<PAGE> 1
[COVER IMAGE]
AIM
ADVISOR INTERNATIONAL VALUE FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31 1998
INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 2
[COVER IMAGE]
-------------------------------------
TRADER GEORG (GISZE), 1532
BY HANS HOLBEIN THE YOUNGER, BAVARIAN (1497-1543)
THIS PAINTING DEPICTS A GERMAN MERCHANT IN LONDON, PRESUMABLY
ON SOME KIND OF BUSINESS VENTURE. THE VARIOUS ITEMS SURROUNDING
HIM--LEDGERS AND LISTS, FOREIGN COINS, ORNAMENTAL AND EXOTIC-
LOOKING OBJECTS--CALL TO MIND HIS TRAVELS IN SUPPORT OF HIS PRO-
FESSION. TRADERS SUCH AS GEORG FORMED THE BASIS OF THE GLOBAL
MARKETPLACE AS WE KNOW IT, ALLOWING COMPANIES SUCH AS THOSE IN
WHICH THIS FUND INVESTS TO BE OPEN TO THE TRADERS OF TODAY.
-------------------------------------
AIM Advisor International Value Fund is for shareholders who seek long-term
growth of capital by investing in large, high-quality, non-U.S. companies.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor International Value Fund performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed at net asset
value without a sales charge.
o During the fiscal year ended 12/31/98, the Fund paid distributions of
$0.0952 per share for Class A shares, and $0.0002 per share for Class B and
Class C shares.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differences in sales charge structure and
class expenses.
o Because Class B shares have been offered for less than one year (since
3/3/98), all total return figures for Class B shares reflect cumulative
total return that has not been annualized.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the Fund's foreign holdings, differences in
accounting, political risks, and the lesser degree of public information
required to be provided by non-U.S. companies.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The EAFE--Registered Trademark-- (Europe, Australasia, and the Far East)
Index is a group of unmanaged foreign securities tracked by Morgan Stanley
Capital International.
o The unmanaged Lipper International Fund Index represents an average of the
performance of the 30 largest international mutual funds. It is compiled by
Lipper, Inc., an independent mutual funds performance monitor. Results shown
reflect reinvestment of dividends.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
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. THERE IS A RISK
THAT YOU COULD LOSE A PORTION OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
AIM ADVISOR INTERNATIONAL VALUE FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
As the fiscal year opened, markets were recovering from the
[PHOTO OF concerns produced by financial crises in Asia during 1997,
Charles T. and this optimism early in 1998 led several market indexes to
Bauer, all-time highs in spring and early summer. However, the year
Chairman of was to bring two particularly serious financial shocks, first
the Board of the debt default by Russia, and later the gathering crisis in
THE FUND Brazil, which devalued its currency shortly after the fiscal
APPEARS HERE] year closed. The result was another year of significant
market volatility.
Optimism yielded to pessimism over the summer as global
financial crises precipitated a worldwide loss of confidence
that affected even previously high-flying U.S. blue chips and
market-leading European stocks. The deep market correction
bolstered U.S. Treasury issues, whose safety attracts
investors in doubtful times.
Beginning in late September, the U.S. Federal Reserve
Board intervened to pump liquidity and confidence into markets. Numerous
interest rate cuts in other countries followed. Investors responded favorably,
and by year end, equities were again rallying. Of course, not all markets
rebounded into positive territory. Europe and the U.S. regained their market
leadership, but investors in most emerging markets suffered serious financial
loss over the year.
HOW SHOULD INVESTORS RESPOND?
We understood how unnerving 1998's level of volatility could have been. Our
repeated message to you is to keep a long-term outlook on investments rather
than responding to short-term fluctuations. And we are pleased to note that most
mutual fund shareholders remained cool headed and did not pull out of the
markets during 1998. In the end, most were rewarded for their long-term
perspective.
In view of recent volatility and the divergent performance of market
sectors, this may be a very good time to meet with your financial consultant to
review your current asset allocation and the diversification of your portfolio.
Broad portfolio diversification remains one of the most fundamental principles
of investing, along with long-term thinking and realistic expectations.
YOUR FUND MANAGERS' COMMENTS
On the pages that follow, your Fund's managers, experienced professionals
who have weathered previous periods of market turbulence, offer more detailed
discussion of how markets behaved, how they managed the portfolio in light of
recent volatility, and what they foresee for markets and your Fund. We hope you
find their discussion informative.
YEAR 2000 CONCERN
Many of our shareholders have asked us about AIM's year 2000 readiness
status. We appreciate these concerns, and we take the year 2000 issue seriously.
AIM has devoted considerable effort to creating a comprehensive plan for
assessing, correcting and testing our in-house systems. We will also participate
in an industrywide testing effort scheduled to begin in March. But no matter how
well we prepare and test, no one can know for sure what the year 2000 will
bring. Our industry's systems are connected in complex ways to many third
parties, and there may be unforeseen problems when the year 2000 actually
arrives. Though we cannot predict what all those problems might be, we are
working with our business recovery team to develop contingency plans appropriate
for a variety of year 2000 scenarios.
We are pleased to send you this report on your Fund's fiscal year. If you
have any questions or comments, please contact our Client Services department at
800-959-4246, or e-mail your inquiry to us at [email protected]. You can
access information about your account through our AIM Investor Line at
800-246-5463 or at our Web site, www.aimfunds.com. We often post market updates
on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
-------------------------------------
. . . WE ARE PLEASED
TO NOTE THAT MOST
MUTUAL FUND
SHAREHOLDERS REMAINED COOL HEADED AND
DID NOT PULL OUT OF THE MARKETS DURING 1998.
