AIM INTERNATIONAL FUNDS INC, 497, 1995-05-02

AIM INTERNATIONAL FUNDS INC
497, 1995-05-02

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<PAGE> 1

[AIM LOGO] THE AIM FAMILY OF FUNDS(R)

AIM INTERNATIONAL EQUITY FUND

(A SERIES PORTFOLIO OF AIM INTERNATIONAL FUNDS, INC.)

PROSPECTUS
MARCH 1, 1995
AS REVISED
MAY 2, 1995

AIM INTERNATIONAL EQUITY FUND (the "Fund") is a diversified, series
investment portfolio of AIM International Funds, Inc. (the
"Company"), an open-end, series, management investment company. The
Fund seeks to provide long-term growth of capital by investing in a
diversified portfolio of international equity securities, the issuers
of which are considered by the Fund's investment advisor to have
strong earnings momentum. Under normal market conditions, at least
80% of the Fund's total assets will be invested in equity securities
of companies located outside the United States which, with their
predecessors, have been in continuous operation for three years or
more and which are listed on a recognized foreign securities exchange
or traded in a foreign over-the-counter market. In addition, under
normal market conditions, the Fund will be invested in securities of
issuers located in at least four foreign countries. There is no
assurance that the Fund will attain its investment objective.

This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read
and retained for future reference. A Statement of Additional
Information, dated March 1, 1995 as revised May 2, 1995, has been
filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Statement of Additional Information is
available without charge upon written request to the Company at P.O.
Box 4739, Houston, Texas 77210-4739.

THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................. 2
THE FUND................................ 4
Table of Fees and Expenses............ 4
Financial Highlights.................. 5
Performance........................... 6
Investment Objective and Policies..... 6
Hedging Strategies and Other
Investment Techniques.............. 7
Risk Factors.......................... 9
Investment Restrictions............... 10
Management............................ 10
Organization of the Company........... 12

<CAPTION>
PAGE
----
<S> <C>
INVESTOR'S GUIDE........................ A-1
Introduction to The AIM Family of
Funds(R)........................... A-1
How to Purchase Shares................ A-1
Terms and Conditions of Purchase of
the AIM Funds...................... A-2
Special Plans......................... A-8
Exchange Privilege.................... A-10
How to Redeem Shares.................. A-12
Determination of Net Asset Value...... A-15
Dividends, Distributions and Tax
Matters............................ A-16
General Information................... A-18
APPLICATION INSTRUCTIONS................ B-1
</TABLE>

SUMMARY
- --------------------------------------------------------------------------------

THE FUND. AIM International Funds, Inc. (the "Company") is a Maryland
corporation organized as an open-end, series, management investment company.
Currently the Company offers four separate series portfolios. This Prospectus
relates to AIM International Equity Fund (the "Fund"). The other portfolios of
the Company are offered to investors pursuant to a separate prospectus.

The investment objective of the Fund is to provide long-term growth of capital
by investing in a diversified portfolio of international equity securities the
issuers of which are considered by the Fund's investment advisor to have strong
earnings momentum. Any income realized by the Fund will be incidental and will
not be an important criterion in the selection of portfolio securities. Under
normal market conditions, the Fund will invest at least 80% of its total assets
in marketable equity securities (including common and preferred stocks,
depositary receipts for stock and securities convertible into or exchangeable
for stock) of companies located outside the United States ("foreign companies")
which, with their predecessors, have been in continuous operation for three
years or more and which are listed on a recognized foreign securities exchange
or traded in a foreign over-the-counter market. In addition, under normal market
conditions, the Fund's assets will be invested in the securities of foreign
companies located in at least four countries outside the United States. The Fund
will emphasize investment in foreign companies in the developed countries of
Western Europe and the Pacific Basin and may also invest to a limited extent in
the securities of companies located in developing countries in various regions
of the world.

Over the past 30 years, securities of foreign companies ("foreign securities")
have offered generally higher levels of capital growth than similar investments
in the United States. The Fund's investment advisor believes that investment in
foreign securities offers significant potential for long-term capital
appreciation. Also, foreign equity markets often do not move in step with each
other or with domestic equity markets. The Fund's investment advisor believes
that a portfolio invested in a number of markets worldwide should thus achieve
better long-term results for investors than one which is subject to the
movements of a single market.

The Fund intends to achieve its investment objective by using a fully managed
investment policy providing for the selection of securities. The Fund will also
seek to spread its investments among countries or regions in accordance with the
investment advisor's assessment of prospects for relative economic growth,
political conditions, currency exchange fluctuations and other relevant factors.
For more complete information on the Fund's investment objective, policies and
strategies, see "Investment Objective and Policies" and "Hedging Strategies and
Other Investment Techniques."

RISK FACTORS. THE FUND IS DESIGNED FOR LONG-TERM INVESTORS SEEKING
INTERNATIONAL DIVERSIFICATION AND WILLING TO BEAR THE RISKS ASSOCIATED WITH
INVESTMENT IN FOREIGN SECURITIES, INCLUDING CURRENCY RISK, POLITICAL AND
ECONOMIC RISK, REGULATORY RISK AND MARKET RISK. IT IS NOT DESIGNED AS A COMPLETE
INVESTMENT PROGRAM. FOR A DISCUSSION OF THESE RISKS, SEE "RISK FACTORS."

MANAGEMENT. A I M Advisors, Inc. ("AIM") serves as the Fund's investment
advisor pursuant to an investment advisory agreement (the "Advisory Agreement").
AIM manages or advises 37 investment company portfolios. As of February 1, 1995,
the total assets advised or managed by AIM or its affiliates were approximately
$27.7 billion. Under the terms of the Advisory Agreement, AIM supervises all
aspects of the Fund's operations and provides investment advisory services to
the Fund. As compensation for these services, AIM receives a fee based on the
Fund's average daily net assets. Under an Administrative Services Agreement, AIM
may be reimbursed by the Fund for its costs of performing, or arranging for the
performance of, certain accounting, shareholder servicing and other
administrative services for the Fund. Under a Transfer Agency and Service
Agreement, A I M Fund Services, Inc. ("AFS"), AIM's wholly-owned subsidiary and
a registered transfer agent, receives a fee for its provision of shareholder
services for the Fund.

2
<PAGE> 3

MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A or Class B shares
of the Fund which are offered by this Prospectus at an offering price that
reflects differing sales charges and expense levels. See "Terms and Conditions
of Purchase of the AIM Funds -- Sales Charges and Dealer Concessions."

Class A Shares -- Shares are offered at net asset value plus any
applicable initial sales charge.

Class B Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a maximum contingent deferred
sales charge of 5% on certain redemptions made within six years of the end
of the calendar month in which a purchase was made. Class B shares
automatically convert to Class A shares of the Fund eight years following
the end of the calendar month in which a purchase was made. Class B shares
are subject to higher expenses than Class A shares.

SUITABILITY FOR INVESTORS. The Multiple Distribution System permits an
investor to choose the method of purchasing shares that is most beneficial given
the amount of the purchase, the length of time the shares are expected to be
held, whether dividends will be paid in cash or reinvested in additional shares
of the Fund and other circumstances. Investors should consider whether, during
the anticipated life of their investment in the Fund, the accumulated
distribution fees and any applicable contingent deferred sales charges on Class
B shares prior to conversion would be less than the initial sales charge and
accumulated distribution fees on Class A shares purchased at the same time, and
to what extent such differential would be offset by the higher return on Class A
shares. To assist investors in making this determination, the table under the
caption "Table of Fees and Expenses" sets forth examples of the charges
applicable to each class of shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for reduced initial
sales charges, as described below. Therefore, A I M Distributors, Inc. will
reject any order for purchase of more than $250,000 for Class B shares.

PURCHASING SHARES. Initial investments in either class of shares must be at
least $500 and additional investments must be at least $50. The minimum initial
investment is modified for investments through tax-qualified retirement plans
and accounts initially established with an Automatic Investment Plan. The
distributor of the Fund's shares is A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739. See "How to Purchase
Shares" and "Special Plans."

EXCHANGE PRIVILEGE. The Fund is one of several mutual funds distributed by AIM
Distributors ("The AIM Family of Funds(R)"). Class A shares of the Fund may be
exchanged for Class A shares (or shares which normally involve payment of
initial sales charges) of other funds in The AIM Family of Funds(R). Class B
shares of the Fund may be exchanged only for Class B shares of other funds in
The AIM Family of Funds(R). See "Exchange Privilege."

REDEEMING SHARES. Holders of Class A shares may redeem all or a portion of
their shares at net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1% may apply to certain redemptions of Class
A shares, where purchases of $1 million or more are made at net asset value. See
"How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."

Holders of Class B shares may redeem all or a portion of their shares at net
asset value on any business day, less a contingent deferred sales charge for
redemptions made within six years following the end of the calendar month in
which a purchase was made. Class B shares redeemed after six years following the
end of the calendar month of purchase will not be subject to any contingent
deferred sales charge. See "How to Redeem Shares -- Multiple Distribution
System."

DISTRIBUTIONS. The Fund declares and pays dividends from net investment
income, if any, and makes distributions of realized capital gains, if any, on an
annual basis. Dividends and distributions paid with respect to Class A shares of
the Fund may be paid by check, may be reinvested in additional Class A shares of
the Fund or, subject to certain conditions, in Class A shares (or shares which
normally involve payment of initial sales charges) of other funds in The AIM
Family of Funds(R) at current net asset value (without payment of a sales
charge). Dividends and distributions paid with respect to Class B shares of the
Fund may be paid by check or reinvested in additional Class B shares of the Fund
or Class B shares of other funds in The AIM Family of Funds(R), subject to
certain conditions. See "Dividends, Distributions and Tax Matters" and "Special
Plans."

The AIM Family of Funds(R), The AIM Family of Funds and Design (i.e, the AIM
logo), and AIM and Design are registered service marks of A I M Management Group
Inc.

