As of December 31, 1999, the Morningstar
ratings and Lipper Inc. rankings for Emerging Markets Debt Fund and Developing
Markets Fund were as follows:
Morningstar Rating(1)
<TABLE>
<CAPTION>
OVERALL 3-YEAR 5-YEAR
------- ------ ------
<S> <C> <C> <C>
Emerging Markets Debt Fund.................................. 1 1 1
Developing Markets Fund..................................... 2 2 2
</TABLE>
Lipper Rank (Percentile)(2)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR 5-YEAR
------ ------ ------
<S> <C> <C> <C>
Emerging Markets Debt Fund.................................. 72% 94% 83%
Developing Markets Fund..................................... 70% 92% 57%
</TABLE>
- ---------------
(1) Under the Morningstar rating system, the top 10% of funds in a category
receive 5 stars, the next 22.5% receive 4 stars, the middle 35% receive 3
stars, the next 22.5% receive 2 stars, and the bottom 10% receive a single
star.
(2) Under the Lipper ranking system, the lower the percentile rank the better
the performance.
AIM also advised the Board that it could benefit in the future if the
combined Fund's assets grow faster than the assets of the two Funds would have
grown separately in the absence of the Reorganization. In addition, any
reduction in Developing Markets Fund's expense ratio as a result of the
Reorganization could benefit AIM by reducing or eliminating any reimbursements
or waivers of expenses resulting from its obligation to limit the expenses of
Developing Markets Fund to 1.75% for Class A shares, 2.40% for Class B shares,
and 2.40% for Class C shares.
In addition, the Board noted that no initial sales or other charges would
be imposed on any Developing Markets Fund shares issued to Emerging Markets Debt
Fund shareholders in connection with the Reorganization. Finally, the Board
reviewed the principal terms of the Plan. The Board also noted that Emerging
Markets Debt Fund would be provided with an opinion of counsel that the
Reorganization would be tax-free to Emerging Markets Debt Fund and its
shareholders.
On the basis of the information provided to the Board and on their
evaluation of the Reorganization, the Board determined that the proposed
Reorganization will not dilute the interests of shareholders of Emerging Markets
Debt Fund or Developing Markets Fund and is in the best interest of Emerging
Markets Debt Fund and its shareholders. Therefore, the Board recommended the
approval of the Plan by the shareholders of Emerging Markets Debt Fund at a
special meeting.
SYNOPSIS
THE REORGANIZATION
The Plan provides for the acquisition by Developing Markets Fund of
Emerging Markets Debt Fund's assets (its interest in the Portfolio) in exchange
solely for Developing Markets Fund shares and the assumption by Developing
Markets Fund of Emerging Markets Debt Fund's liabilities. Those transactions
will occur as of 8:00 a.m., Eastern time, on June 19, 2000, or on such later
date as the conditions to the closing are satisfied ("Closing Date"). Emerging
Markets Debt Fund will then distribute the Developing Markets Fund shares to its
shareholders, by class, so that each Emerging Markets Debt Fund shareholder will
receive the number of full and fractional shares of the corresponding class of
Developing Markets Fund in terms of
3
<PAGE> 9
fees and other characteristics, including nomenclature ("Corresponding Class"),
that equals the value of the shareholder's holdings of Emerging Markets Debt
Fund shares as of the closing date. Following the Reorganization, (1) Developing
Markets Fund will redeem in-kind the interest it received in the Portfolio; and
(2) Emerging Markets Debt Fund will be terminated as soon as practicable.
The Trust will receive an opinion of Kirkpatrick & Lockhart LLP, its
counsel, to the effect that the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1) of the Internal Revenue
Code of 1986, as amended ("Code"). Accordingly, no gain or loss will be
recognized by either Fund or their shareholders as a result of the
Reorganization. See "Additional Information About the Reorganization -- Federal
Tax Considerations" herein.
COMPARISON OF EMERGING MARKETS DEBT FUND AND DEVELOPING MARKETS FUND
INVESTMENT OBJECTIVES AND POLICIES
Emerging Markets Debt Fund's primary investment objective is high current
income, and its secondary investment objective is growth of capital. Under
normal circumstances, Emerging Markets Debt Fund seeks its objective by
investing all of its investable assets in the Portfolio which, in turn, invests
at least 65% of its total assets in debt securities of issuers located in
developing or emerging market countries; i.e., those that are in the initial
stages of their industrial cycles. The Portfolio may invest in the following
types of debt securities: (1) debt securities issued or guaranteed by the
governments of developing countries, or their agencies or instrumentalities; (2)
securities issued or guaranteed by the central banks of emerging market
countries; (3) securities issued by other banks and companies in such countries;
and (4) securities denominated in or indexed to the currencies of developing
countries. In addition, Emerging Markets Debt Fund may invest up to 35% of its
total assets in equity securities of issuers in developing countries; equity and
debt securities of issuers in developed countries, including the U.S.; and cash
and money market instruments. As of October 31, 1999, the Portfolio's holdings
consisted of 0% equity securities, 97% debt securities, and 3% other
investments.
Developing Markets 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. Developing Markets Fund normally
invests substantially all of its assets in issuers in the developing (or
"emerging") markets of Asia, Europe, Latin America and elsewhere. Under normal
circumstances, a majority of Developing Markets Fund's assets is invested in
emerging market equity securities. Developing Markets Fund may invest 100% of
its total assets in debt securities that are below investment grade. Developing
Markets Fund may also 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 current income. Although Developing Markets Fund has
flexibility to invest in debt securities, it primarily invests in equity
securities. As of October 31, 1999, Developing Markets Fund's holdings consisted
of 98% equity securities, 0% debt securities, and 2% other investments.
INVESTMENT ADVISORY SERVICES
AIM serves as investment adviser, and INVESCO Asset Management Limited
("INVESCO") serves as investment sub-adviser, to Developing Markets Fund and the
Portfolio. After the Reorganization, AIM and INVESCO will continue to serve
Developing Markets Fund in their current capacities. John Cleary, Edwin
Gutierrez, and Jonathan Mann are primarily responsible for the portfolio
management of the Portfolio and William Barron, John Cleary, and Christine
Rowley are primarily responsible for the portfolio management of Developing
Markets Fund.
4
<PAGE> 10
PERFORMANCE
Set forth below are average annual total returns for the periods indicated
for Emerging Markets Debt Fund and Developing Markets Fund. The average annual
total return figures take into account sales charges applicable to purchases of
shares of the Funds. Past performance cannot guarantee future results.
<TABLE>
<CAPTION>
EMERGING MARKETS DEBT FUND DEVELOPING MARKETS FUND
--------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended Oct. 31, 1999................. 12.78% 12.61% n/a 26.71% 27.14% n/a
3 Years Ended Oct. 31, 1999................ (3.36)% (2.98)% n/a (8.86)% n/a n/a
5 Years Ended Oct. 31, 1999................ 5.22% 5.36% n/a (4.63)% n/a n/a
</TABLE>
EXPENSES
Set forth below is a comparison of annual operating expenses as a
percentage of net assets ("Expense Ratio") for the Class A, Class B, and Class C
shares of Emerging Markets Debt Fund and Developing Markets Fund for the fiscal
year ended October 31, 1999. The pro forma estimated Expense Ratios of
Developing Markets Fund giving effect to the Reorganization is also provided.
<TABLE>
<CAPTION>
EMERGING MARKETS DEVELOPING MARKETS FUND PRO
DEBT FUND DEVELOPING MARKETS FUND FORMA ESTIMATED
--------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load on purchase
of shares (as a % of offering
price)(1)..................... 4.75% None None 4.75% None None 4.75% None None
Deferred Sales Charge(as a % of
original purchase price or
redemption proceeds, as
applicable)(1)................ None 5.00% 1.00% None 5.00% 1.00% None 5.00% 1.00%
ANNUAL OPERATING EXPENSES (AS A
% OF NET ASSETS)
Management Fees................. 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98%
Rule 12b-1 Distribution......... 0.35% 1.00% 1.00% 0.36% 1.00% 1.00% 0.40% 1.00% 1.00%
Plan Fees
Other Expenses................ 0.46% 0.46% 0.46% 1.03% 0.99% 0.99% 0.73% 0.73% 0.73%
Interest Expense.............. 0.13% 0.13% 0.13% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Other Expenses............ 0.59% 0.59% 0.59% 1.04% 1.00% 1.00% 0.74% 0.74% 0.74%
Total Annual Fund............... 1.92% 2.57% 2.57% 2.38% 2.98% 2.98% 2.12% 2.72% 2.72%
---- ---- ---- ---- ---- ---- ---- ---- ----
Operating Expenses
Fee Waiver...................... 0.04% 0.04% 0.04% 0.47% 0.47% 0.47% 0.37% 0.37% 0.37%
Net Expenses(2)................. 1.88% 2.53% 2.53% 1.91% 2.51% 2.51% 1.75% 2.35% 2.35%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) Sales charge waivers are available for Class A and Class B shares, and
reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charges ("CDSC") on Class B shares
apply to redemptions during the first year after purchase; the charge
generally declines by 1% annually thereafter, reaching zero after six years.
The maximum 1% CDSCs on Class C shares apply to redemptions during the first
year after purchase.
(2) Expenses are based on each fund's fiscal year ended October 31, 1999, and
reflect AIM's contractual agreement to limit Emerging Markets Debt Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 1.75%, 2.40%, and 2.40% of the
average daily net assets of the fund's Class A, Class B, and Class C shares,
respectively, and to limit Developing Market Fund's expenses (exclusive of
brokerage commissions, taxes, interest, and extraordinary expenses) to the
annual rate of 2.00%, 2.50%, and 2.50% of the average daily net assets of
the fund's Class A,
5
<PAGE> 11
Class B, and Class C shares, respectively. Further, AIM has contractually
agreed to limit the expenses of Developing Markets Fund after consummation
of the Reorganization (excluding interest, taxes, dividends on short sales,
extraordinary items and increases for indirect credits, if any) to the
annual rate of 1.75%, 2.40%, and 2.40% of the average daily net assets of
the fund's Class A, Class B, and Class C shares, respectively, until June
30, 2001. "Other expenses" include custody, transfer agent, legal and audit
fees and other operating expenses.
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES
An investor would have directly or indirectly paid the following expenses
on a $10,000 investment under the existing and estimated fees and expenses
stated above, assuming a 5% annual return. To the extent fees are waived, the
expenses will be lower.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS (3)
---- ------ ------ ---------
<S> <C> <C> <C> <C>
EMERGING MARKETS DEBT FUND
Class A shares(1)........................................ $661 $1,049 $1,462 $2,612
Class B shares:
Assuming complete redemption at end of period(2)...... $760 $1,099 $1,565 $2,747
Assuming no redemption................................ $260 $ 799 $1,365 $2,747
Class C shares
Assuming complete redemption at end of period (2)..... $360 $ 799 $1,365 $2,905
Assuming no redemption................................ $260 $ 799 $1,365 $2,905
DEVELOPING MARKETS FUND
Class A shares(1)........................................ $705 $1,182 $1,685 $3,062
Class B shares:
Assuming complete redemption at end of period(2)...... $801 $1,221 $1,767 $3,159
Assuming no redemption................................ $301 $ 921 $1,567 $3,159
Class C shares
Assuming complete redemption at end of period (2)..... $401 $ 921 $1,567 $3,299
Assuming no redemption................................ $301 $ 921 $1,567 $3,299
COMBINED FUND
Class A shares(1)........................................ $680 $1,107 $1,560 $2,810
Class B shares:
Assuming complete redemption at end of period(2)...... $775 $1,144 $1,640 $2,907
Assuming no redemption................................ $275 $ 844 $1,440 $2,907
Class C shares
Assuming complete redemption at end of period (2)..... $375 $ 844 $1,440 $3,051
Assuming no redemption................................ $275 $ 844 $1,440 $3,051
</TABLE>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable contingent deferred sales charge.