-------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
EUROPEAN STOCKS HELP FUND RIDE OUT
VOLATILE MARKETS
MARKETS AROUND THE WORLD EXPERIENCED RECORD VOLATILITY DURING THE YEAR. HOW DID
AIM ADVISOR INTERNATIONAL VALUE FUND PERFORM?
It was an unsettling year in the stock market, particularly for international
investors. But the Fund was able to endure a severe market correction and finish
strongly. For the fiscal year ended December 31, 1998, Class A shares posted a
total return of 11.20% and Class C shares finished at 10.38%. Class B shares,
which had their inception on March 3, 1998, produced a cumulative total return
of 1.67% through the end of the fiscal year. The Fund closely tracked the Lipper
International Fund Index, which returned 12.66% for the fiscal year.
Growth stocks outperformed value stocks in 1998, which is why the more
growth-oriented EAFE Index finished the fiscal year ahead of the Fund with a
total return of 20.00%. However, as the following pages will show you, the Fund
consistently outperforms the EAFE Index over the long term.
WHAT WERE THE MAJOR THEMES IN THE STOCK MARKET DURING THE FISCAL YEAR?
The bull market in the United States and Europe charged on during the first part
of 1998, then screeched to an abrupt halt in the summer. Major indexes that
reached all-time highs in July plummeted by nearly 20% in August. A number of
events converged to create the sharp downturn. Currency devaluations occurred in
Thailand, Malaysia, Indonesia and Korea. A lingering recession gripped Japan,
exacerbated by a proliferation of bad loans in the banking system. Crippled by
overwhelming debt, Russia effectively defaulted on much of its government debt,
and the ruble suffered deep currency devaluation. Fears of a global credit
crunch then spread to Latin America, as investors worried that Brazil could not
sustain its exchange rate in light of the country's increasing debt.
In an attempt to calm the nerves of investors who were shifting their money
from equity markets to any security considered liquid--a worldwide flight to
quality--the U.S. Federal Reserve Board (the Fed) cut the federal funds rate by
0.25% in September. Few people were assuaged by the action. Two weeks later, in
an unusual inter-meeting move, the Fed lowered the federal funds rate and the
discount rate by 0.25%, and a fierce market rally ensued. Both rates were
lowered by 0.25% again in November.
Also contributing to the market rally were Japan's announcement of an
extensive bank rescue package, approval by the International Monetary Fund of a
large bailout package to shore up Brazil, and easing of monetary policy by the
11 European countries adopting the euro as their new common currency starting in
January 1999. By the close of the fiscal year, markets were enjoying relative
equilibrium.
WHAT MARKET FACTORS AFFECTED THE FUND'S PERFORMANCE?
With Europe as the largest regional exposure in the Fund, the continued solid
performance of those markets, particularly those participating in European
Economic and Monetary Union (EMU), helped the Fund during the worst of the
market's volatility. We had limited exposure to Asia and emerging markets, which
was positive for the Fund because those markets are still recovering. The
portfolio has also been underweight in the largest continental European markets
because it is hard to find value there.
WHY DO YOU REMAIN SO ENTHUSIASTIC ABOUT EUROPE?
We continue to be positive about Europe because of the favorable interest rate
environment, the coming EMU, and the opportunities for consolidation in some of
the fragmented industries like telephone and banking. Another plus in Europe is
price--European equities are trading at much lower valuations than U.S. stocks,
although the gap is starting to narrow.
The debut of Europe's brand new currency, the euro, went very smoothly on
January 1, 1999. At first, only 11 countries will adopt the euro: Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, and Spain. These countries have met the financial and economic
criteria required for membership in EMU, and they have agreed to follow certain
monetary, exchange rate, and budgetary policies.
The euro is expected to bring greater unity to the European business world.
Price comparison of goods, services and labor across Europe may be much easier.
Because of this "price transparency," European companies may be forced to become
more competitive. An increase in merger and acquisition activity is also
expected. Equity markets are likely to become broader and more liquid because
European companies may find it easier to attract capital across borders.
-------------------------------------
WE HAD LIMITED EXPOSURE TO ASIA AND
EMERGING MARKETS, WHICH WAS POSITIVE
FOR THE FUND BECAUSE THOSE MARKETS
ARE STILL RECOVERING.
-------------------------------------
See important Fund and index disclosures inside front cover.
AIM ADVISOR INTERNATIONAL VALUE FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
The changeover to euro will take place gradually. New coins and paper
currency will not be issued until January 2002. Until then, Spanish shoppers
will still use pesetas and the French will still use francs, but these will be
thought of simply as denominations of the euro--the same way that a quarter is a
denomination of a dollar.
The introduction of a new currency can present unique risks and
uncertainties for investors. Please see your prospectus and statement of
additional information for more information about currency risk factors.
WHAT SECTORS PERFORMED WELL FOR THE FUND?
Our top sectors included financials, 20.8%; consumer staples, 15.5%;
communication services, 11.7%; and health care, 11.4%. In general, European
banks and telecommunications companies have posted solid results. Banks we have
liked include Italy's largest commercial bank, Instituto Bancario San Paolo di
Torino, and French bank Societe Generale, which was a top performer in the
fourth quarter of 1998. We also found value in Takefuji Corp., Japan's largest
consumer-finance company.
Europe's telecom industry has seen a wave of deregulation bring increased
competition into many countries. Some companies, like Italy's Telecom Italia,
have responded by branching out into satellite and digital television services.