3
<PAGE> 4

THE FUND
- --------------------------------------------------------------------------------

TABLE OF FEES AND EXPENSES

The following table is designed to help an investor in the Fund understand the
various costs that an investor will bear, both directly and indirectly. The fees
and expenses set forth in the table for Class A shares are based on the average
net assets of the Class A shares of the Fund for the year ended October 31,
1994. "Other expenses" for the Class B shares are based on estimated amounts for
the current fiscal year. Actual expenses may be greater or less than such
estimates. The rules of the Securities and Exchange Commission require that the
maximum sales charge be reflected in the table, even though certain investors
may qualify for reduced sales charges. See "How to Purchase Shares."

<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchase of shares (as a % of offering price)................. 5.50% None
Maximum sales load on reinvested dividends and distributions................................ None None
Deferred sales load (as a % of original purchase price or redemption proceeds, whichever is
lower).................................................................................... None* 5.0%
Redemption fee.............................................................................. None None
Exchange fee**.............................................................................. None None
Annual Fund Operating Expenses (as a % of average net assets)
Management fees*** (after fee waivers)...................................................... 0.94% 0.94%
Rule 12b-1 distribution plan payments....................................................... 0.30% 1.00%
Other expenses.............................................................................. 0.40% 0.59%
----- -----
Total fund operating expenses........................................................... 1.64% 2.53%
===== =====
</TABLE>

- ------------

* Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months following the end of the calendar month of
such purchases. See the Investor's Guide, under the caption "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases."
** No fee will be charged for exchanges among The AIM Family of Funds(R);
however, a $5 service fee will be charged for exchanges by accounts of
market timers.
*** If management fees had not been waived, the management fees would have been
0.95%.

EXAMPLES. An investor in the Fund would pay the following expenses on a $1,000
investment in Class A shares of the Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period:

<TABLE>
<S> <C>
1 year.................................................... $ 71
3 years................................................... $104
5 years................................................... $139
10 years.................................................. $239
</TABLE>

The examples above assume payment of a sales charge at the time of purchase of
Class A shares; actual expenses may vary for purchases of $25,000 or more or
purchases of $1 million or more, which are made at net asset value and are
subject to a contingent deferred sales charge for 18 months following the end of
the calendar month of purchase.

An investor in the Fund would pay the following expenses on a $1,000
investment in Class B shares of the Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period:

<TABLE>
<S> <C>
1 year.................................................... $ 76
3 years................................................... $109
</TABLE>

An investor in the Fund would pay the following expenses on the same $1,000
investment in Class B shares, assuming no redemption at the end of each time
period.

<TABLE>
<S> <C>
1 year.................................................... $ 26
3 years................................................... $ 79
</TABLE>

As a result of 12b-1 fees, a long-term shareholder in the Fund may pay more
than the economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. Given the maximum
front-end sales charge applicable to Class A shares and the Rule 12b-1 fees
applicable to Class A shares and Class B shares, it is estimated that it would
require a substantial number of years to exceed the maximum permissible
front-end sales charges.

THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF THE FUND'S
ACTUAL OR FUTURE EXPENSES, WHICH MAY BE GREATER OR LESS THAN THOSE SHOWN. In
addition, while the examples assume a 5% annual return, the Fund's actual
performance will vary and may result in an actual return that is greater or less
than 5%. The examples assume reinvestment of all dividends and distributions and
that the percentage amounts for total fund operating expenses remain the same
for each year.

4
<PAGE> 5

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

Shown below are per share income and capital changes for a Class A share of
the Fund for the years ended October 31, 1994 and 1993 and the period April 7,
1992 (effective date of registration statement) through October 31, 1992, and
for a Class B share of the Fund for the period September 15, 1994 (date sales
commenced) through October 31, 1994. The information has been audited by KPMG
Peat Marwick LLP, independent auditors, whose unqualified report on the Fund's
financial statements and the related notes appears in the Statement of
Additional Information.

<TABLE>
<CAPTION>
YEAR YEAR PERIOD APRIL 7, 1992
ENDED ENDED THROUGH
OCTOBER 31, 1994 OCTOBER 31, 1993 OCTOBER 31, 1992
---------------- ---------------- ----------------
<S> <C> <C> <C>
CLASS A SHARE:
Net asset value, beginning of period............................. $ 12.18 $ 8.88 $ 8.74(a)
Income from investment operations:
Net investment income........................................ 0.02 0.02 0.01
Net gains or losses on securities (both realized and
unrealized)................................................ 1.31 3.29 0.13
-------- -------- --------
Total from investment operations............................. 1.33 3.31 0.14
-------- -------- --------
Less distributions:
Dividends from net investment income......................... (0.01) (0.01) --
Distributions from capital gains............................. -- -- --
-------- -------- --------
Total distributions.......................................... (0.01) (0.01) --
-------- -------- --------
Net asset value, end of period................................... $ 13.50 $ 12.18 $ 8.88
======== ======== ========
Total return(b).................................................. 10.94% 37.36% 1.65%
======== ======== ========
Ratios/supplemental data
Net assets, end of period (000s omitted)....................... $708,159 $372,282 $122,663
======== ======== ========
Ratio of expenses to average net assets........................ 1.64%(c) 1.78% 1.85%(d)(e)
======== ======== ========
Ratio of net investment income to average net assets........... 0.22%(c) 0.28% 0.27%(d)(e)
======== ======== ========
Portfolio turnover rate........................................ 67% 62% 23%
======== ======== ========
</TABLE>

- ---------------

(a) Net asset value at beginning of period has been restated to reflect a 1.1619
for 1 stock split, effected in the form of a dividend, on May 21, 1992.
(b) Does not include sales charges and, for periods less than one year, total
returns are not annualized.
(c) Ratios are based on average net assets of $586,016,976.
(d) After waiver of advisory fees.
(e) Annualized.

<TABLE>
<CAPTION>
PERIOD SEPTEMBER 15, 1994
THROUGH
OCTOBER 31, 1994
-------------------------
<S> <C>
CLASS B SHARE:
Net asset value, beginning of period.................................................................... $13.42
Income from investment operations:
Net investment income (loss)........................................................................ (0.01)
Net gains or losses on securities (both realized and unrealized).................................... 0.08
------
Total from investment operations.................................................................... 0.07
------
Less distributions:
Dividends from net investment income................................................................ --
Distributions from capital gains.................................................................... --
------
Total distributions................................................................................. --
------
Net asset value, end of period.......................................................................... $13.49
======
Total return(a)......................................................................................... 0.52%
======
Ratios/supplemental data
Net assets, end of period (000s omitted).............................................................. $4,833
======
Ratio of expenses to average net assets(b)............................................................ 2.53%
======
Ratio of net investment income (loss) to average net assets(b)........................................ (0.67)%
======
Portfolio turnover rate............................................................................... 67%
======
</TABLE>

- ---------------

(a) Total return is not annualized and does not include contingent deferred
sales charges.
(b) Ratios are annualized and based on average net assets of $2,334,163.

5
<PAGE> 6

- --------------------------------------------------------------------------------

PERFORMANCE

The Fund's performance may be quoted in advertising in terms of total return.
All advertisements of the Fund will disclose the maximum sales charge (including
deferred sales charge) to which investments in the Fund's shares may be subject.
The Fund will also include performance data on Class A and Class B shares in any
advertisement or promotional material which includes Fund performance data. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.

Standardized total return for Class A shares reflects the deduction of the
Fund's maximum initial sales charge at the time of purchase. Standardized total
return for Class B shares reflects the deduction of the maximum applicable
contingent deferred sales charge on a redemption of shares held for the period.

The Fund's total return shows its overall change in value, including changes
in share price assuming that all the Fund's dividends and capital gain
distributions are reinvested and that all charges and expenses are deducted. A
cumulative total return reflects the Fund's performance over a stated period of
time. An average annual total return reflects the hypothetical compounded annual
rate of return that would have produced the same cumulative total return if the
Fund's performance had been constant over the entire period. BECAUSE AVERAGE
ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN, INVESTORS
SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR
RESULTS. To illustrate the components of overall performance, the Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses. The stated period for quotations of average annual
total return will be for periods of one year and the life of the Fund
(commencing as of the effective date of its registration statement).

From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such a practice will
have the effect of increasing the Fund's yield and total return.

The performance of the Fund will vary from time to time, and past results are
not necessarily representative of future results. The Fund's performance is a
function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund as well
as by general market conditions. A shareholder's investment in the Fund is not
insured or guaranteed. These factors should be carefully considered by the
investor before making an investment in the Fund.

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund, which is a fundamental policy that may
be changed only with the approval of the Fund's shareholders, is to provide
long-term growth of capital by investing in a diversified portfolio of
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum. Any income realized by the Fund will be
incidental and will not be an important criterion in the selection of portfolio
securities. There can be no assurance that the Fund will achieve its objective.

The Board of Directors of the Company reserves the right to change any of the
investment policies, strategies or practices of the Fund, as described below and
elsewhere in this Prospectus and in the Statement of Additional Information,
without approval of the Fund's shareholders, except in those instances in which
shareholder approval is expressly required.

Under normal market conditions the Fund will invest at least 80% of its total
assets in marketable equity securities (including common and preferred stock,
depositary receipts for stock and securities exchangeable for or convertible
into stock) of foreign companies which, with their predecessors, have been in
continuous operation for three years or more and which are listed on a
recognized foreign securities exchange or traded in a foreign over-the-counter
market. In addition, under normal market conditions, the Fund's assets will be
invested in the securities of foreign companies located in at least four
countries outside the United States.

In managing the Fund, AIM seeks to apply to a diversified portfolio of
international equity securities substantially the same investment strategy which
it applies to several of its other managed portfolios which have similar
investment objectives but which invest primarily in United States equities
markets. The Fund will utilize to the extent practicable a fully managed
investment policy providing for the selection of securities which meet certain
quantitative standards determined by AIM. AIM reviews carefully the earnings
history and prospects for growth of each company considered for investment by
the Fund. It is expected that the Fund's portfolio, when fully invested, will
generally be comprised of two basic categories of foreign companies: (1) "core"
companies, which AIM considers to have experienced consistent long-term growth
in earnings and to have strong prospects for outstanding future growth, and (2)
companies that AIM believes are currently experiencing a greater than
anticipated increase in earnings.