(3) For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which the purchase
was made.
SALES CHARGES
No sales charges are applicable to shares of Developing Market Fund
received in connection with the Reorganization. The Class A shares of both
Developing Markets Fund and Emerging Markets Debt Fund are sold subject to a
maximum initial sales charge of 4.75%. Class B shares are sold subject to a
maximum CDSC of 5.00% of the lesser of the net asset value ("NAV") at time of
purchase or sale, which declines to zero after six years. Class C shares are
sold subject to a maximum CDSC of 1.00% of the lesser of the NAV at time of
purchase or sale, only during the first year. For purposes of calculating the
CDSC, the holding period for the Class B shares distributed to Class B
shareholders and for the Class C shares distributed to Class C shareholders of
Emerging Markets Debt Fund will be treated as having the same period as the
shares
6
<PAGE> 12
of Emerging Markets Debt Fund previously held. New purchases of Class A, Class
B, and Class C shares of Developing Markets Fund by any shareholders will be
subject to their terms, including, for example, for Class A shares, the 4.75%
initial sales charge. As is currently the case for each Fund, no CDSC will be
applied to redemptions of Class B shares that represent reinvested dividends or
other distributions, nor will Class A shares so acquired be subject to any
initial sales charge.
DISTRIBUTION; PURCHASE, EXCHANGE AND REDEMPTION
Shares of Developing Markets Fund and Emerging Markets Debt Fund are
distributed by A I M Distributors, Inc. ("AIM Distributors"). The Class A shares
of Developing Markets Fund and Emerging Markets Debt Fund pay a fee in the
amount of 0.50% and 0.35%, respectively, of average daily net assets to AIM
Distributors for distribution services. The Class B shares and Class C shares of
Developing Markets Fund and Emerging Markets Debt Fund pay AIM Distributors fees
at an annual rate of 1.00% of the average daily net assets attributable to the
Class B shares and Class C shares, respectively, for distribution services. For
more information, see the Shareholder Information section in the Developing
Markets Fund Prospectus attached as Appendix II to this Proxy
Statement/Prospectus.
Purchase and redemption procedures are the same for Developing Markets Fund
and Emerging Markets Debt Fund. Shares of Developing Markets Fund and Emerging
Markets Debt Fund may be exchanged for shares of other funds of The AIM Family
of Funds--Registered Trademark-- of the same class, as provided in each Fund's
prospectus. No initial sales charge will be imposed on the shares being
acquired, and no CDSC will be imposed on the shares being disposed of, through
an exchange. However, a CDSC may apply to redemptions of an AIM Fund's Class B
shares or Class C shares acquired through an exchange. Exchanges will be subject
to minimum investment and other requirements of the Fund into which exchanges
are made.
OPERATIONS OF DEVELOPING MARKETS FUND FOLLOWING THE REORGANIZATION
There are differences in the investment objectives and some of the
investment policies of the Funds. It is not expected that Developing Markets
Fund will revise its investment objectives or policies following the
Reorganization to reflect those of Emerging Markets Debt Fund. Rather, AIM and
INVESCO believe that substantially all of the assets held by the Portfolio will
be consistent with Developing Markets Fund's investment policies and thus could
be held by Developing Markets Fund if the Reorganization is approved. If the
Reorganization is approved, the Portfolio 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 the Portfolio 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 the Portfolio's
realizing losses that would not otherwise have been realized.
PORTFOLIO MANAGEMENT
John Cleary, Edwin Gutierrez, and Jonathan Mann are primarily responsible
for the day-to-day management of the Portfolio. Mr. Cleary has been Portfolio
Manager for the Portfolio since 1999 and has been associated with AIM and/or its
affiliates since 1998. From 1997 to 1998, he was Manager of a global emerging
markets fixed income fund for West Merchant Bank Ltd. From 1993 to 1996, he was
a portfolio manager for Fischer Francis Trees and Watts. Mr. Cleary completed
the investment management program at the London Business School in 1996. Mr.
Gutierrez has been Portfolio Manager for the Portfolio since 1999 and has been
associated with AIM and/or its affiliates since 1998. From 1994 to 1998, he was
an economist for Chancellor LGT Asset Management. Mr. Mann has been Portfolio
Manager for the Portfolio since 1999 and has been associated with AIM and/or its
affiliates since 1998. From 1994 to 1998, he was an economist for LGT Asset
Management.
William Barron, John Cleary, and Christine Rowley are primarily responsible
for the day-to-day management of the Developing Markets Fund. Mr. Barron has
been Portfolio Manager for Developing Markets Fund since 1999 and has been
associated with AIM and/or its affiliates since 1995. Mr. Cleary has
7
<PAGE> 13
been Portfolio Manager for Developing Markets Fund since 1999 and has been
associated with AIM and/or its affiliates since 1998. From 1997 to 1998, he was
Manager of a global emerging markets fixed income fund for West Merchant Bank
Ltd. From 1993 to 1996, he was a portfolio manager for Fischer Francis Trees and
Watts. Ms. Rowley has been Portfolio Manager for Developing Markets Fund since
1999 and has been associated with AIM and/or its affiliates since 1991.
MANAGEMENT DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of Developing Markets Fund for the twelve
month period ended October 31, 1999, is set forth in Appendix III to this Proxy
Statement/Prospectus.
RISK FACTORS
NON-DIVERSIFIED CLASSIFICATION
Both Emerging Markets Debt Fund and Developing Markets Fund are classified
as "non-diversified" funds. As a result, investment may be made in a smaller
number of issuers than a "diversified" fund. To the extent that investment is
made in a smaller number of issuers, the NAV of a Fund's shares may fluctuate
more widely and it may be subject to greater investment and credit risk with
respect to its portfolio.
INVESTING IN EMERGING MARKETS
Developing Markets Fund and the Portfolio each invests primarily in
securities of issuers located in emerging markets. Emerging markets generally
are dependent heavily upon international trade and, accordingly, have been and
may continue to be affected adversely by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. Inflation and
rapid fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain countries with
emerging markets.
Disclosure and regulatory standards in most emerging markets are, in many
respects, less stringent than in the United States and other developed markets.
There also may be a lower level of monitoring and regulation of emerging markets
and the activities of investors in those markets, and enforcement of existing
regulations has been extremely limited.
The securities markets of emerging countries are substantially smaller,
less developed, less liquid, and more volatile than the securities markets of
the developed countries. The risk also exists that an emergency situation may
arise in one or more emerging markets as a result of which trading of securities
may cease or may be substantially curtailed and prices for a Fund's portfolio
securities in those markets may not be readily available. Section 22(e) of the
1940 Act permits a registered investment company and series thereof, such as a
Fund, to suspend redemption of its shares for any period during which an
emergency exists, as determined by the SEC. Accordingly, if the Trust believes
that circumstances dictate, it will promptly apply to the SEC for a
determination that such an emergency exists. During the period commencing with
the Trust's identification of such conditions until the date of any SEC action,
the Funds' portfolio securities in the affected markets will be valued at fair
value determined in good faith by or under the direction of the Board.
8
<PAGE> 14
LOWER QUALITY DEBT
The Portfolio normally invests a significant amount of its total assets in
debt securities rated below investment grade. The Developing Markets Fund also
may invest in such securities. Such investments involve a high degree of risk.
Debt rated Baa by Moody's Investor Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and
debt rated Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. Debt rated C
by Moody's or S&P is the lowest-rated debt that is not in default as to
principal or interest, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
The market values of lower quality debt securities tend to reflect
individual developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such period, such issuers may not have
sufficient revenues to meet their interest payment obligations. An issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting it, such as its inability to meet specific
projected business forecasts or the unavailability of additional financing.
Similarly, certain emerging market governments that issue lower quality debt
securities are among the largest debtors to commercial banks, foreign
governments and supranational organizations such as the World Bank and may not
be able or willing to make principal and/or interest repayments as they come
due. The risk of loss due to default by an issuer is significantly greater for
the holders of lower quality securities because such securities are generally
unsecured and may be subordinated to the claims of other creditors of the
issuer.
Lower quality debt securities frequently have call or buy-back features
that permit an issuer to call or repurchase the security from the holder. In
addition, a Fund may have difficulty disposing of lower quality securities
because they may have a thin trading market.
SOVEREIGN DEBT
Developing Markets Fund and the Portfolio each may invest in sovereign debt
securities of emerging market governments, including Brady Bonds. Investments in
such securities involve special risks. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable or
unwilling to repay principal or interest when due in accordance with the terms
of the debt. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt obligations and in turn a Fund's NAV, to a
greater extent than the volatility inherent in domestic fixed income securities.
Investors also should be aware that certain sovereign debt instruments in
which a Fund may invest involve great risk. As noted above, sovereign debt
obligations issued by emerging market governments generally are deemed to be the
equivalent in terms of quality to securities rated below investment grade by
Moody's and S&P. Those securities are regarded as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations and involve major risk exposure to
adverse conditions. Some of those securities, with respect to which the issuer
currently may not be paying interest or may be in payment default, may be
comparable to securities rated D by S&P or C by Moody's. A Fund may have
difficulty disposing of and valuing certain sovereign debt obligations because
there may be a limited trading market for those securities. Because there is no
liquid secondary market for many of these securities, each Fund anticipates that
they could be sold only to a limited number of dealers or institutional
investors.
9
<PAGE> 15
CURRENCY RISK
Because Developing Markets Fund and the Portfolio each may invest
substantially in securities denominated in currencies other than the U.S. dollar
and may hold foreign currencies, it will be affected favorably or unfavorably by
exchange control regulations or changes in the exchange rates between those
currencies and the U.S. dollar. Changes in currency exchange rates will affect
the NAV of a Fund's shares and also may affect the value of dividends and
interest earned by a Fund and gains and losses realized by it.
Many of the currencies of emerging market countries have experienced steady
devaluations relative to the U.S. dollar, and major devaluations have occurred
in certain countries. Any devaluations in the currencies in which portfolio
securities are denominated may have a detrimental impact on a Fund.
OPTIONS, FUTURES, AND FOREIGN CURRENCY TRANSACTIONS
Developing Markets Fund and the Portfolio are each authorized to enter into
options, futures, and forward currency transactions. These transactions involve
certain risks, which include: (1) dependence on AIM's ability to predict
movements in the prices of individual securities, fluctuations in the general
securities markets, and movements in interest rates and currency markets; (2)
imperfect correlation, or even no correlation, between movements in the price of
forward contracts, options, futures contracts, or options thereon and movements
in the price of the currency or security hedged or used for cover; (3) the fact
that skills and techniques needed to trade options, futures contracts, and
options thereon or to use forward currency contracts are different from those
needed to select the securities in which a Fund invests; (4) lack of assurance
that a liquid secondary market will exist for any particular option, futures
contract, or option thereon at any particular time; (5) the possible loss of
principal under certain conditions; and (6) the possible inability of a Fund to
purchase or sell a portfolio security at a time when it would otherwise be
favorable for it to do so, or the possible need for a Fund to sell a security at
a disadvantageous time, due to the need for a Fund to maintain "cover" or to set
aside securities in connection with hedging transactions.
10
<PAGE> 16
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand
Developing Markets Fund's financial performance. Certain information reflects
financial results for a single Developing Markets Fund 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 (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, which is available upon request.