Others, like the United Kingdom's dominant telephone company British
Telecommunications, have formed alliances with companies in other countries to
increase their market share.
Other companies we have liked include Dutch food producer and distributor
Unilever, Spanish electric company Endesa, and pharmaceutical companies Astra
from Sweden and Novartis from Switzerland.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
Volatility will probably remain high due to the uncertain outlook for corporate
profits coupled with the weakness in smaller markets. Oversupply due to the
slowing of the world's economies resulted in commodity price weakness and a lack
of pricing power for goods. In order to continue to enhance shareholder value,
merger and acquisition activity has increased dramatically and will probably
continue at a steady pace. Many analysts also expect Asian markets to hit bottom
in mid to late 1999, and there is clearly added risk until those markets
stabilize.
Because of our bottom-up investment style that focuses on individual
companies, we do not target countries or industries for investment. However, we
have consistently found value in the food and beverage, utility, and oil and gas
sectors. We remain committed to our disciplined approach of seeking undervalued
and out-of-favor stocks, and we are confident that the international markets
will continue to offer good value.
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================================
Top 10 Holdings Top 10 Industries Top 10 Countries
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. British Telecommunications PLC 1. Foods 11.49% 1. United Kingdom 21.44%
(United Kingdom) 3.31%
2. Endesa S.A.-ADR (Spain) 3.14 2. Telephone 11.15 2. Japan 10.44
3. Unilever N.V. (Netherlands) 3.01 3. Oil (International Integrated) 8.58 3. Spain 9.69
4. Novartis A.G.-ADR (Switzerland) 2.86 4. Health Care (Drugs--Major Pharmaceuticals) 8.01 4. Netherlands 9.01
5. Instituto Bancario San Paolo 5. Banks (Money Center) 7.21 5. Germany 7.79
di Torino-ADR (Italy) 2.85
6. Telecom Italia S.p.A.-ADR (Italy) 2.84 6. Electric Companies 7.14 6. Italy 7.27
7. Astra A.B.-ADR (Sweden) 2.78 7. Banks (Major Regional) 5.44 7. France 6.28
8. HSBC Holdings PLC-ADR 8. Banks (Regional) 3.90 8. Australia 5.73
(United Kingdom) 2.71
9. Carlton Communications 9. Chemicals (Diversified) 3.75 9. Switzerland 5.23
PLC-ADR(United Kingdom) 2.60
10. Societe Generale-ADR (France) 2.59 10. Manufacturing (Diversified) 3.74 10. Denmark 4.13
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
===================================================================================================================================
</TABLE>
-------------------------------------
WE ARE CONFIDENT THAT THE
INTERNATIONAL MARKETS WILL
CONTINUE TO OFFER GOOD VALUE.
-------------------------------------
See important Fund and index disclosures inside front cover.
AIM ADVISOR INTERNATIONAL VALUE FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ADVISOR INTERNATIONAL VALUE FUND VS. BENCHMARK INDEXES
5/1/95-12/31/98
- -------------------------------------------------------------------------------
AIM Advisor
International
Value Fund, Lipper International
Class C Shares EAFE Index Fund Index
- -------------------------------------------------------------------------------
In thousands
5/1/95 $10,000.00 $10,000.00 $10,000.00
6/30/95 10,215.00 9,713.00 10,137.00
9/30/95 10,560.00 10,125.00 10,689.00
12/31/95 11,128.00 10,543.00 10,883.00
3/31/96 11,690.00 10,856.00 11,362.00
6/30/96 12,069.00 11,036.00 11,826.00
9/30/96 12,299.00 11,030.00 11,835.00
12/31/96 13,463.00 11,214.00 12,453.00
3/31/97 13,523.00 11,046.00 12,761.00
6/30/97 15,428.00 12,488.00 14,190.00
9/30/97 15,829.00 12,408.00 14,462.00
12/31/97 15,210.00 11,445.00 13,355.00
3/31/98 17,380.00 13,137.00 15,347.00
6/30/98 17,390.00 13,285.00 15,467.00
9/30/98 14,487.00 11,405.00 13,027.00
12/31/98 16,790.00 13,627.00 15,046.00
Past Performance is no guarantee of comparable future results.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/98, including sales charges
CLASS C SHARES
Inception (5/1/95) 15.17%
3 years 14.70
1 year 9.38*
CLASS A SHARES
Inception (12/31/96) 9.37%
1 year 5.10**
CLASS B SHARES
Inception (3/3/98) -3.33%***
*10.38%, excluding sales charges
**11.20%, excluding sales charges
***1.67%, excluding sales charges.
Total return provided is cumulative total return that has not been annualized.
Sources: Towers Data Systems HYPO--Registered Trademark--, Bloomberg.
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of the Fund's Class C shares will differ from Class A and
Class B shares due to differing fees and expenses. For fund data performance
calculations and descriptions of indexes cited in this page, please refer to the
inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
ABOUT THIS CHART
The chart compares your Fund to benchmark indexes. An index measures
performance of a hypothetical portfolio. It is important to understand
differences between your Fund and these indexes. Your Fund's total return is
shown with a sales charge and includes Fund expenses and management fees. A
market index such as the EAFE Index is not managed, incurring no sales charges,
expenses, or fees. If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return.
An index of funds such as the Lipper International Fund Index includes a
number of mutual funds grouped by investment objective. Each of those funds
interprets that objective differently, and each employs a different management
style and investment strategy. Use of these indexes is intended to give you a
general idea of how your Fund performed compared to the stock market. Please
note that the results of these indexes are for the period 4/30/95-12/31/98.