If a particular foreign company meets the quantitative standards determined by
AIM, its securities may be acquired by the Fund regardless of the location of
the company or the percentage of the Fund's investments in the company's country
or region. However, AIM will also consider other factors in making investment
decisions for the Fund, including such factors as the prospects for relative
economic growth among countries or regions, economic and political conditions,
currency exchange fluctuations, tax considerations and the liquidity of a
particular security.

6
<PAGE> 7

AIM recognizes that often there is less public information about foreign
companies than is available in reports supplied by domestic companies, that
foreign companies are not subject to uniform accounting and financial reporting
standards, and that there may be greater delays experienced by the Fund in
receiving financial information supplied by foreign companies than comparable
information supplied by domestic companies. For these and other reasons, AIM
from time to time may encounter greater difficulty applying its disciplined
stock selection strategy to an international equity investment portfolio than to
a portfolio of domestic equity securities.

The Fund normally will invest at least 80% of its total assets in marketable
equity securities, including common and preferred stock and other securities
having the characteristics of stock (such as an equity or ownership interest in
a company). The Fund may satisfy the foregoing requirement in part through the
ownership of securities which are convertible into, or exchangeable for, common
stocks, or by investment in the securities of foreign issuers which are in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), or other securities representing underlying securities of foreign
issuers.

As a temporary defensive measure, and without regard to the Fund's investment
objective, AIM may invest all or substantially all of the Fund's assets in cash
or high-grade short-term securities, including repurchase agreements,
denominated either in U.S. dollars or foreign currencies. To the extent that the
Fund assumes a temporary defensive posture and holds cash or is invested in
high-grade short-term securities, it will not be pursuing its investment
objective of growth of capital. Under normal circumstances, the Fund will invest
no more than 20% of the value of its total assets in high-grade short-term
securities, including repurchase agreements. A repurchase agreement is an
instrument under which the Fund acquires ownership of a debt security and the
seller agrees, at the time of the sale, to repurchase the obligation at a
mutually agreed upon time and price, thereby determining the yield during the
Fund's holding period. In the event of a bankruptcy or other default of a seller
of a repurchase agreement, the Fund could experience both delays in liquidating
the underlying securities and losses, including (a) a possible decline in the
value of the underlying security during the period while the Fund seeks to
enforce its rights thereto, (b) possible reduced levels of income and lack of
access to income during this period and (c) expenses of enforcing its rights.
The Fund intends to enter into repurchase agreements with sellers believed by
AIM to present minimal credit risk. See "Investment Restrictions."

Under normal market conditions, the Fund intends to invest in the securities
of foreign companies located in at least four countries outside the United
States. The Fund will emphasize investment in foreign companies in the developed
countries of Western Europe (such as Germany, France, Switzerland, the
Netherlands and the United Kingdom) and the Pacific Basin (such as Japan, Hong
Kong and Australia), and the Fund may also invest in the securities of companies
located in developing countries (such as Turkey, Malaysia and Mexico) in various
regions of the world. A "developing country" is a country in the initial stages
of its industrial cycle.

Investment in the equity markets of developing countries involves exposure to
securities exchanges that may have substantially less trading volume and greater
price volatility, economic structures that are less diverse and mature, and
political systems that may be less stable than the equity markets of developed
countries. At the present time, AIM does not intend to invest more than 20% of
the Fund's total assets in foreign companies located in developing countries.

- --------------------------------------------------------------------------------

HEDGING STRATEGIES AND OTHER INVESTMENT TECHNIQUES

The Fund may, at such times as AIM deems appropriate and consistent with the
investment objective of the Fund, write (sell) covered put or call options on
its portfolio securities. The Fund may also purchase and sell (i) options on
domestic and foreign securities and currencies, (ii) stock index options, (iii)
stock, currency and interest rate futures, (iv) options on stock, currency,
stock index and interest rate futures and (v) foreign forward currency exchange
contracts. The purpose of such transactions is to hedge against changes in the
market value of the Fund's portfolio securities caused by fluctuating interest
rates, fluctuating currency exchange rates and changing market conditions, and
to close out or offset existing positions in such options or futures contracts
as described below. The Fund will not engage in such transactions for
speculative purposes. The Fund does not intend to hedge against currency,
investment and interest rate risks during the coming year. Any change to such
policy must be submitted by AIM to the Company's Board of Directors prior to the
effectiveness of such change.

To a limited extent the Fund may employ certain investment techniques intended
to provide liquidity for temporary or emergency purposes, provide flexibility in
the purchase of new issues of securities, protect the Fund from a decline in the
market value of its securities and permit the Fund to invest all of its assets.
Those techniques include entering into reverse repurchase agreements, lending
portfolio securities, purchasing securities on a "when-issued" basis, short
sales "against the box" and investing in closed-end investment companies.

OPTIONS. The Fund may purchase options issued by the Options Clearing
Corporation. Such options give the Fund the right for a fixed period of time to
sell (in the case of purchase of a put option) or to buy (in the case of
purchase of a call option) the number of units of the underlying security or
obligation covered by the option at a fixed or determinable exercise price.
Buying a put option hedges against the risk of a market decline. Buying a call
option hedges against a market advance. Prior to its expiration, a put or call
option may be sold in a closing sale transaction. Gain or loss from such a sale
will depend on whether the amount received is more or less than the premium paid
for the option plus the related transaction costs.

The Fund also may write (sell) put or call options, but only if such options
are covered and remain covered as long as the Fund is obligated as a writer of
the option (seller). A call option is "covered" if the Fund owns the underlying
security covered by the call. A put option is "covered" if the Fund segregates
with its custodian cash, U.S. Treasury bills or other high-grade short-term debt
obligations with a value equal to the exercise price of the put option. If a
"covered" call or put option expires unexercised, the writer realizes

7
<PAGE> 8

a gain in the amount of the premium received. If the covered call option is
exercised, the writer realizes either a gain or loss from the sale or purchase
of the underlying security with the proceeds to the writer being increased by
the amount of the premium. If the covered put option is exercised, the writer's
cost of purchasing the underlying security is reduced by the amount of the
premium received from the initial sale of the put option. Prior to its
expiration, a put or call option may be closed out by means of a purchase of an
identical option. Any gain or loss from such transaction will depend on whether
the amount paid is more or less than the premium received for the option plus
related transaction costs.

The Fund may also purchase and write options in combination with each other to
adjust the risk and return characteristics of certain portfolio security
positions. This technique is commonly referred to as a "straddle."

Options are subject to certain risks, including the risk of imperfect
correlation between the option and the Fund's portfolio securities and the risk
that there might not be a liquid secondary market for the option when the Fund
seeks to hedge against adverse market movements. In general, options whose
strike prices are close to their underlying securities' current values will have
the highest trading value, while options whose strike prices are further away
may be less liquid. The liquidity of options may also be affected if options
exchanges impose trading halts, particularly when markets are volatile.

The Fund will not write options if, immediately after such sale, the aggregate
value of the securities or obligations underlying the outstanding options
exceeds 25% of the Fund's total assets. The Fund will not purchase put options
(including options on securities indices and futures contracts) if, at the time
of investment, the aggregate premiums paid for such options will exceed 5% of
its total assets.

FUTURES AND FORWARD CONTRACTS. Since substantially all of the securities held
by the Fund may be denominated in foreign currencies, the value of the Fund's
portfolio will be affected by changes in exchange rates between currencies
(including the U.S. dollar), as well as by changes in the market value of the
securities themselves. The Fund may enter into interest rate, exchange rate and
currency futures contracts and related options, or it may purchase or sell stock
index futures contracts and related options in order to mitigate the effects of
such changes. Futures contracts obligate the seller to deliver a specific type
of security called for in the contract, at a specified future time and for a
specified price. Futures contracts are traded on U.S. and foreign exchanges and
generally contain standardized strike prices and expiration dates. Certain
futures contracts may be satisfied by actual delivery of the securities or, more
typically, by entering into an offsetting transaction. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract. In addition to purchasing or selling
futures contracts on currencies and specific securities, interest rates and
exchange rates, the Fund may purchase or sell stock index futures contracts. A
stock index futures contract is an agreement to take or make delivery of an
amount of cash based on the difference between the value of a stock index at the
beginning and at the end of the contract period. No more than 5% of the Fund's
total assets will be committed to initial margin deposits required pursuant to
futures contracts. Percentage investment limitations on the Fund's investment in
options on futures contracts are set forth above under "Options." Although the
Fund is authorized to invest in futures contracts and related options with
respect to foreign securities, stock indices, interest rates and currencies, it
will limit such investments to those which have been approved by the Commodity
Futures Trading Commission for investment by United States investors.

In attempting to manage its currency exposure, the Fund may buy and sell
currencies, either in the spot (cash) market or in the forward market (through
forward contracts generally expiring within one year). The Fund may also enter
into forward contracts with respect to a specific purchase or sale of a
security, or with respect to its portfolio positions generally. When the Fund
purchases a security for settlement in the near future, it may immediately
purchase in the forward market the currency needed to pay for and settle the
purchase. By entering into a forward contract with respect to the specific
purchase or sale of a security denominated in a foreign currency, the Fund can
secure an exchange rate between the trade and settlement dates for that purchase
or sale transaction. This practice is sometimes referred to as "transaction
hedging." Unlike futures contracts, forward contracts are generally individually
negotiated and privately traded. A forward contract obligates the seller to sell
a specific security or currency at a specified price on a future date, which may
be any fixed number of days from the date of the contract. The Fund may enter
into transaction hedging forward contracts with respect to all or a substantial
portion of its trades.

There are risks associated with the use of futures and forward contracts and
options thereon for hedging purposes. During certain market conditions, sales of
futures contracts may not completely offset a decline or rise in the value of
the Fund's portfolio securities or currency against which the futures or forward
contract or options thereon are being sold. In the futures and options on
futures markets, it may not always be possible to execute a buy or sell order at
the desired price, or to close out an open position due to market conditions,
limits on open positions and/or daily price fluctuations. Risks in the use of
futures contracts and options thereon also result from the possibility that
changes in the market value of securities or currency may differ substantially
from the changes anticipated by the Fund when hedged positions were established.
Successful use of futures and forward contracts and options thereon is dependent
upon AIM's ability to predict correctly movements in the direction of the
applicable markets. No assurance can be given that AIM's judgment in this
respect will be correct. Accordingly, the Fund may lose the expected benefit of
futures and forward transactions and options thereon if markets move in an
unanticipated manner.