Total return information in this table may be affected by special market
factors, including Developing Markets Fund's investments in initial public
offerings, which may have a magnified impact on Developing Markets Fund due to
its small asset base. There is no guarantee that, as Developing Markets Fund's
assets grow, it will continue to experience substantially similar performance.
G.T. Global Developing Markets Fund, Inc. ("Predecessor Fund") was a
closed-end investment company whose single class of shares traded on the New
York Stock Exchange. On October 31, 1998, Developing Markets Fund, which had no
previous operating history, acquired the assets and assumed the liabilities of
the Predecessor Fund. 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>
CLASS A
--------------------------------------------------------------
TEN MONTHS
YEAR ENDED OCTOBER 31, ENDED YEAR ENDED DECEMBER 31,
---------------------- OCTOBER 31, -----------------------
1999(a) 1998(a) 1997(b) 1996 1995
--------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
-------- --------- -------- -------- --------
Income From Investment operations:
Net investment income................ 0.06 0.39(c,d) 0.25 0.53 0.72
Net realized and unrealized gain
(loss) on investments............. 2.36 (5.10) (1.53) 2.19 (0.84)
-------- --------- -------- -------- --------
Net increase (decrease) from
investment operations............. 2.42 (4.71) (1.28) 2.72 (0.12)
-------- --------- -------- -------- --------
Redemption fees retained............. 0.03 0.28 -- -- --
Distributions to shareholders:
From net investment income........... (0.12) (0.60) -- (0.48) (0.72)
From net realized gain on
investments....................... -- -- -- -- --
Total distributions.......... (0.12) (0.60) -- (0.48) (0.72)
-------- --------- -------- -------- --------
Net asset value, end of period......... $ 9.86 $ 7.53 $ 12.56 $ 13.84 $ 11.60
======== ========= ======== ======== ========
Total return (e)....................... 33.11% (37.09)% (9.25)% 23.59% (0.95)%
Ratios and supplemental data:
Net assets, end of period (in 000's)... $157,198 $ 87,517 $457,379 $504,012 $422,348
Ratio of net investment income to
average net assets
With fee waivers..................... 0.68%(f) 3.84% 2.03%(g) 4.07% 6.33%
Without fee waivers.................. 0.21%(f) 3.43% 1.95%(g) 4.04% 6.30%
Ratio of operating expenses to average
net assets excluding interest expense
With fee waivers..................... 1.90%(f) 1.73% 1.75%(g) 1.82% 1.77%
Without fee waivers.................. 2.37%(f) 2.14% 1.83%(g) 1.85% 1.80%
Ratio of interest expense to average
net assets........................... 0.01% 0.20% N/A N/A N/A
Portfolio turnover rate................ 125% 111% 184%(g) 138% 75%
</TABLE>
11
<PAGE> 17
- ---------------
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Prior to November 1, 1997, the Fund was known as G.T. Global Developing
Markets Fund, Inc. All capital shares issued and outstanding on October 31,
1997 were reclassified as Class A shares.
(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 return does not include sales charges and is not annualized for
periods less than one year.
(f) Ratios are based on average net assets of $123,758,642.
(g) Annualized.
N/A Not Applicable.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------- ---------------------------
MARCH 1, 1999 (COMMENCEMENT
OF OPERATIONS) TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
----------------------- ---------------------------
1999(a) 1998(a) 1999(a)
--------- --------- ---------------------------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 7.49 $ 12.56 $ 7.47
------- ------- ------
Income From Investment operation
Net investment income (loss)............... 0.01 0.31(b,c) --
Net realized and unrealized gain (loss) on
investments............................. 2.37 (5.07) 2.32
------- ------- ------
Net increase (decrease) from investment
operations.............................. 2.38 (4.76) 2.32
------- ------- ------
Redemption fees retained................... -- 0.28 --
Distributions to shareholders:
From net investment income................. (0.08) (0.59) --
From net realized gain on investments...... -- -- --
------- ------- ------
Total distributions................ (0.08) (0.59) --
------- ------- ------
Net asset value, end of period............... $ 9.79 $ 7.49 $ 9.79
======= ======= ======
Total return(d).............................. 32.14% (39.76)% 31.06%
Ratios and supplemental data:
Net assets, end of period (in 000's)......... $49,723 $ 154 $ 412
Ratio of net investment income (loss) to
average net assets:
With fee waivers........................... 0.08%(e) 3.09% 0.08%(f)
Without fee waivers........................ (0.39)%(e) 2.68% (0.39)%(f)
Ratio of operating expenses to average net
assets excluding interest expense:
With fee waivers........................... 2.50%(e) 2.48% 2.50%(f)
Without fee waivers........................ 2.97%(e) 2.89% 2.97%(f)
Ratio of interest expense to average net
asset...................................... 0.01% 0.20% 0.01%
Portfolio turnover rate...................... 125% 111% 125%
</TABLE>
- ---------------
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement, the net investment income per share would have been
reduced by $0.04.
(c) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $35,727,260.
(f) Ratios are annualized and based on average net assets of $208,934.
12
<PAGE> 18
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 copy of which is attached as Appendix I to this Proxy
Statement/Prospectus.
THE REORGANIZATION
The Plan contemplates (a) Developing Markets Fund's acquiring on the
Closing Date the assets of Emerging Markets Debt Fund in exchange solely for
Developing Markets Fund's shares and its assumption of Emerging Markets Debt
Fund's liabilities and (b) the constructive distribution of those shares to
Emerging Markets Debt Fund shareholders. Emerging Markets Debt Fund's assets
include its interest in the Portfolio as well as all cash, cash equivalents,
receivables, and other property owned by it as of the close of regular trading
on the New York Stock Exchange on the business day next preceding the Closing
Date ("Valuation Time") (collectively, "Assets"). Developing Markets Fund will
assume from Emerging Markets Debt Fund all its debts, liabilities, obligations
and duties of whatever kind or nature as of the Valuation Time (collectively,
"Liabilities"); provided, however, that Emerging Markets Debt Fund will use its
best efforts, to the extent practicable, to discharge all of its known
Liabilities prior to the Valuation Time. Developing Markets Fund also will
deliver its shares to Emerging Markets Debt Fund, which then will be
constructively distributed to Emerging Markets Debt 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, Class B, and
Class C 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 such market quotations, provided the quotations adequately
reflect, in AIM's judgment, the fair value of the security. Where such market
quotations are not readily available, securities will be valued based upon
appraisals received from a pricing service using a computerized matrix system or
based upon 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 the Board
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 the Board.
On, or as soon as practicable after, the Closing Date, Emerging Markets
Debt Fund will distribute to its shareholders of record the Developing Markets
Fund's shares it receives, by Class, so that each Class A, Class B, and Class C
Emerging Markets Debt Fund shareholder will receive a number of full and
fractional shares of the Class A, Class B, or Class C Developing Markets Fund
shares, respectively ("Corresponding Class"), equal in value to the
shareholder's holdings in Emerging Markets Debt Fund. Such distribution will be
accomplished by opening accounts on the books of Developing Markets Fund in the
names of Emerging Markets Debt Fund's shareholders and by transferring thereto
the shares of each Class previously credited to the account of Emerging Markets
Debt Fund on those books. Fractional shares in each Class of Developing Markets
Fund will be rounded to the third decimal place.
Immediately after the Reorganization, each former shareholder of Emerging
Markets Debt Fund will own shares of the Class of Developing Markets Fund that
will equal the value of that shareholder's shares of the Corresponding Class of
Emerging Markets Debt Fund immediately prior to the Reorganization. Because
shares of each Class of Developing Markets Fund will be issued at NAV in
exchange for the net assets attributable to the Corresponding Class of Emerging
Markets Debt Fund, the aggregate value of shares of each Class of Developing
Markets Fund so issued will equal the aggregate value of shares of the
Corresponding Class of Emerging Markets Debt Fund. The NAV per share of
Developing Markets Fund will be unchanged by the transactions. Thus, the
Reorganization will not result in a dilution of any shareholder interest.
13
<PAGE> 19
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 Declaration of Trust, the Trust may issue an
unlimited number of shares. Each share of a 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 prospectus for each Fund, and is entitled to such dividends and other
distributions out of the income earned and gain realized on the assets belonging
to the Fund as may be declared by the Board. The Trustees have established
Developing Markets Fund as one of its series and have authorized the public
offering of three Classes of shares of that Fund, designated Class A, Class B,
and Class C shares. 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 a Fund, when issued, are fully paid and nonassessable.
The Classes of Developing Markets Fund differ as follows: (1) each Class
has exclusive voting rights on matters pertaining to its plan of distribution;
(2) Class A shares are subject to an initial sales charge and bear ongoing
distribution fees; (3) Class B shares bear ongoing distribution fees, are
subject to a CDSC upon certain redemptions, and convert to Class A shares after
a certain period; (4) Class C shares bear ongoing distribution fees, are subject
to a CDSC upon certain redemptions, and do not convert to Class A shares; and
(5) each Class may bear differing amounts of certain Class-specific expenses.
Each share of each Class of Developing Markets Fund is entitled to participate
equally in dividends and other distributions and the proceeds of any
liquidation, except that because of different distribution fees and other
Class-specific expenses, the amount of dividends and other distributions paid by
each class will differ.
PURCHASES, REDEMPTIONS, AND EXCHANGES OF SHARES
Shares of each Fund are available through A I M Fund Services, Inc.
("Transfer Agent") or through any dealer authorized by AIM Distributors to sell
shares of the AIM Funds. The minimum initial investment in each 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 a Fund's automatic investment
plan.
The rights and privileges of the shareholders of each Class of Emerging
Markets Debt Fund Shares will be effectively unchanged by the Reorganization.
Accordingly, the Reorganization will have no effect on the holding period of
Class B and Class C shares of Emerging Markets Debt Fund for purposes of
calculating any applicable CDSC. Similarly, the Reorganization will have no
effect on the policies regarding the ability of investors to qualify for reduced
or waived sales charges, as currently in effect for Emerging Markets Debt Fund.
Shares of each Fund may be exchanged for shares of the Corresponding Class
of other AIM Funds, and shares of each Fund may be acquired through an exchange
of shares of the Corresponding Class of other AIM Funds, as provided in each
Fund's prospectus. No initial sales charge will be imposed on the shares being
acquired, and no CDSC will be imposed on the shares being disposed of, through
an exchange. However, a CDSC may apply to redemptions of AIM Fund's Class B or
Class C shares acquired through an exchange. Exchanges will be subject to
minimum investment and other requirements of the Fund into which exchanges are
made.
DIVIDENDS AND OTHER DISTRIBUTIONS
Emerging Markets Debt Fund generally distributes dividends from its net
investment income, if any, monthly. Developing Markets Fund generally
distributes dividends from its net investment income, if any, annually. Both
Funds generally distribute 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 annually. Shareholders of each Fund may reinvest dividends
and other distributions in additional Fund shares of the distributing class (or
in shares of the Corresponding Class
14
<PAGE> 20
of other AIM Funds) on the payment date at those shares' NAV that day or receive
the distribution amount 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, Emerging Markets Debt Fund will declare as a
distribution substantially all of its net investment income, net capital gain,
net short-term capital gain, and net gains from foreign currency transactions in
order to maintain its tax status as a regulated investment company. Developing
Markets Fund also may declare and distribute as a dividend to its shareholders,
on or before the Closing Date, substantially all of any previously undistributed
net investment income. The consummation of the Reorganization is subject to a
number of conditions set forth in the Plan, some of which may be waived by
Emerging Markets Debt 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 the shareholders' interests.
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
transferred to it by Emerging Markets Debt Fund will be the same as Emerging
Markets Debt Fund's book cost basis of such assets.