AIM ADVISOR INTERNATIONAL VALUE FUND
4
<PAGE> 7
ANNUAL REPORT / FOR CONSIDERATION
WHY STAYING FULLY INVESTED
HAS BEEN THE WISEST COURSE
When the stock market turns volatile, many investors feel the impulse to
pull their money out of mutual funds. The question then becomes when to get back
in. Trying to guess the answer could be very costly.
No one, not even expert market watchers, can consistently predict what the
market will do next. That's why AIM funds stay fully invested even in a down
market, and we encourage investors to do the same.
For long-term investing, the stock market historically has offered the
highest returns. For example, the Standard & Poor's Composite Index of 500
Stocks (S&P 500) has reported an annualized total return of 13.579% for the 50
years ending December 31, 1998. Those were five decades of wars, recessions, and
political upheaval.
If you pull your money out whenever markets decline, you could miss some of
the market's best days. In August 1998, investors withdrew $11 billion from U.S.
mutual funds. Chances are, many of those investors did not put their money back
into the market in time for the October rally. In fact, October 1998 turned out
to be the strongest month for the Dow Jones Industrial Average in 11 years.
For international investors, here's another way to look at market timing: If
you had invested a hypothetical $10,000 in the Europe, Australasia, and Far East
Index tracked by Morgan Stanley Capital International on December 31, 1978, your
money would have grown to $118,674 by December 31, 1998. That's an average
annual total return of 13.17%. But suppose that during that 20-year period,
there were times when you decided to get out of the market. If you missed the
market's two best months, your return would have fallen to 11.72%, and your
investment would be worth $90,020. If you had missed the market's five best
months, your return would have dropped to 10.00% and your investment would be
worth $64,624.
The more you try to time the market, the greater your chances of missing its
biggest single-day gains. Keep focused on your financial goals and remember that
time, not timing, is key to successful investing. Now may be a good time to
visit your financial advisor to talk about your portfolio. Remember:
o think long-term
o diversify your investments
o avoid market timing
o maintain realistic expectations
PENALTY FOR MISSING THE MARKET
MSCI EAFE INDEX
Average annual total returns, 20 years ended 12/31/98
FULLY INVESTED 240 MONTHS 13.17%
MISS THE 2 BEST MONTHS 11.72%
MISS THE 5 BEST MONTHS 10.00%
MISS THE 7 BEST MONTHS 8.92%
MISS THE 9 BEST MONTHS 7.87%
MISS THE 14 BEST MONTHS 5.43%
The EAFE--Registered Trademark-- (Europe, Australasia, and the Far East) Index
is a group of unmanaged foreign securities. The index is compiled by Morgan
Stanley Capital International. Source: Lipper, Inc.
AIM ADVISOR INTERNATIONAL VALUE FUND
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS-95.70%
ARGENTINA-1.62%
YPF Sociedad Anonima-ADR
(Oil-International Integrated) 80,000 $ 2,235,000
- -------------------------------------------------------------
AUSTRALIA-5.73%
National Australia Bank Ltd.-ADR
(Banks-Regional) 45,000 3,349,688
- -------------------------------------------------------------
News Corp. Ltd. (The)
(Publishing-Newspapers) 400,000 2,640,238
- -------------------------------------------------------------
Rio Tinto Ltd.-ADR (Metals Mining) 40,000 1,899,456
- -------------------------------------------------------------
7,889,382
- -------------------------------------------------------------
DENMARK-4.13%
Den Danske Bank-ADR (Banks-Money
Center) 25,000 3,358,552
- -------------------------------------------------------------
Novo-Nordisk A.S.-ADR (Health
Care-Drugs-Major Pharmaceuticals) 35,000 2,327,500
- -------------------------------------------------------------
5,686,052
- -------------------------------------------------------------
FRANCE-6.28%
Elf Aquitaine S.A.-ADR
(Oil-International Integrated) 30,000 1,698,750
- -------------------------------------------------------------
Groupe Danone-ADR (Foods) 60,000 3,375,000
- -------------------------------------------------------------
Societe Generale (Banks-Major
Regional) 110,000 3,564,264
- -------------------------------------------------------------
8,638,014
- -------------------------------------------------------------
GERMANY-7.79%
BASF A.G.-ADR (Chemicals-Diversified) 75,000 2,863,972
- -------------------------------------------------------------
Bayer A.G.-ADR
(Chemicals-Diversified) 55,000 2,296,729
- -------------------------------------------------------------
Deutsche Bank A.G.-ADR (Banks-Money
Center) 48,000 2,825,784
- -------------------------------------------------------------
RWE A.G.-ADR
(Manufacturing-Diversified) 50,000 2,739,385
- -------------------------------------------------------------
10,725,870
- -------------------------------------------------------------
ITALY-7.27%
ENI S.p.A.-ADR (Oil-International
Integrated) 32,000 2,168,000
- -------------------------------------------------------------
Istituto Bancario San Paolo di
Torino-ADR (Banks-Major
Regional)(a) 109,725 3,922,669
- -------------------------------------------------------------
Telecom Italia S.p.A.-ADR (Telephone) 45,000 3,915,000
- -------------------------------------------------------------
10,005,669
- -------------------------------------------------------------
JAPAN-10.44%
Canon, Inc.-ADR (Office Equipment &
Supplies) 75,000 1,612,500
- -------------------------------------------------------------
Dai Nippon Printing Co., Ltd.-ADR
(Specialty Printing) 11,000 1,757,323
- -------------------------------------------------------------
Fuji Photo Film-ADR
(Photography/Imaging) 50,000 1,831,250
- -------------------------------------------------------------
Hitachi Ltd.-ADR
(Manufacturing-Diversified) 20,000 1,208,750
- -------------------------------------------------------------
Kirin Brewery Co., Ltd.-ADR
(Beverages-Alcoholic) 23,000 2,846,250
- -------------------------------------------------------------
Kyocera Corp.-ADR
(Beverages-Alcoholic) 28,000 1,454,250
- -------------------------------------------------------------
Nintendo Co. Ltd. (Leisure
Time-Products) 25,000 2,411,931
- -------------------------------------------------------------
Takefuji Corp.