OTHER HEDGING TECHNIQUES. For hedging purposes, the Fund may also purchase
foreign currencies in the form of bank deposits as well as other foreign money
market instruments, including, but not limited to, bankers' acceptances,
certificates of deposit, commercial paper, short-term government and corporate
obligations and repurchase agreements.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is the same as a repurchase
agreement, except that the Fund acts as the seller and repurchaser of the
subject security. Reverse repurchase agreements are considered to be borrowings
under the Investment Company Act of 1940, as amended (the "1940 Act"). The

8
<PAGE> 9

Fund will enter into a reverse repurchase agreement only when the interest
income to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the transaction. Any investment gains made
by the Fund with monies borrowed through reverse repurchase agreements will
cause the net asset value of the Fund's shares to rise faster than would be the
case if the Fund had no such borrowings. On the other hand, if the investment
performance resulting from the investment of borrowings obtained through reverse
repurchase agreements fails to cover the cost of such borrowings to the Fund,
the net asset value of the Fund will decrease faster than would otherwise be the
case. The Fund currently intends to enter into reverse repurchase agreements
only for temporary or emergency purposes and not as a means of increasing
income.

LENDING OF PORTFOLIO SECURITIES. The Fund may from time to time lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions, and receive in
return collateral in the form of cash or securities issued or guaranteed by the
U.S. Government which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. During the
period of the loan, the Fund receives the income on both the loaned securities
and the collateral and thereby increases its yield. In the event that the
borrower defaults on its obligation to return loaned securities because of
insolvency or otherwise, the Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent that the value of
the collateral falls below the market value of the loaned securities.

WHEN-ISSUED SECURITIES. The Fund may sometimes purchase new issues of
securities on a "when-issued" basis. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery of and
payment for these securities typically occur 15 to 45 days after the commitment
to purchase. The value of securities purchased on a when-issued basis could
decline before the Fund completes the transaction, which could cause a loss to
the Fund. A separate account for the Fund consisting of cash or high-quality
liquid debt securities in an amount at least equal to the when-issued
commitments will be established and maintained with the Fund's custodian for
payment for securities on a when-issued basis.

SHORT SALES. The Fund may make short sales "against the box." A short sale is
a transaction in which a party sells a security it does not own in anticipation
of a decline in the market value of that security. A short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain securities identical to those sold short without payment of any further
consideration. The Fund will enter into such transactions only to the extent the
aggregate value of all securities sold short does not represent more than 10% of
the Fund's assets at any given time.

ILLIQUID SECURITIES AND RULE 144A SECURITIES. The Fund will not invest more
than 15% of its assets in illiquid securities, including restricted securities
which are illiquid. Although securities which may be resold only to "qualified
institutional buyers" in accordance with the provisions of Rule 144A under the
Securities Act of 1933 are unregistered securities, the Fund may purchase Rule
144A securities without regard to the 15% limitation described above provided
that a determination is made that such securities have a readily available
trading market. AIM will determine the liquidity of Rule 144A securities under
the supervision of the Company's Board of Directors. The liquidity of Rule 144A
securities will be monitored by AIM and, if as a result of changed conditions,
it is determined that a Rule 144A security is no longer liquid, the Fund's
holdings of illiquid securities will be reviewed to determine what, if any,
action is required to assure that the Fund does not invest more than 15% of its
assets in illiquid securities. See the Statement of Additional Information.

- --------------------------------------------------------------------------------

RISK FACTORS

There can be no assurance that the Fund's investment objective will be
attained. The Fund is designed for investors seeking international
diversification, and is not intended as a complete investment program. In
addition, investing in securities of foreign companies generally involves
greater risks than investing in securities of domestic companies. Investors
should consider carefully the following special factors before investing in the
Fund.

CURRENCY RISK. The value of the Fund's foreign investments may be affected by
changes in currency exchange rates. The U.S. dollar value of a foreign security
generally decreases when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and tends to increase when the
value of the U.S. dollar falls against such currency.

POLITICAL AND ECONOMIC RISK. The economies of many of the countries in which
the Fund may invest are not as developed as the United States economy and may be
subject to significantly different forces. Political or social instability,
expropriation or confiscatory taxation, and limitations on the removal of funds
or other assets could also adversely affect the value of the Fund's investments.

REGULATORY RISK. Foreign companies are generally not subject to the regulatory
controls imposed on United States issuers and, as a consequence, there is
generally less publicly available information about foreign securities than is
available about domestic securities. Foreign companies are not subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the Fund may be reduced by withholding tax at the
source which would reduce dividend income payable to the Fund's shareholders.

MARKET RISK. The securities markets in many of the countries in which the Fund
invests will have substantially less trading volume than the major United States
markets. As a result, the securities of some foreign companies may be less
liquid and experience more price volatility than comparable domestic securities.
There is generally less government regulation and supervision of foreign stock
exchanges, brokers and issuers which may make it difficult to enforce
contractual obligations. In addition, transaction costs in foreign securities
markets are likely to be higher, since brokerage commission rates in foreign
countries are likely to be higher than in the United States.

9
<PAGE> 10

- --------------------------------------------------------------------------------

INVESTMENT RESTRICTIONS

The following restrictions may not be changed without approval of the Fund's
shareholders. The Fund may not:

1. Purchase a security if, as a result, with respect to 75% of the
value of the Fund's total assets, taken at market value, more than 5% of
the value of the Fund's total assets, taken at market value, would be
invested in securities of any one issuer (including repurchase agreements
with any one entity), except securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities.

2. Purchase a security if, as a result, more than 10% of the
outstanding voting securities of any issuer would be held by the Fund.

3. Purchase a security if, as a result, 25% or more of the value of
the Fund's total assets, taken at market value, would be invested in the
securities of issuers having their principal business activities in the
same industry. This restriction does not apply to obligations issued or
guaranteed by the U.S. Government or by any of its agencies or
instrumentalities but will apply to foreign government obligations unless
the Securities and Exchange Commission permits their exclusion.

4. Purchase a security if, as a result, the Fund would own securities
of an issuer (including predecessors and unconditional guarantors) which
has a record of less than three years of continuous operations.

A complete listing of investment restrictions applicable to the Fund, some of
which may be changed by the Board of Directors without shareholder approval, is
contained in the Statement of Additional Information.

- --------------------------------------------------------------------------------

MANAGEMENT

The overall management of the business and affairs of the Fund is vested with
the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Fund and persons or companies furnishing
services to the Fund, including the investment advisory agreement with AIM, the
administrative services agreement with AIM, the agreement with AIM Distributors
regarding distribution of the Fund's shares, the agreement with State Street
Bank and Trust Company as custodian and accounting agent, and the agreement with
A I M Fund Services, Inc. as transfer agent. The day-to-day operations of the
Fund are delegated to the officers of the Company and to AIM, subject always to
the objective and policies of the Fund and to the general supervision of the
Board of Directors. Certain directors and officers of the Company are affiliated
with AIM and A I M Management Group Inc. ("AIM Management"), the parent
corporation of AIM. AIM Management is a holding company engaged in the financial
services business. Information concerning the Board of Directors may be found in
the Statement of Additional Information.

INVESTMENT ADVISOR. A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046, serves as the investment advisor to the Fund
pursuant to an investment advisory agreement dated as of October 18, 1993 (the
"Advisory Agreement"). AIM was organized in 1976 and, together with its
affiliates, manages or advises 37 investment company portfolios (including the
Fund). As of February 1, 1995, the total assets advised or managed by AIM or its
affiliates were approximately $27.7 billion.

Under the terms of the Advisory Agreement, AIM supervises all aspects of the
Fund's operations and provides investment advisory services to the Fund. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Fund. The Advisory Agreement
also provides that, upon the request of the Board of Directors, AIM may perform
or arrange for certain accounting, shareholder servicing and other
administrative services for the Fund which are not required to be performed by
AIM under the Advisory Agreement. The Board of Directors has made such a
request. As a result, AIM and the Company have entered into an Administrative
Services Agreement, dated as of October 18, 1993, pursuant to which AIM is
entitled to receive from the Fund reimbursement of its costs or such reasonable
compensation as may be approved by the Board of Directors. Currently, AIM is
reimbursed for the services of the Fund's principal financial officer and his
staff, and any expenses related to such services. In addition, pursuant to the
terms of a Transfer Agency and Service Agreement A I M Fund Services, Inc.
("AFS"), a wholly-owned subsidiary of AIM and registered transfer agent,
receives a fee for its provision of shareholder services to the Fund.

For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the Board of Directors,
AIM may take into account sales of shares of the Fund and other funds advised by
AIM in selecting broker-dealers to effect portfolio transactions on behalf of
the Fund.

PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Fund. AIM's investment staff consists of 81 individuals, of which
21 are equity portfolio managers and analysts. While individual members of AIM's
investment staff are assigned primary responsibility for the day-to-day
management of each of AIM's accounts, all accounts are reviewed on a regular
basis by AIM's Investment Policy Committee to ensure that they are being
invested in accordance with the accounts' and AIM's investment policies. The
individuals on the investment team

10
<PAGE> 11

who are primarily responsible for the day-to-day management of the Fund are A.
Dale Griffin, III and Paul A. Rogge. Mr. Griffin is Vice President of the
Company and A I M Capital Management, Inc. ("AIM Capital"), a wholly-owned
subsidiary of AIM. Mr. Griffin, who has had responsibility for the Fund since
its inception, previously was an assistant portfolio manager for other
investment companies and private accounts managed by AIM and AIM Capital, and a
senior loan officer for Citicorp. Mr. Griffin has been associated with AIM since
1989 and has a total of nine years of experience as an investment professional.
Mr. Rogge is Vice President of the Company and AIM Capital. Mr. Rogge, who also
has had responsibility for the Fund since its inception, previously was a global
strategy analyst with Union Bank of Switzerland and completed the University of
Texas graduate business degree program. Mr. Rogge has been associated with AIM
since 1991 and has five years of experience as an investment professional.