FEDERAL TAX CONSIDERATIONS
The exchange of Emerging Markets Debt Fund's Assets for Developing Markets
Fund shares and Developing Markets Fund's assumption of the liabilities of
Emerging Markets Debt Fund is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368 of the Internal Revenue
Code of 1986, as amended ("Code"). The Trust will receive an opinion of
Kirkpatrick & Lockhart LLP, its counsel, substantially to the effect that:
(i) The acquisition of the assets of the Emerging Markets Debt Fund by
the Developing Markets Fund in exchange solely for the Developing
Markets Fund Shares and the Developing Markets Fund's assumption of
the Emerging Markets Debt Fund's liabilities, followed by the
distribution of those Shares pro rata to the Emerging Markets Debt
Fund Shareholders constructively in exchange for their Emerging
Markets Debt Fund Shares, as provided in the Agreement, will qualify
as a "reorganization" within the meaning of section 368(a) of the
Code, and each of the Emerging Markets Debt Fund and the Developing
Markets Fund will be a "party to a reorganization" within the meaning
of 368(b) of the Code.
(ii) The Emerging Markets Debt Fund will recognize no gain or loss on the
transfer of its assets to the Developing Markets Fund in exchange
solely for Developing Markets Fund Shares and the Developing Markets
Fund's assumption of the Emerging Markets Debt Fund's liabilities or
on the distribution of those Shares to the Emerging Markets Debt Fund
Shareholders.
(iii) The Developing Markets Fund will recognize no gain or loss on its
receipt of the assets of the Emerging Markets Debt Fund in exchange
solely for Developing Markets Fund Shares and its assumption of the
Emerging Markets Debt Fund's liabilities.
(iv) The Developing Markets Fund's basis for the assets of the Emerging
Markets Debt Fund transferred to it will be the same as the Emerging
Markets Debt Fund's basis therefor immediately before the
Reorganization, and the Developing Markets Fund's holding period for
those assets will include the Emerging Markets Debt Fund's holding
period therefor.
(v) An Emerging Markets Debt Fund Shareholder will recognize no gain or
loss on the receipt of Developing Markets Fund Shares in constructive
exchange for all its Emerging Markets Debt Fund Shares pursuant to
the Reorganization.
(vi) An Emerging Markets Debt Fund Shareholder's aggregate basis for the
Developing Markets Fund Shares received thereby in the Reorganization
will be the same as the aggregate basis for
15
<PAGE> 21
its Emerging Markets Debt Fund Shares to be constructively
surrendered in exchange therefor, and its holding period for those
Developing Markets Fund Shares will include its holding period for
those Emerging Markets Debt Fund Shares, provided the Emerging
Markets Debt Fund Shareholder held the Emerging Markets Debt Fund
Shares as capital assets at the Effective Time.
The 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.
Utilization by Developing Markets Fund after the Reorganization of
pre-Reorganization capital losses realized by Emerging Markets Debt Fund could
be subject to limitation in future years under the Code.
Shareholders of Emerging Markets Debt 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
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
The Trust is an open-end management investment company organized as a
Delaware business trust. Emerging Markets Debt Fund commenced operations on
October 22, 1992, as a series of G.T. Investment Funds, Inc. (the "Company"),
the Trust's predecessor entity. Developing Markets Fund commenced operations on
November 1, 1997 as a series of the Company, as the successor (in a
reorganization) to G.T. Global Developing Markets, Inc., a closed-end investment
company that commenced operations on January 11, 1994. On September 4, 1998, the
Trust acquired the assets and assumed the liabilities of the Company. The
operations of the Trust, as a Delaware business trust, are governed by its
Agreement and Declaration of Trust, as amended (the "Declaration of Trust") and
Delaware law.
OWNERSHIP OF EMERGING MARKETS DEBT FUND AND
DEVELOPING MARKETS FUND SHARES
Listed below is the name, address and percent ownership of each person who
as of April 24, 2000, to the knowledge of the Trust, owned beneficially five
percent or more of any class of the outstanding shares of Emerging Markets Debt
Fund and Developing Markets Fund:
EMERGING MARKETS DEBT FUND
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
RECORD BENEFICIALLY
-------- ------------
<S> <C> <C>
Class A
Salomon Smith Barney Inc. ................................ 6.06% -0-*
388 Greenwich Street
New York, NY 10013-2339
Class B
Merrill Lynch Pierce Fenner & Smith....................... 9.35% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
16
<PAGE> 22
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
RECORD BENEFICIALLY
-------- ------------
<S> <C> <C>
Class C
Salomon Smith Barney Inc. ................................ 31.47% -0-*
333 West 34th St., 3rd Floor
New York, NY 10001
Donaldson Lufkin Jenrette................................. 14.48% -0-*
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Jane W. Glover............................................ -0- 6.49%
1201 Kirkland Rd.
Covington, GA 30016-2948
ITC Cust. Rollover IRA FBO................................ -0- 5.68%
Dennis M. Maziarz
27 Bailey Dr.
Washington Crossing, PA 18977-1007
Raymond James & Assoc. Inc. CSDN.......................... -0- 5.10%
Cosmo D. Mastropaolo IRA
(PASS)
9 Point View Pl.
Mountain Lakes, NJ 07046
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
DEVELOPING MARKETS FUND
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
RECORD BENEFICIALLY
-------- ------------
<S> <C> <C>
Class A
Merrill Lynch Pierce Fenner & Smith....................... 8.97% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class B
Merrill Lynch Pierce Fenner & Smith....................... 5.87% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
17
<PAGE> 23
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
RECORD BENEFICIALLY
-------- ------------
<S> <C> <C>
Class C
Merrill Lynch Pierce Fenner & Smith....................... 10.37% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
First Clearing Corporation................................ -0- 8.11%
W. L. Burgess IRA R/O
FCC as Custodian
7893 Vue Estates Road
Meridian, ID 83642-5207
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
To the best of the knowledge of the Trust, the beneficial ownership of
shares of Emerging Markets Debt Fund or of Developing Markets Fund by officers
or trustees of the Trust as a group constituted less than one percent of the
outstanding Class A, Class B and Class C shares of each Fund as of April 24,
2000.
CAPITALIZATION
The following table shows the capitalization of each Fund as of October 31,
1999, and on a pro forma combined basis (unaudited) as of that date, giving
effect to the Reorganization.
<TABLE>
<CAPTION>
EMERGING MARKETS DEVELOPING MARKETS PRO FORMA CLASS A
DEBT FUND: CLASS A FUND: CLASS A COMBINED
------------------ ------------------ -----------------
<S> <C> <C> <C>
Net Assets................................ $54,330,409 $157,197,964 $211,528,373
Shares Outstanding........................ 6,543,402 15,944,507 21,452,645
Net Asset Value Per Share................. $ 8.30 $ 9.86 $ 9.86
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS DEVELOPING MARKETS PRO FORMA CLASS B
DEBT FUND: CLASS B FUND: CLASS B COMBINED
------------------ ------------------ -----------------
<S> <C> <C> <C>
Net Assets................................. $97,393,834 $49,723,202 $147,117,036
Shares Outstanding......................... 11,728,667 5,079,702 15,023,311
Net Asset Value Per Share.................. $ 8.30 $ 9.79 $ 9.79
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS DEVELOPING MARKETS PRO FORMA CLASS C
DEBT FUND: CLASS C FUND: CLASS C COMBINED
------------------ ------------------ -----------------
<S> <C> <C> <C>
Net Assets................................ $208,357 $411,826 $620,183
Shares Outstanding........................ 25,096 42,079 63,355
Net Asset Value Per Share................. $ 8.30 $ 9.79 $ 9.79
</TABLE>
18
<PAGE> 24
LEGAL MATTERS
Certain legal matters concerning the Trust and its participation in the
Reorganization, the issuance of 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 the Trust.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statements of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which the Trust
has filed with the Securities and Exchange Commission ("SEC") pursuant to the
requirements of the 1933 Act and the 1940 Act, to which reference is hereby
made. The SEC file number for the Trust's registration statement containing the
Prospectus and Statement of Additional Information relating to Emerging Markets
Debt Fund is Registration No. 33-19338. Such Prospectus and Statement of
Additional Information are 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.
The Trust is subject to the informational requirements of the 1940 Act and
in accordance therewith files reports and other information with the SEC.
Reports, proxy statements, registration statements, and other information filed
by the Trust (including the Registration Statement of the Trust relating to the
Developing Markets 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, NW, 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 6066l. Copies of
such material may also be obtained from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549 at the prescribed rates. The
SEC maintains an internet web site at http://www.sec.gov that contains
information regarding the Trust and other registrants that file electronically
with the SEC.
ADDITIONAL INFORMATION ABOUT EMERGING MARKETS
DEBT FUND AND DEVELOPING MARKETS FUND
For more information with respect to the Trust and Developing Markets Debt
Fund concerning the following topics, please refer to the Developing Markets
Fund Prospectus attached as Appendix II to this Proxy Statement/Prospectus, as
indicated: (i) see "Investment Objectives and Strategies" and "Fund Management"
for further information regarding the Trust and Developing Markets Fund; (ii)
see discussion in "Investment Objectives and Strategies, "Fund Management," and
"Other Information" for further information regarding management of Developing
Markets Fund; (iii) see "Fund Management" and "Other Information" for further
information regarding the shares of Developing Markets Fund; (iv) see "Fund
Management," "Shareholder Information" for further information regarding the
purchase, redemption, and repurchase of shares of Developing Markets Fund.
For more information with respect to the Trust and Emerging Markets Debt
Fund concerning the following topics, please refer to the Emerging Markets Debt
Fund Prospectus as indicated: (i) see "Investment Objectives and Strategies" and
"Fund Management" for further information regarding the Trust and Emerging
Markets Debt Fund; (ii) see discussion in "Investment Objectives and
Strategies," "Fund Management," and "Other Information" for further information
regarding management of Emerging Markets Debt Fund; (iii) see "Fund Management"
and "Other Information" for further information regarding the shares of Emerging
Markets Debt Fund; (iv) see "Fund Management," "Other Information" and
"Shareholder Information" for further information regarding the purchase,
redemption, and repurchase of shares of Emerging Markets Debt Fund.
19
<PAGE> 25
EXPERTS
The audited financial statements of the Funds incorporated by reference
herein and in their respective Statements of Additional Information have 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, 1999. 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.