(Financial-Diversified) 17,000 1,241,370
- -------------------------------------------------------------
14,363,624
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO-0.71%
Telefonos de Mexico S.A.-ADR
(Telephone) 20,000 $ 973,750
- -------------------------------------------------------------
NETHERLANDS-9.01%
Akzo Nobel N.V.-ADR (Chemicals) 60,000 2,677,500
- -------------------------------------------------------------
ING Groep N.V.-ADR
(Insurance-Life/Health) 55,000 3,420,313
- -------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares (Oil-International
Integrated) 45,000 2,154,375
- -------------------------------------------------------------
Unilever N.V. (Foods) 50,000 4,146,875
- -------------------------------------------------------------
12,399,063
- -------------------------------------------------------------
NORWAY-0.87%
Norsk Hydro A.S.A.-ADR
(Manufacturing-Diversified) 35,000 1,196,562
- -------------------------------------------------------------
PORTUGAL-1.78%
Portugal Telecom S.A.-ADR (Telephone) 55,000 2,454,375
- -------------------------------------------------------------
SPAIN-9.69%
Banco Santander S.A.-ADR
(Banks-Regional) 102,000 2,014,500
- -------------------------------------------------------------
Endesa S.A.-ADR (Electric Companies) 160,000 4,320,000
- -------------------------------------------------------------
Repsol S.A.-ADR (Oil-International
Integrated) 65,000 3,550,625
- -------------------------------------------------------------
Telefonica S.A.-ADR (Telephone) 25,500 3,452,062
- -------------------------------------------------------------
13,337,187
- -------------------------------------------------------------
SWEDEN-3.71%
Astra A.B.-ADR (Health
Care-Drugs-Major Pharmaceutical) 185,000 3,827,187
- -------------------------------------------------------------
Volvo A.B.-ADR (Automobiles) 55,000 1,282,188
- -------------------------------------------------------------
5,109,375
- -------------------------------------------------------------
SWITZERLAND-5.23%
Nestle S.A.-ADR (Foods) 30,000 3,265,428
- -------------------------------------------------------------
Novartis A.G.-ADR (Health
Care-Diversified) 40,000 3,931,620
- -------------------------------------------------------------
7,197,048
- -------------------------------------------------------------
UNITED KINGDOM-21.44%
Associated British Foods PLC-ADR
(Foods) 300,000 2,800,200
- -------------------------------------------------------------
British Airways PLC-ADR (Airlines) 33,000 2,237,813
- -------------------------------------------------------------
British Telecommunications PLC
(Telephone) 30,000 4,550,625
- -------------------------------------------------------------
Carlton Communications PLC-ADR
(Electrical Equipment) 78,000 3,578,250
- -------------------------------------------------------------
Glaxo Wellcome PLC-ADR (Health
Care-Drugs-Major Pharmaceuticals) 50,000 3,475,000
- -------------------------------------------------------------
HSBC Holdings PLC-ADR (Banks-Money
Center) 15,000 3,736,921
- -------------------------------------------------------------
PowerGen PLC-ADR (Electric Companies) 55,000 2,942,500
- -------------------------------------------------------------
Scottish Power PLC (Electric
Companies) 250,000 2,565,558
- -------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
SmithKline Beecham PLC-ADR (Health
Care-Drugs-Major Pharmaceuticals) 20,000 $ 1,390,000
- -------------------------------------------------------------
Unigate PLC (Foods) 310,000 2,233,344
- -------------------------------------------------------------
29,510,211
- -------------------------------------------------------------
Total Foreign Stocks (Cost
$101,385,402) 131,721,182
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-4.29%(b)
SBC Warburg Dillon Read Inc.,
4.75%, 01/04/99(c) (Cost
$5,913,111) $5,913,111 $ 5,913,111
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.99% 137,634,293
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.01% 17,635
- --------------------------------------------------------------
NET ASSETS-100.00% $137,651,928
- --------------------------------------------------------------
</TABLE>
Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$107,298,513) $137,634,293
- ---------------------------------------------------------
Foreign currencies, at value (cost $21,310) 19,060
- ---------------------------------------------------------
Receivables for:
Capital stock sold 136,224
- ---------------------------------------------------------
Interest and dividends 364,816
- ---------------------------------------------------------
Investment for deferred compensation plan 6,044
- ---------------------------------------------------------
Total assets 138,160,437
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 119,578
- ---------------------------------------------------------
Deferred compensation plan 6,044
- ---------------------------------------------------------
Accrued advisory fees 114,615
- ---------------------------------------------------------
Accrued operating services fees 28,263
- ---------------------------------------------------------
Accrued distribution fees 237,507
- ---------------------------------------------------------
Accrued directors' fees and expenses 2,502
- ---------------------------------------------------------
Total liabilities 508,509
- ---------------------------------------------------------
Net assets applicable to shares outstanding $137,651,928
- ---------------------------------------------------------
NET ASSETS:
Class A $ 28,280,585
=========================================================
Class B $ 4,288,637
=========================================================
Class C $105,082,706
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 1,707,161
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 260,201
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 6,377,274
=========================================================
Class A:
Net asset value and redemption price per
share $ 16.57
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $16.57
divided by 94.50%) $ 17.53
=========================================================
Class B:
Net asset value and offering price per
share $ 16.48
=========================================================
Class C:
Net asset value and offering price per
share $ 16.48
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $393,010 foreign
withholding tax) $ 2,707,231
- --------------------------------------------------------
Interest 270,056
- --------------------------------------------------------
Total investment income 2,977,287
- --------------------------------------------------------
EXPENSES:
Advisory fees 1,238,568
- --------------------------------------------------------
Operating services fees 554,160
- --------------------------------------------------------
Distribution fees-Class A 58,205
- --------------------------------------------------------
Distribution fees-Class B 19,718