FEES AND EXPENSES. For the year ended October 31, 1994, the Fund paid AIM an
amount for its advisory services which represented 0.94% of the Fund's average
daily net assets. Although the fee payable to AIM under the Advisory Agreement
is higher than that paid by most mutual funds which invest in domestic
securities, it is competitive with such fees paid by mutual funds which invest
primarily in foreign securities. The Company believes such fee is justified due
to the higher costs and additional expenses associated with managing and
operating a fund holding primarily foreign equity securities. For the year ended
October 31, 1994, the Fund reimbursed AIM for administrative services costs
pursuant to the Administrative Services Agreement an amount which represented
0.07% of the Fund's average daily net assets. The Class A shares' total expenses
for such year were 1.64% of the Fund's average daily net assets. The Class B
shares' total expenses for the period September 15, 1994 (date operations
commenced) through October 31, 1994 were 2.53% (annualized) of the Fund's
average daily net assets. AIM paid Nationale-Nederlanden International
Investment Advisors B.V. ("NNIA") during the year ended October 31, 1994 an
amount which represented 0.07% of the Fund's average daily net assets pursuant
to a sub-advisory agreement. The sub-advisory agreement with NNIA was terminated
in the first quarter of 1994 and NNIA no longer acts as sub-advisor for the
Fund.

AIM reimbursed AFS for providing shareholder servicing for the Fund for the
fiscal year ended October 31, 1994 an amount which represented 0.06% of the
Fund's average daily net assets.

FEE WAIVERS. AIM may from time to time voluntarily waive or reduce its fees,
while retaining its ability to be reimbursed for such fee prior to the end of
each fiscal year. Fee waivers or reductions, other than those contained in the
Advisory Agreement, may be modified or terminated at any time and without notice
to investors. AIM has voluntarily agreed to waive its advisory fees under the
Advisory Agreement in order to achieve the following annual fee structure for
the Fund: 0.95% of the first $500 million of the Fund's average daily net
assets; 0.90% of the next $500 million of the Fund's average daily net assets;
and 0.85% of the Fund's average daily net assets exceeding $1 billion. For the
fiscal year ended October 31, 1994, AIM waived advisory fees for the Fund which
represented 0.01% of the Fund's average daily net assets.

DISTRIBUTOR. The Company has entered into Master Distribution Agreements on
behalf of the Fund (the "Distribution Agreements") with A I M Distributors, Inc.
("AIM Distributors"), a registered broker-dealer and a wholly-owned subsidiary
of AIM, to act as the distributor of Class A and Class B shares of the Fund. The
address of AIM Distributors is P.O. Box 4739, Houston, Texas 77021-4739. Certain
directors and officers of the Company are affiliated with AIM Distributors.

The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Fund directly and through institutions with whom AIM
Distributors has entered into selected dealer agreements. Under the Distribution
Agreement for the Class B shares, AIM Distributors sells Class B shares at net
asset value subject to a contingent deferred sales charge established by AIM
Distributors. AIM Distributors is authorized to advance to institutions through
whom Class B shares are sold a sales commission under schedules established by
AIM Distributors. The Distribution Agreement for the Class B shares provides
that AIM Distributors (or its assignee or transferee) will receive 0.75% (of the
total 1.00% payable under the distribution plan applicable to Class B shares) of
the Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of AIM Distributors. In the event the Class B shares
Distribution Agreement is terminated, AIM Distributors would continue to receive
payments of asset based sales charges in respect of the outstanding Class B
shares attributable to AIM Distributors; provided, however, that a complete
termination of the Class B shares master distribution plan (as defined in the
plan) would terminate all payments to AIM Distributors. Termination of the Class
B shares distribution plan or Distribution Agreement does not affect the
obligation of Class B shareholders to pay Contingent Deferred Sales Charges.

DISTRIBUTION PLANS. The Company has adopted a master distribution plan
applicable to Class A shares of the Fund (the "Class A Plan") pursuant to Rule
12b-1 under the 1940 Act. Under the Class A Plan, the Fund pays compensation of
0.30% per annum of the average daily net assets attributable to the Class A
shares to AIM Distributors for the purpose of financing any activity which is
primarily intended to result in the sale of Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs, and to implement a program which provides periodic payments to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class A shares of
the Fund.

The Company has also adopted a master distribution plan applicable to Class B
shares of the Fund (the "Class B Plan"). Under the Class B Plan, the Fund pays
distribution expenses at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of such amount, the Fund pays a service fee
of 0.25% of the average daily net assets attributable to the Class B shares to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and

11
<PAGE> 12

own Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset based sales charge. Amounts paid in accordance with the
Class B Plan may be used to finance any activity primarily intended to result in
the sale of Class B shares.

Activities that may be financed under the Class A Plan and the Class B Plan
(collectively, the "Plans") include, but are not limited to: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, overhead, preparation and distribution of advertising
material and sales literature, supplemental payments to dealers and other
institutions such as asset-based sales charges or as payments of service fees
under shareholder service arrangements and the cost of administering the Plans.
These amounts payable by a Fund under the Plans need not be directly related to
the expenses actually incurred by AIM Distributors on behalf of the Fund. Thus,
even if AIM Distributors' actual expenses exceed the fee payable to AIM
Distributors thereunder at any given time, the Company will not be obligated to
pay more than that fee, and, if AIM Distributors' expenses are less than the fee
it receives, AIM Distributors will retain the full amount of the fee. Payments
pursuant to the Plans are subject to any applicable limitations imposed by the
rules of the National Association of Securities Dealers, Inc.

Each of the Plans may be terminated at any time by a vote of the majority of
those directors who are not "interested persons" of the Company or by a vote of
the holders of the majority of the outstanding shares of the applicable class.

Under the Plans, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or any portion of its fee that has not been
assigned or transferred, while retaining its ability to be reimbursed for such
fee prior to the end of each fiscal year.

Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Fund pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent, for the Fund in
making such payments. The Fund will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one
particular class over another.

For additional information concerning the operation of the Plans see the
Statement of Additional Information.

- --------------------------------------------------------------------------------

ORGANIZATION OF THE COMPANY

The Company was organized in 1991 as a Maryland corporation, and is registered
with the Securities and Exchange Commission as an open-end series management
investment company. The Company currently consists of four investment
portfolios: the Fund, AIM Global Aggressive Growth Fund, AIM Global Growth Fund
and AIM Global Income Fund. The Board of Directors may authorize additional
portfolios in the future. Shares of the Fund are offered to investors pursuant
to this Prospectus, while shares of the Company's other portfolios are offered
to investors pursuant to a separate prospectus. The authorized capital stock of
the Company consists of 2,000,000,000 shares of common stock with a par value of
$0.001 per share, of which 200,000,000 shares are designated Class A shares and
200,000,000 shares are designated Class B shares of the Fund, and the balance of
which are designated shares of the Company's other portfolios or are
unclassified.

Class A shares and Class B shares of the Fund represent interests in the
Fund's assets and have identical voting, dividend, liquidation and other rights
on the same terms and conditions, except that each class of shares bears
differing class-specific expenses, is subject to differing sales loads,
conversion features and exchange privileges, and has exclusive voting rights on
matters pertaining to that class' distribution plan.

Except as specifically noted above, shareholders of the Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the Class A shares and Class B
shares of the Fund. However, on matters affecting one portfolio of the Company
or one class of shares, a separate vote of shareholders of that portfolio or
class is required. Shareholders of a portfolio or class are not entitled to vote
on any matter which does not affect that portfolio or class but which requires a
separate vote of another portfolio or class. An example of a matter which would
be voted on separately by shareholders of a portfolio is the approval of an
advisory agreement, and an example of a matter which would be voted on
separately by shareholders of a class of shares is approval of a distribution
plan. When issued, shares of the Fund are fully paid and nonassessable, have no
preemptive or subscription rights, and are fully transferable. Other than the
automatic conversion of Class B shares to Class A shares, there are no
conversion rights. Shares do not have cumulative voting rights, which means that
in situations in which shareholders elect directors, holders of more than 50% of
the shares voting for the election of directors can elect all of the directors
of the Company, and the holders of less than 50% of the shares voting for the
election of directors will not be able to elect any directors.

Under Maryland law and the Company's By-Laws, the Company need not hold an
annual meeting of shareholders unless a meeting is otherwise required under the
1940 Act to elect directors. Shareholders may remove directors from office, and
a meeting of shareholders may be called at the request of the holders of 10% or
more of the Company's outstanding shares.

12
<PAGE> 13

THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 5:30 P.M. CENTRAL TIME).

INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS(R)
- --------------------------------------------------------------------------------

INTRODUCTION TO THE AIM FAMILY OF FUNDS(R)

THE AIM FAMILY OF FUNDS(R) consists of the following mutual funds:

<TABLE>
<S> <C>
AIM AGGRESSIVE GROWTH FUND AIM INCOME FUND
AIM BALANCED FUND AIM INTERNATIONAL EQUITY FUND
AIM CHARTER FUND AIM LIMITED MATURITY TREASURY SHARES
AIM CONSTELLATION FUND AIM MONEY MARKET FUND*
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM MUNICIPAL BOND FUND
AIM GLOBAL GROWTH FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL INCOME FUND AIM TAX-EXEMPT CASH FUND*
AIM GLOBAL UTILITIES FUND AIM TAX-FREE INTERMEDIATE SHARES
AIM GOVERNMENT SECURITIES FUND AIM VALUE FUND
AIM GROWTH FUND AIM WEINGARTEN FUND
AIM HIGH YIELD FUND
</TABLE>

* Shares of AIM TAX-EXEMPT CASH FUND, and Class C shares of AIM MONEY MARKET
FUND, are offered to investors at net asset value, without payment of a sales
charge, as described below. Other funds, including the Class A and Class B
shares of AIM MONEY MARKET FUND, are sold with an initial sales charge or
subject to a contingent deferred sales charge upon redemption, as described
below.

IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.

- --------------------------------------------------------------------------------

HOW TO PURCHASE SHARES

HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds(R) ("AIM Funds"), an investor must submit a fully completed New Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by AIM Distributors to sell shares of
the AIM Funds.

Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for a spousal IRA account is $250. There are no minimum initial
investment requirements applicable to money-purchase/profit-sharing plans,
401(k) plans, IRA/SEP, 403(b) plans or 457 (state deferred compensation) plans
(except that the minimum initial investment for salary deferrals for such plans
is $25), or for investment of dividends and distributions of any of the AIM
Funds into any existing AIM Funds account.

AFS' mailing address is:

A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739

For additional information or assistance, investors should call the Client
Services Department of A I M Fund Services, Inc. at one of the following
telephone numbers:

(713) 626-1919 Extension 5224 (in Houston)
(800) 959-4246 (elsewhere)

Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (713) 626-1919, Extension 5001 (in Houston) or (800) 347-4246
(elsewhere).

MCF 05/95

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<PAGE> 14

HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.

Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:

SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.

PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:

Texas Commerce Bank
ABA 113000609
Attn: AIM Wire Purchase
DDA 00100366807
Fund Name/Reference Number
Shareholder Name
Shareholder Account Number

If wires are received after 4:15 p.m. Eastern Time or during a bank holiday,
purchases will be confirmed at the price determined on the next business day of
the applicable AIM Fund.

- --------------------------------------------------------------------------------

TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS

Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM GOVERNMENT SECURITIES
FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERNATIONAL
EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND and AIM VALUE FUND
(collectively, the "Multiple Class Funds") may be purchased at their respective
net asset value plus a sales charge as indicated below, except that shares of
AIM TAX-EXEMPT CASH FUND and Class C shares (the "Class C shares") of AIM MONEY
MARKET FUND are sold without a sales charge and Class B shares (the "Class B
shares") of the Multiple Class Funds are sold at net asset value subject to a
contingent deferred sales charge payable upon certain redemptions. These
contingent deferred sales charges are described under the caption "How to Redeem
Shares -- Multiple Distribution System." Securities dealers and other persons
entitled to receive compensation for selling or servicing shares of a Multiple
Class Fund may receive different compensation for selling or servicing one
particular class of shares over another class in the same Multiple Class Fund.
Factors an investor should consider prior to purchasing Class A or Class B
shares (or, if applicable, Class C shares) of a Multiple Class Fund are
described below under "Special Information Relating to Multiple Class Funds."
For information on purchasing any of the AIM Funds and to receive a prospectus,
please call (713) 626-1919, Extension 5001 (in Houston) or (800) 347-4246
(elsewhere). As described below, the sales charge otherwise applicable to a
purchase of shares of a fund may be reduced if certain conditions are met. In
order to take advantage of a reduced sales charge, the prospective investor or
his dealer must advise AIM Distributors that the conditions for obtaining a
reduced sales charge have been met. Net asset value is determined in the manner
described under the caption "Determination of Net Asset Value." The following
tables show the sales charge and dealer concession at various investment levels
for the AIM Funds.

MCF 05/95

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<PAGE> 15

SALES CHARGES AND DEALER CONCESSIONS

GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds are: AIM AGGRESSIVE GROWTH FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND and AIM WEINGARTEN FUND; and the Class A shares of each of AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET
FUND and AIM VALUE FUND.

<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
----------------------------- ----------
AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>

There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. Purchases of $1,000,000 or more are at net asset value, subject to
a contingent deferred sales charge of 1% if shares are redeemed prior to 18
months from the end of the calendar month of the date of purchase, as described
under the caption "How to Redeem Shares -- Contingent Deferred Sales Charge
Program for Large Purchases."

GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: AIM TAX-EXEMPT BOND FUND OF CONNECTICUT; and the Class A
shares of each of AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GOVERNMENT SECURITIES FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND and AIM MUNICIPAL BOND FUND.

<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
----------------------------- ----------
AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>

There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. Purchases of $1,000,000 or more are at net asset value, subject to
a contingent deferred sales charge of 1% if shares are redeemed prior to 18
months from the end of the calendar month of the date of purchase, as described
under the caption "How to Redeem Shares -- Contingent Deferred Sales Charge
Program for Large Purchases."

GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE
INTERMEDIATE SHARES.

<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
----------------------------- ----------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE PUBLIC OF THE NET OF THE PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>

There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions.

MCF 05/95

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<PAGE> 16

ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.

In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives will take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.

AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE INTERMEDIATE
SHARES as follows: 1% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such
purchases.

AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.0% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.

In June 1992, AIM Management entered into a strategic alliance with CIGNA
Investments, Inc. ("CII"), pursuant to which AIM became the investment advisor
to certain AIM Funds formerly managed by CII, and AIM Distributors became the
principal underwriter of such funds. As part of the strategic alliance, CIGNA
Securities, Inc. ("CSI") entered into a dealer agreement with AIM Distributors
pursuant to which CSI may be entitled to one-half of the sales load retention of
AIM Distributors on the sale of shares of the AIM Funds if CSI meets certain
annual sales goals related to the sale of certain AIM Funds.

TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than the Money Market Funds, as described below) received by dealers
prior to 4:15 p.m. Eastern Time on any business day of an AIM Fund and either
received by AIM Distributors in its Houston, Texas office prior to 5:00 p.m.
Central Time on that day or transmitted by dealers to the Transfer Agent through
the facilities of the National Securities Clearing Corporation ("NSCC") by 7:00
p.m. Eastern Time on that day, will be confirmed at the price determined as of
the close of that day. Orders received by dealers after 4:15 p.m. Eastern Time
will be confirmed at the price determined on the next business day of the AIM
Fund. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis to AIM Distributors or to the Transfer Agent
through the facilities of NSCC. Any loss resulting from the dealer's failure to
submit an order within the prescribed time frame will be borne by that dealer.
Please see "How to Purchase Shares -- Purchases by Wire" for information on
obtaining a reference number for wire orders, which will facilitate the handling
of such orders and ensure prompt credit to an investor's account. A "business
day" of an AIM Fund is any day on which the New York Stock Exchange is open for
business, except for AIM LIMITED MATURITY TREASURY SHARES, for which a "business
day" is any day on which either the New York Stock Exchange or such fund's
custodian bank is open for business. It is expected that the New York Stock
Exchange will be closed during the next twelve months on Saturdays and Sundays
and on the days on which New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day are
observed by the New York Stock Exchange.

An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.

SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class
Funds, other than AIM MONEY MARKET FUND, currently offer two classes of shares,
and AIM MONEY MARKET FUND currently offers three classes of shares, through
separate distribution systems (the "Multiple Distribution System"). Although the
Class A and Class B shares (and with respect to AIM MONEY MARKET FUND, Class C
shares) of a particular Multiple Class Fund represent an interest in the same
portfolio of investments, each class is subject to a different distribution
structure and, as a result, differing expenses. This Multiple Distribution
System allows investors to select the class that is best suited to the
investor's needs and objectives. In considering the options afforded by the
Multiple Distribution Sys-

MCF 05/95

A-4
<PAGE> 17

tem, investors should consider both the applicable initial sales charge or
contingent deferred sales charge, as well as the ongoing expenses borne by Class
A or Class B shares and, if applicable, Class C shares, and other relevant
factors, such as whether his or her investment goals are long-term or
short-term.

CLASS A SHARES are sold subject to the initial sales charges described
above and are subject to the other fees and expenses described herein.
Class A shares of AIM MONEY MARKET FUND are designed to meet the needs of
an investor who wishes to establish a dollar cost averaging program,
pursuant to which Class A shares an investor owns may be exchanged at net
asset value for Class A shares of another Multiple Class Fund or shares of
another AIM Fund which is not a Multiple Class Fund.

CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Class B Plan payments of 1.00% per
annum on the average daily net assets of a Multiple Class Fund attributable
to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the end of the calendar month in which a purchase was
made are subject to a contingent deferred sales charge ranging from 5% for
redemptions made within the first year to 1% for redemptions made within
the sixth year. No contingent deferred sales charge will be imposed if
Class B shares are redeemed after six years from the end of the calendar
month in which the purchase of Class B shares was made. Redemptions of
Class B shares and associated charges are further described under the
caption "How to Redeem Shares -- Multiple Distribution System."

Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Class B Plan payments associated
with Class B shares. See "Management --Distribution Plans."

CLASS C SHARES of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. Such
shares are, however, subject to the other fees and expenses described in
the prospectus for AIM MONEY MARKET FUND.

SPECIAL INFORMATION RELATING TO MONEY MARKET FUNDS. Shares of AIM MONEY MARKET
FUND or AIM TAX-EXEMPT CASH FUND (the "Money Market Funds") are purchased or
exchanged at the net asset value next determined after acceptance of an order
for purchase or exchange in proper form, except for Class A shares of AIM MONEY
MARKET FUND, which are sold with a sales charge. Net asset value is normally
determined at 12:00 noon and 4:15 p.m. Eastern Time on each business day of AIM
MONEY MARKET FUND and at 4:15 p.m. Eastern Time on each business day of AIM
TAX-EXEMPT CASH FUND. Because each Money Market Fund uses the amortized cost
method of valuing the securities it holds and rounds its per share net asset
value to the nearest whole cent, it is anticipated that the net asset value of
the shares of such funds will remain constant at $1.00 per share. However, there
is no assurance that either Money Market Fund can maintain a $1.00 net asset
value per share. In order to earn dividends with respect to AIM MONEY MARKET
FUND on the same day that a purchase is made, purchase payments in the form of
federal funds must be received by the Transfer Agent before 12:00 noon Eastern
Time on that day. See "How to Purchase Shares -- Purchases by Wire." Purchases
made by payments in any other form, or payments in the form of federal funds
received after such time, will begin to earn dividends on the next business day
following the date of purchase. The Money Market Funds generally will not issue
share certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position. Class B shares of
AIM MONEY MARKET FUND are designed for temporary investment as part of an
investment program in the Class B shares and, unlike shares of most money market
funds, are subject to a contingent deferred sales charge as well as Rule 12b-1
distribution fees and service fees.

SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.

MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500.

REDUCTIONS IN INITIAL SALES CHARGES

Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of shares of AIM
TAX-EXEMPT CASH FUND, Class C shares of AIM MONEY MARKET FUND and Class B shares
of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.