20
<PAGE> 26
APPENDIX I
PLAN OF REORGANIZATION
AND TERMINATION
BETWEEN
AIM EMERGING MARKETS DEBT FUND
AND
AIM DEVELOPING MARKETS FUND
EACH A PORTFOLIO OF
AIM INVESTMENT FUNDS
MARCH 22, 2000
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS...................................... I-1
Section 1.1 Definitions.................................. I-1
ARTICLE 2 THE REORGANIZATION............................... I-3
Section 2.1 Transfer of Assets, Issuance of Shares, and
Assumption of Liabilities.............................. I-3
Section 2.2 Computation of Net Asset Value............... I-3
Section 2.3 Redemption Requests.......................... I-3
Section 2.4 Delivery of Assets........................... I-3
Section 2.5 Dissolution.................................. I-4
Section 2.6 Distribution of Acquiring Fund's Shares...... I-4
Section 2.7 Identification of Assets..................... I-4
Section 2.8 Discharge of Liabilities..................... I-4
Section 2.9 Transfer Taxes............................... I-4
ARTICLE 3 CONDITIONS PRECEDENT TO ACQUIRING FUND'S
OBLIGATIONS............................................... I-4
Section 3.1 Acquired Fund's Shares; Liabilities; Business
Operations............................................. I-4
Section 3.2 Court Jurisdiction........................... I-5
Section 3.3 Concentration of Assets...................... I-5
Section 3.4 Assets....................................... I-5
Section 3.5 RIC Status................................... I-5
Section 3.6 Dividend(s).................................. I-5
Section 3.7 No Distribution.............................. I-5
Section 3.8 Liabilities.................................. I-5
Section 3.9 Shareholder Expenses......................... I-5
Section 3.10 Closing Certificate.......................... I-5
Section 3.11 Voting Requirements.......................... I-5
Section 3.12 No Compensation to Certain Shareholders...... I-5
Section 3.13 Liquidation of Portfolio Interest............ I-6
ARTICLE 4 CONDITIONS PRECEDENT TO ACQUIRED FUND'S
OBLIGATIONS............................................... I-6
Section 4.1 Registration of Acquiring Fund's Shares...... I-6
Section 4.2 Court Jurisdiction........................... I-6
Section 4.3 RIC Status................................... I-6
Section 4.4 Ownership of Acquired Fund's Shares.......... I-6
Section 4.5 Reacquisition of Acquiring Fund's Shares..... I-6
Section 4.6 Disposition of Assets........................ I-6
Section 4.7 Continuation of Acquired Fund's Business..... I-6
Section 4.8 Consideration................................ I-7
Section 4.9 Closing Certificate.......................... I-7
Section 4.10 Post-Reorganization Transactions............. I-7
Section 4.11 Concentration of Assets...................... I-7
ARTICLE 5 CONDITIONS PRECEDENT TO BOTH FUNDS'
OBLIGATIONS............................................... I-7
Section 5.1 Shareholder Vote............................. I-7
Section 5.2 Transfer of Assets........................... I-7
Section 5.3 Intercompany Indebtedness.................... I-7
Section 5.4 Value of Shares.............................. I-7
Section 5.5 Value of Assets.............................. I-7
Section 5.6 Tax Opinion.................................. I-7
Section 5.7 Expenses..................................... I-8
Section 5.8 Trust Authority.............................. I-8
Section 5.9 No Control of Acquiring Fund................. I-8
ARTICLE 6 MISCELLANEOUS.................................... I-8
Section 6.1 Termination.................................. I-8
Section 6.2 Governing Law................................ I-8
Section 6.3 Obligations of AIF and Others................ I-9
</TABLE>
(i)
<PAGE> 28
PLAN OF REORGANIZATION AND TERMINATION
This PLAN OF REORGANIZATION AND TERMINATION, effective as of March 22, 2000
("Plan"), is adopted by AIM Investment Funds, a Delaware business trust ("AIF"),
acting on behalf of AIM Emerging Markets Debt Fund (the "Acquired Fund") and AIM
Developing Markets Fund (the "Acquiring Fund"), each a separate segregated
portfolio of assets ("series") of AIF.
WITNESSETH
WHEREAS, AIF is an investment company registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act that offers
separate series of its shares representing interests in its investment
portfolios, the Acquired Fund and the Acquiring Fund, for sale to the public;
and
WHEREAS, A I M Advisors, Inc. provides investment advisory services to both
Funds; and
WHEREAS, the Acquired Fund owns securities in which the Acquiring Fund is
permitted to invest; and
WHEREAS, the Acquired Fund desires to provide for its reorganization
through the transfer of all of its assets to the Acquiring Fund in exchange
solely for the assumption by the Acquiring Fund of all of its liabilities and
the issuance by AIF of shares of the Acquiring Fund in the manner set forth in
this Plan; and
WHEREAS, this Plan is intended to be, and is adopted by AIF as, a "plan of
reorganization" within the meaning of Section 1.368-2(g) of the Regulations.
NOW, THEREFORE, AIF hereby adopts this Plan.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. For all purposes of this Plan (including the
foregoing recitals), the terms defined in the introductory paragraph shall apply
and the following terms shall have the respective meanings set forth in this
Section 1.1 (such definitions to be equally applicable to both the singular and
plural forms of the terms herein defined):
"Acquired Fund's Class A Shares" means Class A shares of beneficial
interest in the Acquired Fund issued by AIF.
"Acquired Fund's Class B Shares" means Class B shares of beneficial
interest in the Acquired Fund issued by AIF.
"Acquired Fund's Class C Shares" means Class C shares of beneficial
interest in the Acquired Fund issued by AIF.
"Acquired Fund's Net Value" means the total value of the Assets less
the amount of the Liabilities.
"Acquired Fund's Shareholders" means the holders of record as of the
Effective Time of all the Acquired Fund's Shares.
"Acquired Fund's Shareholders Meeting" means a meeting of the
shareholders of the Acquired Fund convened in accordance with applicable
law and the Agreement and Declaration of Trust of AIF to consider and vote
upon the approval of this Plan and the transactions contemplated by this
Plan.
"Acquired Fund's Shares" means the Acquired Fund's Class A Shares,
Class B Shares, and Class C Shares.
"Acquiring Fund's Class A Shares" means Class A shares of beneficial
interest in the Acquiring Fund issued by AIF.
"Acquiring Fund's Class B Shares" means Class B shares of beneficial
interest in the Acquiring Fund issued by AIF.
I-1
<PAGE> 29
"Acquiring Fund's Class C Shares" means Class C shares of beneficial
interest in the Acquiring Fund issued by AIF.
"Acquiring Fund's Shares" means the Acquiring Fund's Class A Shares,
Class B Shares, and Class C Shares issued pursuant to Sections 2.1 and 2.6
of this Plan.
"AIF Registration Statement" means the registration statement on Form
N-1A of AIF, as amended, Registration No. 811-05426.
"AIF N-14 Registration Statement" means the registration statement on
Form N-14 of AIF as in effect on the Closing Date.
"Assets" means 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 the Acquired
Fund's books, and other property owned by the Acquired Fund at the
Valuation Time.
"Business Day" means a day on which the NYSE is open for trading.
"Closing" means the transfer of the Assets to the Acquiring Fund, the
assumption of all the Liabilities and the issuance of the Acquiring Fund's
Shares as described in Section 2.1 of this Plan.
"Closing Date" means June 19, 2000, or such other date AIF may
determine.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of each Fund.
"Effective Time" means 8:00 a.m. Eastern time on the Closing Date.
"Fund" means the Acquired Fund or the Acquiring Fund.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means all of the Acquired Fund'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 Valuation Time, and
whether or not specifically referred to in this Plan.
"Lien" means any pledge, lien, security interest, charge, claim, or
encumbrance of any kind.
"NYSE" means the New York Stock Exchange.
"Open-End Investment Company" means an open-end management investment
company operating under the Investment Company Act.
"Person" means an individual or a corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, or other entity.
"Portfolio" means Emerging Markets Debt Portfolio, a Delaware business
trust.
"Regulations" means the regulations under the Code.
"Reorganization" means the acquisition of the Assets by the Acquiring
Fund in exchange solely for the assumption by the Acquiring Fund of all of
the Liabilities and the issuance by AIF of the Acquiring Fund's Shares to
the Acquired Fund, the distribution of such shares to Acquired Fund's
Shareholders as described in this Plan, and the termination of the Acquired
Fund as a designated series of shares of AIF.
"Required Shareholder Vote" shall have the meaning set forth in
Section 3.11 of this Plan.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
I-2
<PAGE> 30
"Valuation Time" means the close of the customary trading session of
the NYSE, or such other time as AIF may determine, on the Business Day
immediately preceding the Closing Date, or such other date AIF may
determine.
ARTICLE 2
THE REORGANIZATION
SECTION 2.1 Transfer of Assets, Issuance of Shares, and Assumption of
Liabilities. At the Effective Time, the Acquired Fund shall assign, sell,
convey, transfer, and deliver all of its Assets to the Custodian for the account
of the Acquiring Fund. In exchange therefor, the Acquiring Fund shall
(a) issue and deliver to the Acquired Fund the number of full and
fractional (to the third decimal place) (i) Class A Acquiring Fund's Shares
determined by dividing the Acquired Fund's Net Value attributable to the
Class A Acquired Fund's Shares by the net asset value per Class A Acquiring
Fund's Share, (ii) Class B Acquiring Fund's Shares determined by dividing
the Acquired Fund's Net Value attributable to the Class B Acquired Fund's
Shares by the net asset value per Class B Acquiring Fund's Share, and (iii)
Class C Acquiring Fund's Shares determined by dividing the Acquired Fund's
Net Value attributable to the Class C Acquired Fund's Shares by the net
asset value per Class C Acquiring Fund's Share, and
(b) assume all of the Liabilities.
Such transactions shall all take place at the Closing.
SECTION 2.2 Computation of Net Asset Value. (a) The net asset value per
share of each class of the Acquiring Fund's Shares and the Acquired Fund's Net
Value shall, in each case, be determined as of the Valuation Time.
(b) The net asset value per share of each class of the Acquiring Fund's
Shares shall be computed in accordance with the policies and procedures of the
Acquiring Fund as described in the AIF Registration Statement.
(c) The Acquired Fund's Net Value shall be computed in accordance with the
policies and procedures of the Acquired Fund as described in the AIF
Registration Statement.
(d) All computations of value pursuant to this Section 2.2 shall be made by
or under the direction of A I M Advisors, Inc.
(e) If, immediately before the Valuation Time, (i) the NYSE is closed to
trading or trading thereon is restricted or (ii) trading or the reporting of
trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the
Acquired Fund's Net Value and the net asset value per share of the Acquiring
Fund's Shares is impracticable, the Closing Date 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.
SECTION 2.3 Redemption Requests. The share transfer books of the Acquired
Fund will be permanently closed as of the Valuation Time, and only requests for
the redemption of the Acquired Fund's Shares received in proper form prior to
the Valuation Time shall be accepted by the Acquired Fund. Redemption requests
thereafter received by the Acquired Fund shall be deemed to be redemption
requests for the applicable class of the Acquiring Fund's Shares (assuming that
the transactions contemplated by this Plan have been consummated) to be
distributed to the Acquired Fund's Shareholders under this Plan.
SECTION 2.4 Delivery of Assets. (a) AIF shall instruct the Custodian, no
later than three Business Days preceding the Closing Date, to deliver the Assets
to the Acquiring Fund at the Effective Time, by transferring ownership of the
Assets from the Acquired Fund's account with the Custodian to the Acquiring
Fund's account therewith. The Custodian shall deliver at the Closing a
certificate of an authorized officer thereof stating that such delivery of the
Assets will be effectuated in accordance with such instructions.
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<PAGE> 31
(b) If delivery cannot be made in the manner contemplated by Section 2.4(a)
of securities held by the Acquired Fund that were purchased thereby but not yet
delivered to it or its broker or brokers by the Effective Time, then such
undelivered securities shall be credited to the Acquiring Fund's account with
the Custodian on such delivery.
SECTION 2.5 Dissolution. As soon as reasonably practicable after the
Closing Date, but no later than six months thereafter, the Acquired Fund's
status as a designated series of shares of AIF shall be terminated.
SECTION 2.6 Distribution of Acquiring Fund's Shares. At the Effective
Time, each Acquired Fund's Shareholder (a) holding Acquired Fund's Class A
Shares shall receive that number of full and fractional Acquiring Fund's Class A
Shares having an aggregate net asset value equal to the aggregate net asset
value of the Acquired Fund's Class A Shares held by such Acquired Fund's
Shareholder at the Effective Time, (b) holding Acquired Fund's Class B Shares
shall receive that number of full and fractional Acquiring Fund's Class B Shares
having an aggregate net asset value equal to the aggregate net asset value of
the Acquired Fund's Class B Shares held by such Acquired Fund's Shareholder at
the Effective Time, and (c) holding Acquired Fund's Class C Shares shall receive
that number of full and fractional Acquiring Fund's Class C Shares having an
aggregate net asset value equal to the aggregate net asset value of the Acquired
Fund's Class C Shares held by such Acquired Fund's Shareholder at the Effective
Time. (In each case, fractional shares shall be calculated to the third decimal
place.) All Acquired Fund's Shares shall thereupon be canceled on the books of
AIF. AIF shall provide instructions to the Funds' transfer agent with respect to
the Acquiring Fund's Shares to be issued to each Acquired Fund's Shareholder.