- --------------------------------------------------------
Distribution fees-Class C 1,052,550
- --------------------------------------------------------
Directors' fees and expenses 8,026
- --------------------------------------------------------
Total expenses 2,931,227
- --------------------------------------------------------
Less: Fees waived by advisor (180,746)
- --------------------------------------------------------
Net expenses 2,750,481
- --------------------------------------------------------
Net investment income 226,806
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (5,464,277)
- --------------------------------------------------------
Foreign currencies (29,923)
- --------------------------------------------------------
(5,494,200)
- --------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 15,277,088
- --------------------------------------------------------
Foreign currencies (1,740)
- --------------------------------------------------------
15,275,348
- --------------------------------------------------------
Net gain from investment securities and
foreign currencies 9,781,148
- --------------------------------------------------------
Net increase in net assets resulting from
operations $10,007,954
========================================================
</TABLE>
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 226,806 $ 88,685
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (5,494,200) 885,467
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 15,275,348 7,942,380
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 10,007,954 8,916,532
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (160,712) (4,884)
- -----------------------------------------------------------------------------------------
Class C -- (54,101)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (237) (99,400)
- -----------------------------------------------------------------------------------------
Class B (51) --
- -----------------------------------------------------------------------------------------
Class C (1,274) (1,300,488)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 18,784,781 8,386,957
- -----------------------------------------------------------------------------------------
Class B 4,303,232 --
- -----------------------------------------------------------------------------------------
Class C 3,112,106 33,845,537
- -----------------------------------------------------------------------------------------
Net increase in net assets 36,045,799 49,690,153
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 101,606,129 51,915,976
- -----------------------------------------------------------------------------------------
End of period $137,651,928 $101,606,129
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $113,159,037 $ 86,958,918
- -----------------------------------------------------------------------------------------
Undistributed net investment income 58,330 (25,744)
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (5,899,391) (385,649)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 30,333,952 15,058,604
- -----------------------------------------------------------------------------------------
$137,651,928 $101,606,129
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor International Value Fund (the "Fund") is a series portfolio of AIM
Advisor Funds, Inc. (the "Company"). The Company is a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of five
diversified portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is to achieve a high total
return on investment through capital appreciation and current income, without
regard to U.S. or foreign tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. If a mean is not available, as is the case in some
foreign markets, the closing bid will be used absent a last sales price.
Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the
mean between the last bid and asked
9
<PAGE> 12
prices based upon quotes furnished by market makers for such securities.
Each security reported on the NASDAQ National Market System is valued at
the last sales price on the valuation date, or absent a last sales price,
at the mean of the closing bid and asked prices. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may
be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the
above methods are valued at the mean between last bid and asked prices
based upon quotes furnished by independent sources. Securities for which
market quotations are not readily available or are questionable are valued
at fair value as determined in good faith by or under the supervision of
the Company's Board of Directors. Investments with maturities of 60 days or
less are valued on the basis of amortized cost which approximates market
value. Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of such time. Foreign currency
exchange rates are also generally determined prior to the close of the New
York Stock Exchange. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which
would not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at the date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
C. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid annually. On December 31, 1998 undistributed net
investment income was increased by $17,980 and undistributed net realized
gains was decreased by $17,980 as a result of differing book/tax treatment
of foreign currency transactions and in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes-The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $5,869,981 (which may be carried forward to offset future
taxable capital gain if any) which expires, if not previously utilized,
through the year 2006.
F. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Global Asset Management Limited ("IGAM") whereby AIM pays
IGAM an annual rate of 0.35% of average net assets up to $50 million; 0.30% on
average net assets over $50 million up to $100 million; and 0.25% on average net
assets in excess of $100 million.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, registrar, custodial, shareholder reporting, sub-accounting
and recordkeeping services and functions. This agreement provides that AIM pays
all fees and expenses associated with these and other functions, including, but
not limited to, registration fees, shareholder meeting fees, and proxy statement
and shareholder report expenses. During the year ended December 31, 1998, AIM
was paid $390,044 for such services. As of June 1, 1998, AIM has voluntarily
agreed to limit the operating services fees to an annual rate of 0.45% of the
first $50 million of the Fund's average daily net assets and 0.10% of the Fund's
average daily net assets in excess of $50 million. During the period June 1,
1998 through
10
<PAGE> 13
December 31, 1998, AIM voluntarily waived operating services fees in the amount
of $164,116.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $41,575, $19,718 and $1,052,550, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $16,630 for the Class A shares.