MCF 05/95

A-5
<PAGE> 18

The term "purchaser" means:

- an individual and his or her spouse and minor children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an Individual Retirement Account (IRA),
a single-participant money-purchase/profit-sharing plan or an individual
participant in a 403(b) Plan (unless such 403(b) plan qualifies as the
purchaser as defined below);

- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:

a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);

b. each transmittal must be accompanied by a single check or wire
transfer; and

c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;

- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code, a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension Accounts ("SARSEP")) and 457 plans,
although more than one beneficiary or participant is involved;

- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or

- the discretionary advised accounts of A I M Advisors, Inc. or A I M Capital
Management, Inc.

Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.

(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) AIM TAX-EXEMPT CASH FUND and Class C shares of AIM MONEY MARKET FUND and
(ii) Class B shares of the Multiple Class Funds) within the following 13
consecutive months. By marking the LOI section on the account application and by
signing the account application, the purchaser indicates that he understands and
agrees to the terms of the LOI and is bound by the provisions described below.

Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.

To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attor-

MCF 05/95

A-6
<PAGE> 19

ney to surrender for redemption any or all escrowed shares, to make up such
difference within 60 days of the expiration date. Full shares and any cash
proceeds for a fractional share remaining after such redemption will be released
from escrow.

If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.

(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH
FUND and Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the
Multiple Class Funds) at the time of the proposed purchase. Rights of
Accumulation are also available to holders of the Connecticut General Guaranteed
Account, established for tax-qualified group annuities, for contracts purchased
on or before June 30, 1992. To determine whether or not a reduced initial sales
charge applies to a proposed purchase, AIM Distributors takes into account not
only the money which is invested upon such proposed purchase, but also the value
of all shares of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH FUND and
Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the Multiple
Class Funds) owned by such purchaser, calculated at their then current public
offering price. If a purchaser so qualifies for a reduced sales charge, the
reduced sales charge applies to the total amount of money then being invested by
such purchaser and not just to the portion that exceeds the breakpoint above
which a reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum initial sales charge of 5.50%,
the reduced initial sales charge of 5.25% will apply to the full $20,000
purchase and not just to the $15,000 in excess of the $25,000 breakpoint. To
qualify for obtaining the discount applicable to a particular purchase, the
purchaser or his dealer must furnish AIM Distributors with a list of the account
numbers and the names in which such accounts of the purchaser are registered at
the time the purchase is made.

PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.

Shareholders of record of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND on
September 8, 1986, and shareholders of record of AIM CHARTER FUND on November
17, 1986, may purchase additional shares of the particular AIM Fund(s) whose
shares they owned on such date, at net asset value (without payment of a sales
charge) for as long as they continuously own shares of such AIM Fund(s) having a
market value of at least $500. In addition, discretionary advised clients of any
investment advisors whose clients held shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held shares of AIM CHARTER FUND
on November 17, 1986, and have held such shares at all times subsequent to such
date, may purchase shares of the applicable AIM Fund(s) at the net asset value
of such shares.

The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) AIM Management and
its affiliated companies; (b) any current or retired officer, director, trustee
or employee, or any member of the immediate family (including spouse, minor
children, parents and parents of spouse) of any such person, of AIM Management
or its affiliates or of certain mutual funds which are advised or managed by
AIM, or any trust established exclusively for the benefit of such persons; (c)
any employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, minor children, parents
and parents of spouse) of any such person, or of CIGNA Corporation or of any of
its affiliated companies, or of The Shareholders Services Group, Inc., a
wholly-owned subsidiary of First Data Corporation; (e) any investment company
sponsored by CIGNA Investments, Inc. or any of its affiliated companies for the
benefit of its directors' deferred compensation plans; (f) discretionary advised
clients of AIM or AIM Capital; (g) registered representatives and employees of
dealers who have entered into agreements with AIM Distributors (or financial
institutions that have arrangements with such dealers with respect to the sale
of shares of the AIM Funds) and any member of the immediate family (including
spouse, minor children, parents and parents of spouse) of any such person,
provided that purchases at net asset value are permitted by the policies of such
person's employer; and (h) certain broker-dealers, investment advisers or bank
trust departments that provide asset allocation or similar specialized
investment services to their customers, that charge a minimum annual fee for
such services, and that have entered into an agreement with AIM Distributors
with respect to their use of the AIM Funds in connection with such services.

In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the initial amount invested in
the fund(s) is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, or
(3) such shares are purchased by an employer-sponsored plan with at least 100
eligible employees. Section 403(b) plans sponsored by public educational
institutions

MCF 05/95

A-7
<PAGE> 20

will not be eligible for net asset value purchases based on the aggregate
investment made by the plan or number of eligible employees. Participants in
such plans will be eligible for reduced sales charges based solely on the
aggregate value of their individual investments in the applicable AIM Fund.
PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR SUCH
PLANS. AIM Distributors may pay investment dealers or other financial service
firms up to 1.00% of the net asset value of any shares of the Load Funds, up to
0.10% of the net asset value of any shares of AIM LIMITED MATURITY TREASURY
SHARES, and up to 0.25% of the net asset value of any shares of all other AIM
Funds sold at net asset value to an employee benefit plan in accordance with
this paragraph.

Shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be deposited at
net asset value, without payment of a sales charge, in G/SET series unit
investment trusts, whose portfolios consist exclusively of shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States Treasury
issued notes or bonds bearing no current interest ("Treasury Obligations").
Shares of such funds may also be purchased at net asset value by other unit
investment trusts approved by the Board of Directors of AIM Equity Funds, Inc.
Unit holders of such trusts may elect to invest cash distributions from such
trusts in shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net asset
value, including: (a) distributions of any dividend income or other income
received by such trusts; (b) distributions of any net capital gains received in
respect of shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and proceeds
of the sale of shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND used to
redeem units of such trusts; and (c) proceeds from the maturity of the Treasury
Obligations at the termination dates of such trusts. Prior to the termination
dates of such trusts, a unit holder may invest the proceeds from the redemption
or repurchase of his units in shares of AIM WEINGARTEN FUND or AIM CONSTELLATION
FUND at net asset value, provided: (a) that the investment in AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND shares is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND is being funded exclusively by the proceeds from
the redemption or repurchase of units of such trusts.

FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."

- --------------------------------------------------------------------------------

SPECIAL PLANS

Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.

Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AIM Distributors at the address
provided under "How to Purchase Shares," or by calling the Client Services
Department of AIM Distributors at the phone numbers provided under "How to
Purchase Shares." IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.

SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns Class A shares of a Multiple Class Fund, Class C shares of AIM MONEY
MARKET FUND, or shares of another AIM Fund can arrange for monthly, quarterly or
annual checks in any amount (but not less than $50) to be drawn against the
balance of his account in the designated AIM Fund. Shareholders who own Class B
shares of a Multiple Class Fund can only arrange for monthly or quarterly
withdrawals under a Systematic Withdrawal Plan. Payment of this amount is
normally made on or about the tenth or the twenty-fifth day of each month in
which a payment is to be made. A minimum account balance of $5,000 is required
to establish a Systematic Withdrawal Plan, but there is no requirement
thereafter to maintain any minimum investment. No contingent deferred sales
charge with respect to Class B shares of a Multiple Class Fund will be imposed
on withdrawals made under a Systematic Withdrawal Plan, provided that the
amounts withdrawn under such a plan do not exceed on an annual basis 12% of the
account value at the time the shareholder elects to participate in the
Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to Class B
shares that exceed on an annual basis 12% of such account will be subject to a
contingent deferred sales charge on the amounts exceeding 12% of the initial
account value.

Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.

MCF 05/95

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<PAGE> 21

Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B Shares and Class C Shares of the Multiple Class Funds), it
is disadvantageous to effect such purchases while a Systematic Withdrawal Plan
is in effect.

The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.

AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly investments
may establish an Automatic Investment Plan. Under this plan, on or about the
tenth and/or twenty-fifth day of each month, a draft is drawn on the
shareholder's bank account in the amount specified by the shareholder (minimum
$50 per investment, per account). The proceeds of the draft are invested in
shares of the designated AIM Fund at the applicable offering price determined on
the date of the draft. An Automatic Investment Plan may be discontinued upon 10
days' prior notice to the Transfer Agent or AIM Distributors.

AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; and dividends and distributions attributable to
Class C shares of AIM MONEY MARKET FUND may be reinvested in additional shares
of such fund, in Class A shares of another Multiple Class Fund or in shares of
another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $10,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $10,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.

DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, provided that Class A shares may only be exchanged for Class A shares
of another Multiple Class Fund or for shares of another AIM Fund which is not a
Multiple Class Fund, Class B shares may only be exchanged for Class B shares of
another Multiple Class Fund, and Class C shares of AIM MONEY MARKET FUND may
only be exchanged for Class A shares of another Multiple Class Fund or for
shares of another AIM Fund. The account from which exchanges are to be made must
have a value of at least $5,000 when a shareholder elects to begin this program,
and the exchange minimum is $50 per transaction. All of the accounts that are
part of this program must have identical registrations. The net asset value of
shares purchased under this program may vary, and may be more or less
advantageous than if shares were not exchanged automatically. There is no charge
for entering the Dollar Cost Averaging program. Sales charges may apply, as
described under the caption "Exchange Privilege."

PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE SHARES, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the following prototype
retirement plans available to corporations, individuals and employees of
non-profit organizations and public schools: combination money-
purchase/profit-sharing plans; 403(b) plans; Individual Retirement Account
("IRA") plans; and Simplified Employee Pension ("SEP") plans (collectively,
"retirement accounts"). Information concerning these plans, including the
custodian's fees and the forms necessary to adopt such plans, can be obtained by
calling or writing the AIM Funds or AIM Distributors. Shares of the AIM Funds
are also available for investment through existing 401(k) plans (for both
individuals and employers) adopted under the Code. The plan custodian currently
imposes an annual $10 maintenance fee with respect to each retirement account
for which it serves as the custodian. This fee is generally charged in December.
Each AIM Fund and/or the custodian reserve the right to change this maintenance
fee and to initiate an establishment fee (not to exceed its cost).