AIF shall record on its books the ownership of each class of Acquiring Fund's
Shares by Acquired Fund's Shareholders and shall forward a confirmation of such
ownership to each of them.
SECTION 2.7 Identification of Assets. AIF's fund accounting and pricing
agent shall deliver at the Closing a certificate of an authorized officer
thereof verifying that the information (including adjusted basis and holding
period, by lot) concerning the Assets, including all portfolio securities, as
reflected on the Acquiring Fund's books immediately following the Closing does
or will conform to such information on the Acquired Fund's books immediately
before the Closing.
SECTION 2.8 Discharge of Liabilities. The Acquired Fund shall use its
reasonable best efforts to discharge all of its known Liabilities, so far as may
be possible, prior to the Closing Date
SECTION 2.9 Transfer Taxes. Any transfer taxes payable upon issuance of
the Acquiring Fund's Shares in a name other than that of the registered holder
on the Acquired Fund's books of the Acquired Fund's Shares constructively
exchanged therefor shall be paid by the person to whom such Acquiring Fund's
Shares are to be issued, as a condition of such transfer.
ARTICLE 3
CONDITIONS PRECEDENT TO ACQUIRING FUND'S OBLIGATIONS
The Acquiring Fund's obligations hereunder shall be subject to satisfaction
of the following conditions at or before the Effective Time.
SECTION 3.1 Acquired Fund's Shares; Liabilities; Business Operations. (a)
AIF's management is unaware of any plan or intention of Acquired Fund's
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of their
Acquired Fund's Shares before the Reorganization to any person related (within
the meaning of Section 1.368-1(e)(3) of the Regulations) 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 the Acquiring
Fund.
(b) At the time of the Reorganization, the Acquired Fund shall not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any Person could acquire Acquired Fund's Shares, except
for the right of investors to acquire Acquired Fund's Shares at net asset value
in the ordinary course of its business as a series of an Open-End Investment
Company.
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<PAGE> 32
(c) From the date it commenced operations and ending on the Closing Date,
the Acquired Fund will have conducted its "historic business" (within the
meaning of Section 1.368-1(d)(2) of the Regulations) in a substantially
unchanged manner. In anticipation of the Reorganization, the Acquired Fund will
not dispose of Assets that, in the aggregate, will result in less than 50% of
its "historic business assets" (within the meaning of Section 1.368-1(d)(3) of
the Regulations) being transferred to the Acquiring Fund.
SECTION 3.2 Court Jurisdiction. The Acquired Fund 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.
SECTION 3.3 Concentration of Assets. Not more than 25% of the value of the
total Assets (excluding cash, cash equivalents, 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.
SECTION 3.4 Assets. The Acquired Fund has, and upon delivery of the Assets
the Acquiring Fund will receive, good and marketable title to all Assets, free
and clear of all Liens.
SECTION 3.5 RIC Status. The Acquired Fund is a "fund" as defined in
Section 851(g)(2) of the Code; it has elected to be a regulated investment
company under Subchapter M of the Code ("RIC") and has qualified for treatment
as such for each taxable year since inception that has ended prior to the
Closing date; it will continue to satisfy the requirements to maintain such
qualification for the period beginning on the first day of its current taxable
year and ending on the Closing Date; it shall invest the Assets at all times
through the Effective Time in a manner that ensures compliance with the
foregoing; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M did not apply to it.
SECTION 3.6 Dividend(s). On or before the Closing Date, AIF will declare
and pay to the Acquired Fund's shareholders a dividend or dividends that,
together with all previous such dividends, will have the effect of distributing
(a) all of the Acquired Fund's investment company taxable income (determined
without regard to any deductions for dividends paid) for the taxable year ended
October 31, 1999, and for the short taxable year beginning on November 1, 1999,
and ending on the Closing Date and (b) all of the Acquired Fund's net capital
gain recognized in such taxable years (after reduction for any capital loss
carryover).
SECTION 3.7 No Distribution. The Acquiring Fund's Shares are not being
acquired for the purpose of any distribution thereof, other than in accordance
with the terms of this Plan.
SECTION 3.8 Liabilities. The Liabilities were incurred by the Acquired
Fund in the ordinary course of business and are associated with the Assets.
SECTION 3.9 Shareholder Expenses. The Acquired Fund's Shareholders will
pay their own expenses, if any, incurred in connection with the Reorganization.
SECTION 3.10 Closing Certificate. An officer of AIF, in such person's
capacity as such officer and not as an individual, will prepare and deliver at
the Closing, on behalf of the Acquired Fund, a certificate, dated as of the
Closing Date, to the effect that the Acquired Fund has satisfied all conditions
specified in this Plan.
SECTION 3.11 Voting Requirements. The vote of a majority of the Acquired
Fund's Shares cast at a meeting at which a quorum is present (the "Required
Shareholder Vote") is the only vote of the holders of any class or series of
shares of beneficial interest in the Acquired Fund necessary to approve this
Plan and the transactions contemplated by this Plan.
SECTION 3.12 No Compensation to Certain Shareholders. None of the
compensation received by any Acquired Fund's Shareholder who is an employee of
or service provider to the Acquired Fund will be separate consideration for, or
allocable to, any of the Acquired Fund's Shares held by such shareholder; none
of the Acquiring Fund's 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.
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<PAGE> 33
SECTION 3.13 Liquidation of Portfolio Interest. At the time of adoption of
this Plan, the Acquired Fund owns virtually the entire beneficial interest in
the Portfolio, which is classified as a partnership, and is not a "publicly
traded partnership" (as defined in Section 7704(b) of the Code), for federal tax
purposes. Shortly before the Reorganization, the Acquiring Fund will liquidate
such interest and will receive from the Portfolio a distribution in kind of the
assets represented thereby.
ARTICLE 4
CONDITIONS PRECEDENT TO ACQUIRED FUND'S OBLIGATIONS
The Acquired Fund's obligations hereunder shall be subject to satisfaction
of the following conditions at or before the Effective Time.
SECTION 4.1 Registration of Acquiring Fund's Shares. (a) The Acquiring
Fund's Shares to be issued to the Acquired Fund pursuant to Section 2.1 and
distributed to the Acquired Fund's Shareholders pursuant to Section 2.6 shall,
on the Closing Date, be duly registered under the Securities Act by the AIF N-14
Registration Statement.
(b) The Acquiring Fund's Shares to be so issued and distributed are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the AIF
N-14 Registration Statement. At the Effective Time, the Acquiring Fund shall not
have outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any Person could acquire shares of beneficial
interest in the Acquiring Fund, except for the right of investors to acquire
such shares at net asset value in the normal course of its business as a series
of an Open-End Investment Company.
SECTION 4.2 Court Jurisdiction. The Acquiring Fund 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.
SECTION 4.3 RIC Status. The Acquiring Fund is a "fund" as defined in
Section 851(g)(2) of the Code; it has elected to be a RIC and has qualified for
treatment as such for each taxable year since inception that has ended prior to
the Closing Date; it will continue to satisfy the requirements to maintain such
qualification for its current taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did not
apply to it.
SECTION 4.4 Ownership of Acquired Fund's Shares. The Acquiring Fund does
not directly or indirectly own, nor at the Effective Time will it directly or
indirectly own, nor has it at any time during the past five years directly or
indirectly owned, any shares of the Acquired Fund.
SECTION 4.5 Reacquisition of Acquiring Fund's Shares. AIF has no plan or
intention to issue additional Acquiring Fund's Shares following the
Reorganization except for shares issued in the ordinary course of Acquiring
Fund's business as a series of an Open-End Investment Company; nor does AIF have
any plan or intention to redeem or otherwise reacquire any Acquiring Fund's
Shares issued pursuant to the Reorganization, except to the extent the Acquiring
Fund is required by the Investment Company Act to redeem any of its shares
presented for redemption at net asset value in the ordinary course of that
business.
SECTION 4.6 Disposition of Assets. The Acquiring Fund has no plan or
intention to sell or otherwise dispose of any of the Assets, other than in the
ordinary course of its business and to the extent necessary to maintain its
status as a RIC.
SECTION 4.7 Continuation of Acquired Fund's Business. Following the
Reorganization, the Acquiring Fund will continue the "historic business" (within
the meaning of Section 1.368-1(d)(2) of the Regulations) of the Acquired Fund
and use a significant portion of the Acquired Fund's "historic business assets"
(within the meaning of Section 1.368-1(d)(3) of the Regulations) in a business.
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<PAGE> 34
SECTION 4.8 Consideration. No consideration other than the Acquiring
Fund's Shares (and the Acquiring Fund's assumption of the Liabilities) will be
issued in exchange for the Assets in connection with the Reorganization.
SECTION 4.9 Closing Certificate. An officer of AIF, in such person's
capacity as such officer and not as an individual, will prepare and deliver at
the Closing, on behalf of the Acquiring Fund, a certificate, dated as of the
Closing Date, to the effect that the Acquiring Fund has satisfied all conditions
specified in this Plan.
SECTION 4.10 Post-Reorganization Transactions. There is no plan or
intention for the 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.
SECTION 4.11 Concentration of Assets. Immediately after the
Reorganization, (a) not more than 25% of the value of the 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.
ARTICLE 5
CONDITIONS PRECEDENT TO BOTH FUNDS' OBLIGATIONS
Each Fund's obligations hereunder shall be subject to satisfaction of the
following conditions at or before the Effective Time.
SECTION 5.1 Shareholder Vote. This Plan, the Reorganization, and related
matters shall have been approved and adopted at the Acquired Fund's Shareholders
Meeting by the shareholders of the Acquired Fund on the record date therefor by
the Required Shareholder Vote.
SECTION 5.2 Transfer of Assets. Pursuant to the Reorganization, the
Acquired Fund will transfer to the Acquiring Fund, and the 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 the Acquired Fund
immediately before the Reorganization. For these purposes, any assets used by
the Acquired Fund to pay the expenses it incurs in connection with the Plan and
the Reorganization and to effect all shareholder redemptions and
distributions -- except (a) redemptions pursuant to the Investment Company Act
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 -- after the date of this Plan will be included as
assets held by the Acquired Fund immediately before the Reorganization.
SECTION 5.3 Intercompany Indebtedness. There is no intercompany
indebtedness between the Funds that was issued or acquired, or will be settled,
at a discount.
SECTION 5.4 Value of Shares. The fair market value of the Acquiring Fund's
Shares to be received by each Acquired Fund's Shareholder will be approximately
equal to the fair market value of its Acquired Fund's Shares constructively
surrendered in exchange therefor.
SECTION 5.5 Value of Assets. The fair market value of the Assets on a
going concern basis will equal or exceed the sum of the Liabilities to be
assumed by the Acquiring Fund plus the Liabilities to which the Assets are
subject.