AIM Distributors received commissions of $23,552 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $67,046 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average net assets of the Fund are less than
$100 million, the Fund's expenses shall not exceed 1.80% for Class A and 2.45%
for Class C; on the next $400 million of net assets, expenses shall not exceed
1.75% for Class A and 2.40% for Class C; on the next $500 million, expenses
shall not exceed 1.70% for Class A and 2.35% for Class C; on the next $1 billion
of net assets, expenses shall not exceed 1.65% for Class A and 2.30% for Class
C; and on all assets over $2 billion, expenses shall not exceed 1.60% for Class
A and 2.25% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $3,673
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998 was
$32,865,421 and $10,102,638, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $34,724,754
- ------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (4,388,974)
- ------------------------------------------------------------
Net unrealized appreciation of investment
securities $30,335,780
============================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
11
<PAGE> 14
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended December
31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997*
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 1,753,054 $ 28,241,964 638,784 $ 9,521,875
- --------------------------------------------------------------------------------------------------------------------
Class B** 309,463 5,088,103 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 1,767,625 28,826,767 3,118,584 44,774,893
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 9,847 156,574 5,815 92,368
- --------------------------------------------------------------------------------------------------------------------
Class B 3 46 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 71 1,122 59,331 998,719
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (619,207) (9,613,757) (81,132) (1,227,286)
- --------------------------------------------------------------------------------------------------------------------
Class B** (49,265) (784,917) -- --
- --------------------------------------------------------------------------------------------------------------------
Class C (1,630,166) (25,715,783) (806,643) (11,928,075)
- --------------------------------------------------------------------------------------------------------------------
1,541,425 $ 26,200,119 2,934,739 $ 42,232,494
====================================================================================================================
</TABLE>
*Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
**Class B Shares commenced sales on March 3, 1998.
12
<PAGE> 15
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998 and for a share of
Class C capital stock outstanding during each of the years in the three-year
period ended December 31, 1998 and the period May 1, 1995 (date operations
commenced) through December 31, 1995.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
-------------------------- ------------
1998 1997(B) 1998
------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.99 $13.42 $16.21
- ------------------------------------------------------------ ------- ------ ------
Income from investment operations:
Net investment income 0.09 0.17(c) --
- ------------------------------------------------------------ ------- ------ ------
Net gains on securities (both realized and unrealized) 1.59 1.69 0.27
- ------------------------------------------------------------ ------- ------ ------
Total from investment operations 1.68 1.86 0.27
- ------------------------------------------------------------ ------- ------ ------
Less distributions:
Dividends from net investment income (0.10) (0.07) --
- ------------------------------------------------------------ ------- ------ ------
Distributions from net realized gains -- (0.22) --
- ------------------------------------------------------------ ------- ------ ------
Total distributions (0.10) (0.29) --
- ------------------------------------------------------------ ------- ------ ------
Net asset value, end of period $ 16.57 $14.99 $16.48
- ------------------------------------------------------------ ------- ------ ------
Total return(d) 11.20% 13.84% 1.67%
- ------------------------------------------------------------ ------- ------ ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,281 $8,444 $4,289
- ------------------------------------------------------------ ------- ------ ------
Ratio of expenses to average net assets(e) 1.57%(f) 1.71% 2.32%(f)(g)
- ------------------------------------------------------------ ------- ------ ------
Ratio of net investment income to average net assets(h) 0.84%(f) 0.83% 0.09%(f)(g)
- ------------------------------------------------------------ ------- ------ ------
Portfolio turnover rate 9% 9% 9%
- ------------------------------------------------------------ ------- ------ ------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.81% and 1.81% for 1998-1997 for Class A and 2.46% (annualized) for 1998
for Class B.
(f) Ratios are based on average net assets of $16,630,080 and $2,367,422 for
Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.60% and 0.73% for 1998-1997 for Class A and (0.05)%
(annualized) for 1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
--------------------------------------------------
1998 1997(b) 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.93 $ 13.42 $ 11.13 $ 10.00
- ------------------------------------------------------------ -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) --(c) 0.01(c) (0.01) --
- ------------------------------------------------------------ -------- -------- -------- --------
Net gains on securities (both realized and unrealized) 1.55 1.73 2.34 1.13
- ------------------------------------------------------------ -------- -------- -------- --------
Total from investment operations 1.55 1.74 2.33 1.13
- ------------------------------------------------------------ -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- (0.01) -- --
- ------------------------------------------------------------ -------- -------- -------- --------
Distributions from net realized gains -- (0.22) (0.04) --
- ------------------------------------------------------------ -------- -------- -------- --------
Total distributions -- (0.23) (0.04) --
- ------------------------------------------------------------ -------- -------- -------- --------
Net asset value, end of period $ 16.48 $ 14.93 $ 13.42 $ 11.13
- ------------------------------------------------------------ -------- -------- -------- --------
Total return(d) 10.38% 12.98% 20.99% 11.28%
- ------------------------------------------------------------ -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $105,083 $ 93,162 $ 51,916 $ 9,467
- ------------------------------------------------------------ -------- -------- -------- --------
Ratio of expenses to average net assets(e) 2.32%(f) 2.46% 2.50% 2.50%(g)
- ------------------------------------------------------------ -------- -------- -------- --------
Ratio of net investment income (loss) to average net
assets(h) 0.09%(f) 0.08% (0.16)% 0.03%(g)
- ------------------------------------------------------------ -------- -------- -------- --------
Portfolio turnover rate 9% 9% 5% 2%
- ------------------------------------------------------------ -------- -------- -------- --------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.46% for 1998.