SECTION 5.6 Tax Opinion. AIF shall have received an opinion of Kirkpatrick
& Lockhart LLP ("Counsel"), addressed to and in form and substance satisfactory
to AIF, as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, Counsel may (i) assume satisfaction of
all the conditions set forth in Articles 3 through 5 (other than in this Section
5.6) and treat them as representations by AIF to Counsel and (ii) as to any
factual matters, rely exclusively and without independent verification on such
representations and any other representations made to Counsel by
I-7
<PAGE> 35
responsible officers of AIF. The Tax Opinion shall be substantially to the
effect that, based on the facts and assumptions stated therein, for federal
income tax purposes:
(a) The Acquiring Fund's acquisition of the Assets in exchange solely
for the Acquiring Fund's Shares and the Acquiring Fund's assumption of the
Liabilities, followed by the Acquired Fund's distribution of those shares
pro rata to the Acquired Fund's Shareholders constructively in exchange for
their Acquired Fund's 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;
(b) The Acquired Fund will recognize no gain or loss on the transfer
of the Assets to the Acquiring Fund in exchange solely for Acquiring Fund's
Shares and the Acquiring Fund's assumption of the Liabilities or on the
distribution of those shares to the Acquired Fund's Shareholders;
(c) The Acquiring Fund will recognize no gain or loss on its receipt
of the Assets in exchange solely for Acquiring Fund's Shares and its
assumption of the Liabilities;
(d) The Acquiring Fund's basis for the Assets will be the same as the
Acquired Fund's basis therefor immediately before the Reorganization, and
the Acquiring Fund's holding period for the Assets will include the
Acquired Fund's holding period therefor;
(e) An Acquired Fund's Shareholder will recognize no gain or loss on
the receipt of Acquiring Fund's Shares in constructive exchange for all its
Acquired Fund's Shares pursuant to the Reorganization; and
(f) An Acquired Fund's Shareholder's aggregate basis for the Acquiring
Fund's Shares received thereby in the Reorganization will be the same as
the aggregate basis for its Acquired Fund's Shares to be constructively
surrendered in exchange therefor, and its holding period for those
Acquiring Fund's Shares will include its holding period for those Acquired
Fund's Shares, provided the Acquired Fund's Shareholder held the Acquired
Fund's Shares as capital assets at the Effective Time.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Acquired Fund's 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.
SECTION 5.7 Expenses. Each Fund shall bear the expenses incurred by it or
on its behalf in connection with this Plan and the Reorganization and other
transactions contemplated hereby.
SECTION 5.8 Trust Authority. AIF is duly organized, validly existing, and
in good standing under the Delaware Business Trust Act (Del. Code Ann. title 12,
Section 3801 et seq. (1977)), with all requisite trust power and authority to
adopt this Plan and perform its obligations thereunder.
SECTION 5.9 No Control of Acquiring Fund. Immediately after the
Reorganization, the Acquired Fund's Shareholders will not own shares
constituting "control" (within the meaning of Section 304(c) of the Code) of the
Acquiring Fund.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Termination. AIF's trustees may terminate this Plan and
abandon the Reorganization at any time prior to the Closing Date if
circumstances develop that, in their judgment, make proceeding with the
Reorganization inadvisable for either Fund.
SECTION 6.2 Governing Law. This Plan shall be construed and interpreted
according to the laws of the State of Delaware applicable to contracts made and
to be performed wholly within such state; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
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<PAGE> 36
SECTION 6.3 Obligations of AIF and Others. AIF has adopted this Plan on
behalf of each Fund, and any amounts payable by AIF under or in connection with
this Plan shall be payable solely from the revenues and assets of the respective
Funds. No officer, trustee, or shareholder of AIF shall be personally liable for
the liabilities or obligations of AIF incurred hereunder.
I-9
<PAGE> 37
Appendix II
AIM DEVELOPING
MARKETS FUND
- -------------------------------------------------------------------------------
AIM Developing Markets Fund primarily seeks to provide long-term growth of
capital with a secondary objective of income, to the extent consistent
with seeking growth of capital.
PROSPECTUS AIM --Registered Trademark--
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 38
---------------------------
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-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 39
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is long-term growth of capital and its
secondary investment objective is income, to the extent consistent with seeking
growth of capital.
The fund seeks to meet these objectives by investing substantially all of its
assets in issuers in developing countries, i.e., those that are in the initial
stages of their industrial cycles. The fund will invest a majority of its assets
in equity securities, and may also invest in debt securities, of developing
countries. The fund considers issuers in "developing countries" to be those (1)
organized under the laws of a developing country or have a principal office in a
developing country; (2) that derive 50% or more, alone or on a consolidated
basis, of their total revenues from business in developing countries; or (3)
whose securities are trading principally on a stock exchange, or in an over-the-
counter market, in a developing country. The fund will normally invest in
issuers in at least four countries, but it will invest no more than 25% of its
assets in issuers in any one country. The fund also may hold no more than 40% of
its assets in any one foreign currency and securities denominated in or indexed
to such currency. The fund may invest in debt securities when economic and other
factors appear to favor such investments. The fund may also invest up to 100% of
its assets in lower-quality debt securities, i.e., "junk bonds."
The fund may invest up to 50% of its total assets in the following types of
developing market debt securities: (1) debt securities issued or guaranteed by
governments, their agencies, instrumentalities or political subdivisions, or by
government owned, controlled or sponsored entities, including central banks
(sovereign debt), and "Brady Bonds"; (2) interests in issuers organized and
operated for the purpose of restructuring the investment characteristics of
sovereign debt; (3) debt securities issued by banks and other business entities;
and (4) debt securities denominated in or indexed to the currencies of emerging
markets. Brady Bonds are debt restructurings that provide for the exchange of
cash and loans for newly issued bonds. There is no requirement with respect to
the maturity or duration of debt securities in which the fund may invest.
The portfolio managers focus on companies that have experienced above-average,
long-term growth in earnings and have excellent prospects for future growth. In
selecting countries in which the fund will invest, the portfolio managers also
consider such factors as the prospect for relative economic growth among
countries or regions, economic or political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is
permitted to invest more than 5% of its assets in the securities of any one
issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions, and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases may cause the price of a debt security to decrease. The longer a
bond's duration, the more sensitive it is to this risk. Junk bonds are less
sensitive to this risk than are higher-quality bonds.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
1
<PAGE> 40
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
These factors may affect the prices of securities issued by foreign companies
and governments located in developing countries more than those in countries
with mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social or economic
circumstances, some developing countries that issue lower-quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. The value of the fund's shares may vary more widely,
and the fund may be subject to greater investment and credit risk, than if the
fund invested more broadly.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 41
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Returns
- ----------- -------
<S> <C>
1995 .......................................................... -0.95%
1996 .......................................................... 23.59%
1997 .......................................................... -8.49%
1998 .......................................................... -35.32%
1999 .......................................................... 61.50%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
30.56% (quarter ended December 31, 1999) and the lowest quarterly return was
- -27.81% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 53.89% 2.20% (0.72)% 1/11/94
Class B 55.57 -- (1.31) 11/3/97
Class C -- -- -- 03/01/99
MSCI Emerging Markets Free Index(1) 66.41 2.00 0.38(2) 12/31/93(2)
- --------------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Emerging Markets Free Index
measures the performance of securities listed on the exchanges of 26
countries. The index excludes shares that are not readily purchased by
non-local investors.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 42
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
Redemption Fee
(as a percentage of
amount redeemed,
if applicable) None(2) None None
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are
deducted from fund
assets) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.36 1.00 1.00
Other Expenses
Other 1.03 0.99 0.99
Interest 0.01 0.01 0.01
Total Other Expenses 1.04 1.00 1.00
Total Annual Fund
Operating Expenses 2.38 2.98 2.98
Expense
Reimbursement(2) 0.47 0.47 0.47
Net Expenses 1.91 2.51 2.51
- -----------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Shares received as a result of the reorganization of AIM Eastern Europe Fund
into AIM Developing Markets Fund will be subject to a 2% redemption fee if
they are redeemed or exchanged before September 10, 2000.
(3) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) on Class A, Class B and Class C shares to 2.00%,
2.50% and 2.50%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $705 $1,182 $1,685 $3,062
Class B 801 1,221 1,767 3,159
Class C 401 921 1,567 3,299
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $705 $1,182 $1,685 $3,062
Class B 301 921 1,567 3,159
Class C 301 921 1,567 3,299
- ----------------------------------------------
</TABLE>
4
<PAGE> 43
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Limited (the subadvisor), an affiliate of the advisor,
is the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London, EC2M 4YR, England.
The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1967. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.51% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - William Barron, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1995.
- - John Cleary, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1998. From 1997 to 1998, he was Manager of a global markets fixed income fund
for West Merchant Bank Ltd. From 1993 to 1996, he was a portfolio manager for
Fischer Francis Trees and Watts. Mr. Cleary completed the investment
management program at the London Business School in 1996.
- - Christine Rowley, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Developing Markets Fund are subject to the
maximum of 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of income.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 44
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A(a)
-----------------------------------------------------------------------------
YEAR YEAR TEN MONTHS JANUARY 11,
ENDED ENDED ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
1999(a) 1998(a) 1997(b) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
Income from investment operations:
Net investment income 0.06 0.39(c)(d) 0.25 0.53 0.72 0.35
Net realized and unrealized gain (loss) on
investments 2.36 (5.10) (1.53) 2.19 (0.84) (2.46)
Net increase (decrease) from investment
operations 2.42 (4.71) (1.28) 2.72 (0.12) (2.11)
Redemption fees retained 0.03 0.28 -- -- -- --
Distributions to shareholders:
From net investment income (0.12) (0.60) -- (0.48) (0.72) (0.35)
From net realized gain on investments -- -- -- -- -- (0.10)
Total distributions (0.12) (0.60) -- (0.48) (0.72) (0.45)
Net asset value, end of period $ 9.86 $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
Total return(e) 33.11% (37.09)% (9.25)% 23.59% (0.95)% (14.07)%
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $157,198 $87,517 $457,379 $504,012 $422,348 $452,872
Ratio of net investment income to average net
assets:
With fee waivers 0.68%(f) 3.84% 2.03%(g) 4.07% 6.33% 2.75%(g)
Without fee waivers 0.21%(f) 3.43% 1.95%(g) 4.04% 6.30% 2.75%(g)
Ratio of expenses to average net assets
excluding interest expense:
With fee waivers 1.90%(f) 1.73% 1.75%(g) 1.82% 1.77% 2.01%(g)
Without fee waivers 2.37%(f) 2.14% 1.83%(g) 1.85% 1.80% 2.01%(g)
Ratio of interest expense to average net assets 0.01% 0.20% N/A N/A N/A N/A
Portfolio turnover rate 125% 111% 184%(g) 138% 75% 56%(g)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Prior to November 1, 1997 the Fund was known as G.T. Developing Markets
Fund, Inc. All capital shares issued and outstanding on October 31, 1997
were reclassified as Class A shares.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.04.
(d) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(e) Total return does not include sales charges and is not annualized for
periods less than one year.
(f) Ratios are based on average net assets of $123,758,642.
(g) Annualized.
N/A Not applicable.
6
<PAGE> 45
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999(a) 1998(a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 7.49 $ 12.56
Income from investment operations:
Net investment income 0.01 0.31(b)(c)
Net realized and unrealized gain (loss) on investments 2.37 (5.07)
Net increase (decrease) from investment operations 2.38 (4.76)
Redemption fees retained -- 0.28
Distributions to shareholders:
From net investment income (0.08) (0.59)
Net asset value, end of period $ 9.79 $ 7.49
Total return (d) 32.14% (39.76)%
- --------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $49,723 $ 154
Ratio of net investment income (loss) to average net assets:
With fee waivers 0.08%(e) 3.09%
Without fee waivers (0.39)%(e) 2.68%
Ratio of expenses to average net assets excluding interest
expense:
With fee waivers 2.50%(e) 2.48%
Without fee waivers 2.97%(e) 2.89%
Ratio of interest expense to average net assets 0.01% 0.20%
Portfolio turnover rate 125% 111%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Before reimbursement the net investment income per share would have been
reduced by $0.04.