(f) Ratios are based on average net assets of $105,254,958.
(g) Annualized
(h) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.05)% for 1998.
13
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor International Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor International Value Fund (a
portfolio of AIM Advisor Funds, Inc.), including the
schedule of investments, as of December 31, 1998, and the
related statement of operations, the statement of changes
in net assets, and the financial highlights for the year
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial
highlights based on our audit. The accompanying statement
of changes in net assets for the year ended December 31,
1997 and the financial highlights for each of the years
in the two-year period ended December 31, 1997 and the
period May 1, 1995 (date operations commenced) through
December 31, 1995, were audited by other auditors whose
report thereon dated February 5, 1998, expressed an
unqualified opinion on such statement and financial
highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor International Value Fund as of December 31, 1998,
the results of its operations, the changes in its net
assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting
principles.
KPMG LLP
Houston, Texas
February 5, 1999
14
<PAGE> 17
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President INVESCO Global Asset Management Limited
12 Bermudian Rd., 3rd Floor
Edward K. Dunn Jr. Dana R. Sutton P.O. Box HM66
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer Hamilton, HM AX, Bermuda
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley TRANSFER AGENT
President, Mercantile Bankshares Vice President
A I M Fund Services, Inc.
Jack Fields Stuart W. Coco P.O. Box 4739
Chief Executive Officer Vice President Houston, TX 77210-4739
Texana Global, Inc.;
Formerly Member Melville B. Cox CUSTODIAN
of the U.S. House of Representatives Vice President
State Street Bank and Trust Company
Carl Frischling Karen Dunn Kelley 225 Franklin Street
Partner Vice President Boston, MA 02110
Kramer, Levin, Naftalis & Frankel
Jonathan C. Schoolar COUNSEL TO THE FUND
Robert H. Graham Vice President
President and Chief Executive Officer Ballard Spahr
A I M Management Group Inc. Renee A. Friedli Andrews & Ingersoll, LLP
Assistant Secretary 1735 Market Street
Prema Mathai-Davis Philadelphia, PA 19103
Chief Executive Officer, YWCA of the U.S.A.: P. Michelle Grace
Commissioner, New York City Dept. for Assistant Secretary COUNSEL TO THE DIRECTORS
the Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of Jeffrey H. Kupor Kramer, Levin, Naftalis & Frankel
New York State Assistant Secretary 919 Third Avenue
New York, NY 10022
Lewis F. Pennock Nancy L. Martin
Attorney Assistant Secretary DISTRIBUTOR
Ian W. Robinson Ofelia M. Mayo A I M Distributors, Inc.
Consultant; Formerly Executive Assistant Secretary 11 Greenway Plaza
Vice President and Suite 100
Chief Financial Officer Lisa A. Moss Houston, TX 77046
Bell Atlantic Management Assistant Secretary
Services, Inc. AUDITORS
Kathleen J. Pflueger
Louis S. Sklar Assistant Secretary KPMG LLP
Executive Vice President 700 Louisiana
Hines Interests Samuel D. Sirko Houston, TX 77002
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Advisor International Value Fund Class A, Class B and Class C shares paid
ordinary dividends in the amount of $0.0952, $0.0002 and $0.0002 per share,
respectively, during the Fund's tax year ended December 31, 1998. Of these
amounts 0% is eligible for the dividends received deduction for corporations.
15
<PAGE> 18
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Money Market Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately
AIM Capital Development Fund $109 billion in assets for more than 6.2
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS million shareholders, including
AIM Mid Cap Equity Fund(2), (A) AIM Advisor International Value Fund individual investors, corporate clients,
AIM Select Growth Fund(3) AIM Asian Growth Fund and financial institutions, as of
AIM Small Cap Growth Fund(2), (B) AIM Developing Markets Fund(2) December 31, 1998.
AIM Small Cap Opportunities Fund AIM Europe Growth Fund(2) The AIM Family of Funds--Registered
AIM Value Fund AIM European Development Fund Trademark-- is distributed nationwide,
AIM Weingarten Fund AIM International Equity Fund and AIM today is the 10th-largest mutual
AIM Japan Growth Fund(2) fund complex in the U.S. in assets under
GROWTH & INCOME FUNDS AIM Latin American Growth Fund(2) management, according to Strategic
AIM Advisor Flex Fund AIM New Pacific Growth Fund(2) Insight, an independent mutual fund
AIM Advisor Large Cap Value Fund monitor.
AIM Advisor MultiFlex Fund GLOBAL GROWTH FUNDS
AIM Advisor Real Estate Fund AIM Global Aggressive Growth Fund
AIM Balanced Fund AIM Global Growth Fund
AIM Basic Value Fund(2), (C)
AIM Charter Fund GLOBAL GROWTH & INCOME FUNDS
AIM Global Growth & Income Fund(2)
INCOME FUNDS AIM Global Utilities Fund
AIM Floating Rate Fund(2)
AIM High Yield Fund GLOBAL INCOME FUNDS
AIM High Yield Fund II AIM Emerging Markets Debt Fund(2), (D)
AIM Income Fund AIM Global Government Income Fund(2)
AIM Intermediate Government Fund AIM Global Income Fund
AIM Limited Maturity Treasury Fund AIM Strategic Income Fund(2)
TAX-FREE INCOME FUNDS THEME FUNDS
AIM High Income Municipal Fund AIM Global Consumer Products and Services Fund(2)
AIM Municipal Bond Fund AIM Global Financial Services Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Health Care Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2), (E)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998.
(2) Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B)On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money.