(c)Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(d)Total return does not include sales charges and is not annualized for periods
less than one year.
(e)Ratios are based on average net assets of $35,727,260.
<TABLE>
<CAPTION>
CLASS C
----------------------
MARCH 1, 1999
TO OCTOBER 31, 1999(a)
- ------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 7.47
Income from investment operations:
Net investment income (loss) --
Net realized and unrealized gain (loss) on investments 2.32
Net increase (decrease) from investment operations 2.32
Redemption fees retained --
Distributions to shareholders:
From net investment income --
Net asset value, end of period $ 9.79
Total return (b) 31.06%
- ------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 412
Ratio of net investment income (loss) to average net assets:
With fee waivers 0.08%(c)
Without fee waivers (0.39)%(c)
Ratio of expenses to average net assets excluding interest
expense:
With fee waivers 2.50%(c)
Without fee waivers 2.97%(c)
Ratio of interest expense to average net assets 0.01%
Portfolio turnover rate 125%
- ------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Total return does not include sales charges and is not annualized for periods
less than one year.
(c)Ratios are annualized and based on average net assets of $208,934.
7
<PAGE> 46
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 47
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 48
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 49
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 50
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 51
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 52
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 53
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 54
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
- --Registered Trademark-- or your account, or wish to obtain free copies of the
fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
AIM Developing Markets Fund
SEC 1940 Act file number: 811-05426
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com DVM-PRO-1 INVEST WITH DISCIPLINE
--REGISTERED TRADEMARK--
<PAGE> 55
APPENDIX III
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND POSTS IMPRESSIVE RETURNS AS EMERGING
MARKETS REBOUND
EMERGING MARKETS RECORDED SOLID GAINS FOR THE FISCAL YEAR. HOW DID AIM
DEVELOPING MARKETS FUND PERFORM?
The strong showing of emerging markets boosted the fund's performance for the
fiscal year ended October 31, 1999. Excluding sales charges, total returns for
Class A and B shares were 33.11% and 32.14%, respectively. Advisor Class shares
posted gains of 33.62%.
Class C shares began sales on March 1, 1999, and had a cumulative total
return of 31.06%, excluding sales charges, through the end of the fiscal year.
The fund had $207.7 million in total net assets at the close of the fiscal
year, up from $87.7 million at the beginning of the 12-month reporting period.
AIM Eastern Europe Fund was merged into AIM Developing Markets Fund on September
10, 1999, and AIM Emerging Markets Fund was merged into AIM Developing Markets
Fund on February 12, 1999.
HOW DID EMERGING MARKETS FARE FOR THE FISCAL YEAR?
Overall, the performance of emerging markets was very strong. Investors shifted
more of their assets into stocks in developing markets as global economic
conditions improved. Markets in Asia led the way as the region recovered
impressively from the severe economic crisis of 1997-1998.
o Asia's rebound was the product of strong economic growth, improving
corporate earnings and rising consumer demand. Restructuring also helped to
fuel Asia's comeback. Countries such as Malaysia, South Korea and Taiwan,
which exerted the most effort to revamp their banking systems and stabilize
their currencies, enjoyed excellent stock-market performance. Asian markets
also benefited from lower inflation and declining interest rates.
o Latin American markets, led by Mexico and Brazil, also posted impressive
gains for the fiscal year. Mexico benefited from falling interest rates, a
stronger peso and a vibrant economy in the United States, its chief trading
partner. After Brazil moved quickly to resolve its currency crisis in
January, its stock markets soared. Investors gravitated to Brazilian stocks
because of their attractive valuations and the earnings-growth potential of
certain Brazilian companies.
o Other emerging markets that performed well included Greece, Israel, South
Africa and Turkey. Rising gold prices have helped boost South African stocks
while Israeli companies that transact much of their business in the United
States benefited from the strong U.S. economy.
WHAT CHANGES HAVE YOU MADE TO THE PORTFOLIO?
Between our last report on April 30, 1999, and the end of the fiscal year, we
shifted the fund's geographic focus from Latin America to Asia. We increased the
fund's exposure to such markets as Malaysia, South Korea and Taiwan while
reducing its exposure to Brazil and Mexico.
As far as sectors are concerned, the fund's focus remained on the stocks of
financial, consumer-service and basic material companies. As of October 31,
financial stocks comprised about 37% of the portfolio compared to 30% six months
earlier. Mid-and large-cap stocks formed the majority of the fund's holdings.
As of October 31, the fund had 134 holdings, 12 more than at the time of our
last report.
WHAT MADE ASIAN MARKETS ATTRACTIVE?
Several Asian nations, including Taiwan, appeared poised to benefit from the
improving global economy. Demand for semiconductors and computer components
remained strong, a positive development for Taiwan. Analysts did not expect the
severe earthquake that hit the country in September to have a dramatic impact on
the country's exports or economic growth. We also liked Malaysia because its
stocks were favorably priced and its currency appeared to be under-valued. We
were more cautious about South Korea, despite the impressive gains of its stock
market. The restructuring of several key conglomerates in South Korea needed to
be completed for the country's economic recovery to remain on track, according
to several analysts.
FUND PERFORMANCE IMPROVES
Total return, excluding sales charges
================================================================================
Class A Shares
- --------------------------------------------------------------------------------
98/99 37.09%
97/98 -33.11%
Class B Shares
98/99 32.14%
97/98 -39.76%
Advisor Class Shares
98/99 33.62%
97/98 -42.63%
*Performance of Class B shares and Advisor Class Shares is from inception,
11/3/97-10/31/98
================================================================================
GROWTH OF NET ASSETS
in millions
10/31/98 $ 87.7
10/31/99 $207.3
See important fund and index disclosures inside front cover.
AIM DEVELOPING MARKETS FUND
2
<PAGE> 56
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/99, based on total net assets
<TABLE>
<CAPTION>
=========================================================================================================================
TOP 10 INDUSTRIES TOP 10 EQUITY HOLDINGS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Telefonos de Mexico S.A. de C.V. "L" - ADR (Mexico) 2.31 1. Telephone 10.46%
2. PT Lippo Bank TBK (Indonesia) 2.03 2. Investment Management 8.26
3. Pohang Iron & Steel Co. Ltd. ADR (South Korea) 1.98 3. Banks (Regional) 5.86
4. Hindustan Lever Ltd. (India) 1.88 4. Banks (Major Regional) 5.69
5. Petroleo Brasileiro S.A.-Petrobras-Pfd (Brazil) 1.68 5. Electric Companies 3.96
6. Fomento Economico Mexicano, S.A. de C.V. - ADR (Mexico) 1.67 6. Banks (Money Center) 3.83
7. Telebras-ADR (Brazil) 1.64 7. Iron & Steel 3.18
8. Telekom Malaysia Berhad (Malaysia) 1.57 8. Electronics (Component Distributors) 2.79
9. Matv Rt.-ADR (Hungary) 1.53 9. Automobiles 2.40
10. Mahindra & Mahindra Ltd. (India) 1.50 10. Manufacturing (Diversified) 2.34
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
TOP 10 COUNTRIES
- --------------------------------------------------------------------------------
<S> <C>
1. Taiwan 14.79%
2. South Korea 12.31
3. Mexico 10.51
4. Brazil 10.14
5. South Africa 8.98
6. Malaysia 6.61
7. India 6.21
8. Israel 3.60
9. Greece 3.32
10. Turkey 3.27
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
================================================================================
</TABLE>
WHERE WAS YOUR EMPHASIS IN LATIN AMERICA?
Our focus was on Brazil and Mexico, the two largest markets in the region. In
Brazil, we anticipated a significant increase in corporate earnings as the
nation's economy continued to recover. We expected economic growth in Mexico to
remain healthy. We found other Latin American markets much less attractive
because of conditions bordering on recession and a lack of liquidity.
WHAT MARKETS DID YOU LIKE IN EUROPE, AFRICA AND THE MIDDLE EAST?
We increased the fund's exposure to South Africa, where stock prices were
relatively inexpensive. The country is a large exporter of commodities and it
was expected to benefit from improving economic conditions worldwide. Despite
their stellar performance, Greek stocks appeared to be overvalued, considering
the tepid earnings growth of companies in that country.
WHAT WERE SOME OF THE STOCKS THAT YOU LIKED?
o Telefonos de Mexico (Telmex) is Mexico's top telephone-service provider. It
is extending its business into Arizona, California and Texas, where it sells
phones to U.S. customers to connect them with their families in Mexico.
o PT Lippo Bank has more than 350 branches in 110 cities in Indonesia. It
offers a full range of services to more than 2.1 million individual and
corporate customers.
o Pohang Iron & Steel (POSCO) of South Korea is the world's top steel
producer. The company makes hot and cold rolled steel products.
o Hindustan Lever, India's largest company in terms of market capitalization,
offers home and personal care products, foods and beverages.
o Fomento Economico Mexicano is one of the largest beverage producers in Latin
America. The company also owns a convenience store chain and produces
packaging materials.
o Petroleo Brasileiro (PETROBRAS), Brazil's largest industrial company, is
involved in the exploration, production, refining, purchasing and
transporting of oil and gas products.
o Telekom Malaysia provides telecommunications services to 4.2 million
subscribers.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
As 2000 approaches, we remain cautiously optimistic about emerging markets. If
global economic conditions continue to improve, we believe emerging markets will
become increasingly attractive to investors. Many emerging-markets stocks are
favorably priced in comparison to stocks in more developed markets. Moreover,
the economic fundamentals in many emerging markets are on firmer ground than
they were at the outset of the fiscal year. However, we expect emerging markets
to remain volatile as they tend to be more sensitive to socioeconomic and
political developments than more established markets.
See important fund and index disclosures inside front cover.
AIM DEVELOPING MARKETS FUND
3
<PAGE> 57
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM DEVELOPING MARKETS FUND VS. BENCHMARK INDEX
1/11/94-10/31/99
In thousands
================================================================================
AIM Developing
Markets Fund, MSCI Emerging
Class A Shares Markets Free Index
- --------------------------------------------------------------------------------
1/94 9613 10182
10/94 9194 10631
10/95 7664 8565
10/96 9581 9121
10/97 9092 8347
10/98 5720 5761
10/99 7614 8331
Past performance cannot guarantee comparable future results.
================================================================================
ABOUT THIS CHART
The chart compares your fund's Class A shares to a benchmark index. It is
intended to give you a general idea of how your fund performed compared to the
stock market over the period 1/11/94- 10/31/99. (Please note that index
performance is from 12/31/94-10/31/99). It is important to understand the
difference between your fund and an index. An index measures the performance of
a hypothetical portfolio, in this case the Morgan Stanley Capital International
(MSCI) Emerging Markets Free Index. An index is not managed, incurring no sales
charges, expenses or fees. If you could buy all the securities that make up a
particular index, you would incur expenses that would affect the return on your
investment.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/99, including sales charges
================================================================================
CLASS A SHARES
Inception (1/11/94) -4.59%
5 years -4.63
1 year 26.71
CLASS B SHARES
Inception (11/3/97) -12.52%
1 year 27.14
CLASS C SHARES
Inception (3/1/99) 30.06%*
* Cumulative total return that has not been annualized.
ADVISOR CLASS SHARES*
Inception (11/3/97) -9.92%
1 year 33.62*
* Advisor Class Shares were closed to new investors on March 1, 1999.
Source: Lipper, Inc.
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
For fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover. The performance of Class B and C
shares and Advisor Class shares will differ from that of Class A shares due to
differing fees and expenses.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM DEVELOPING MARKETS FUND
4