MCF 05/95

A-9
<PAGE> 22

- --------------------------------------------------------------------------------

EXCHANGE PRIVILEGE

TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, referred to
herein as the "Load Funds," are sold at a public offering price that includes a
maximum sales charge of 5.50% or 4.75% of the public offering price of such
shares; shares of certain of the AIM Funds, referred to herein as the "Lower
Load Funds," are sold at a public offering price that includes a maximum sales
charge of 1.00% of the public offering price of such shares; and shares of
certain other funds, including the Class C shares of AIM MONEY MARKET FUND,
referred to herein as the "No Load Funds," are sold at net asset value, without
payment of a sales charge. In the event shares of any AIM Fund (other than Class
B shares of the Multiple Class Funds) sold at net asset value are subject to a
contingent deferred sales charge of 1% for 18 months from the end of the
calendar month of the date of purchase, and subsequently are exchanged for
shares of any other AIM Fund, the 18-month period shall be computed from the end
of the calendar month of the date of the first purchase subject to this charge.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."

<TABLE>
<CAPTION>
LOAD FUNDS: LOWER LOAD FUNDS:
----------- -----------------

AIM AGGRESSIVE GROWTH AIM GROWTH FUND -- CLASS A AIM LIMITED MATURITY TREASURY SHARES
FUND AIM HIGH YIELD AIM TAX-FREE INTERMEDIATE SHARES
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM CHARTER FUND AIM INCOME FUND -- CLASS A NO LOAD FUNDS:
AIM CONSTELLATION FUND AIM INTERNATIONAL EQUITY --------------
AIM GLOBAL AGGRESSIVE GROWTH FUND -- CLASS A AIM MONEY MARKET FUND
FUND -- CLASS A AIM MONEY MARKET -- CLASS C
AIM GLOBAL GROWTH FUND -- CLASS A AIM TAX-EXEMPT CASH FUND
FUND -- CLASS A AIM MUNICIPAL BOND
AIM GLOBAL INCOME FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL UTILITIES OF CONNECTICUT
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GOVERNMENT SECURITIES AIM WEINGARTEN FUND
FUND -- CLASS A
</TABLE>

Shares of any AIM Fund may be exchanged for shares of any other AIM Fund,
except that Class A shares and shares of all other AIM Funds may not be
exchanged for Class B shares; Class B shares may be exchanged only for Class B
shares; and Class C shares of AIM MONEY MARKET FUND may not be exchanged for
Class A shares of AIM MONEY MARKET FUND or for Class B shares. DEPENDING UPON
THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE, SHARES BEING
ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR AT THEIR NET
ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE TABLE BELOW
FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:

MULTIPLE CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
- ---------------- ------------------------------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Load Funds...... Net Asset Value Net Asset Value Net Asset Value Not Applicable

Lower Load
Funds......... Net Asset Value if shares were held Net Asset Value Net Asset Value Not Applicable
for at least 30 days; or if shares
were acquired upon exchange of any
Load Fund; or if shares were acquired
upon exchange from any Lower Load
Fund and such shares were held for at
least 30 days. (No exchange privilege
is available for the first 30 days
following the purchase of the Lower
Load Fund shares.)
</TABLE>

(Table continued on following page)

MCF 05/95

A-10
<PAGE> 23

<TABLE>
<CAPTION>
MULTIPLE CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
- ---------------- ------------------------------------- --------------------- ---------------- --------------
<S> <C> <C> <C> <C>
No Load Funds............ Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not Applicable
directly purchased. Net Asset Value Load shares were
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund exchange of shares of
or any Lower Load Fund; Net Asset any Load Fund or any
Value if No Load shares were acquired Lower Load Fund;
upon exchange of Lower Load Fund otherwise,
shares and were held for at least 30 Offering Price.
days following the purchase of the
Lower Load Fund shares. (No exchange
privilege is available for the first
30 days following the acquisition of
the Lower Load Fund shares.)
Multiple Class
Funds:
Class B................ Not Applicable Not Applicable Not Applicable Net Asset Value

FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:

Load Funds............... Net Asset Value Net Asset Value Net Asset Value Not Applicable

Lower Load Funds......... Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable
acquired upon exchange of any Load
Fund. Otherwise, difference in sales
charge will apply.

No Load Funds............ Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not Applicable
directly purchased. Net Asset Value Load shares were
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund. exchange of shares of
Difference in sales charge will apply any Load Fund or any
if No Load shares were acquired upon Lower Load Fund;
exchange of Lower Load Fund shares. otherwise, Offering
Price.
Multiple Class
Funds:
Class B................ Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>

An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A and Class B shares of a Multiple Class Fund cannot be
exchanged for each other), except that Class C shares of AIM MONEY MARKET FUND
may be exchanged for Class A shares of another Multiple Class Fund; (b) the
dollar amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the fund acquired through such exchange; (c) the
shares of the fund acquired through exchange must be qualified for sale in the
state in which the shareholder resides; (d) the exchange must be made between
accounts having identical registrations and addresses; (e) the full amount of
the purchase price for the shares being exchanged must have already been
received by the fund; (f) the account from which shares have been exchanged must
be coded as having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (g) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten days, and all other shares are held in an account
for at least one day, prior to the exchange; and (h) certificates representing
shares must be returned before shares can be exchanged.

THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.

THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.

There is no fee for exchanges among the AIM Funds. A service fee of $5 per
transaction will, however, be charged by AIM Distributors on accounts of market
timing investment firms to help to defray the costs of maintaining an automated
exchange service. This service fee will be charged against the market timing
account from which shares are being exchanged.

Shares to be exchanged are redeemed at their net asset value as determined at
the close of business on the day that an exchange request in proper form
(described below) is received by AFS in its Houston, Texas office, provided that
such request is received prior to 4:15 p.m. Eastern Time. Exchange requests
received after this time will result in the redemption of shares at their net
asset value as determined at the close of business on the next business day.
Normally, shares of an AIM Fund to be acquired by exchange are purchased at
their net asset value or applicable offering price, as the case may be,
determined on the date that such request is received by AIM Distributors, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and

MCF 05/95

A-11
<PAGE> 24

the release of the exchange proceeds is delayed for the foregoing five-day
period, such shareholder will not begin to accrue dividends until the sixth
business day after the exchange. Shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten days
from the date that the check is received. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."

In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.

EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AIM Distributors. The request should contain the account
registration and account number, the dollar amount or number of shares to be
exchanged, and the names of the funds from which and into which the exchange is
to be made. The request should comply with all of the requirements for
redemption by mail, except those required for redemption of IRAs. See "How to
Redeem Shares."

EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AIM Distributors at the appropriate telephone number
indicated under the caption "How to Purchase Shares." If a shareholder is unable
to reach AIM Distributors by telephone, he may also request exchanges by
telegraph or use overnight courier services to expedite exchanges by mail, which
will be effective on the business day received by the applicable fund(s) as long
as such request is received prior to 4:15 p.m. Eastern Time. The Transfer Agent
and AIM Distributors will not be liable for any loss, expense or cost arising
out of any telephone exchange request that they reasonably believe to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. Procedures for verification of telephone transactions
may include recordings of telephone transactions (maintained for six months),
requests for confirmation of the shareholder's Social Security number and
current address, and mailings of confirmations promptly after the transaction.

EXCHANGES OF CLASS B SHARES. A contingent deferred sales charge will not be
imposed in connection with exchanges among Class B shares of Multiple Class
Funds. For purposes of determining a shareholder's holding period of Class B
shares in the calculation of the applicable contingent deferred sales charge,
the period of time during which Class B shares were held prior to an exchange
will be added to the holding period of Class B shares acquired in an exchange.

- --------------------------------------------------------------------------------

HOW TO REDEEM SHARES

Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.

MULTIPLE DISTRIBUTION SYSTEM. Class B shares purchased under the Multiple
Distribution System may be redeemed on any business day of a Multiple Class Fund
at the net asset value per share next determined following receipt of the
redemption order, as described under the caption "Timing and Pricing of
Redemption Orders," less the applicable contingent deferred sales charge shown
in the table below. No deferred sales charge will be imposed (i) on redemptions
of Class B shares following six years from the end of the calendar month in
which such shares were purchased, (ii) on Class B shares acquired through
reinvestments of dividends and distributions attributable to Class B shares or
(iii) on amounts that represent capital appreciation in the shareholder's
account above the purchase price of the Class B shares.

<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
------------- ---------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>

In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends

MCF 05/95

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<PAGE> 25

and distributions; third, of shares held for more than six years following the
end of the calendar month in which the purchase was made; and fourth, of shares
held less than six years following the end of the calendar month in which the
purchase was made. The applicable sales charge will be applied against the
lesser of the current market value of shares redeemed or their original cost.

Contingent deferred sales charges on Class B shares will be waived on
redemptions (1) following the registered shareholder's (or in the case of joint
accounts, all registered joint owners') death or disability, as defined in
Section 72(m)(7) of the Code (provided AIM Distributors is notified of such
death or disability at the time of the redemption request and is provided with
satisfactory evidence of such death or disability), (2) in connection with
certain distributions from individual retirement accounts, custodial accounts
maintained pursuant to Code Section 403(b), deferred compensation plans
qualified under Code Section 457 and plans qualified under Code Section 401
(collectively, "Retirement Plans"), (3) pursuant to a Systematic Withdrawal
Plan, provided that amounts withdrawn under such plan do not exceed on an annual
basis 12% of the value of the shareholder's investment in Class B shares at the
time the shareholder elects to participate in the Systematic Withdrawal Plan,
(4) effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund and (5) effected by AIM of its investment
in Class B shares. Waiver category (1) above applies only to redemptions: (i)
made within one year following death or initial determination of disability and
(ii) of Class B shares held at the time of death or initial determination of
disability. Waiver category (2) above applies only to redemptions resulting
from: (i) required minimum distributions to plan participants or beneficiaries
who are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value; (ii) in kind transfers of assets where the
participant or beneficiary notifies AIM Distributors of such transfer no later
than the time such transfer occurs; (iii) tax-free rollovers or transfers of
assets to another Retirement Plan invested in Class B shares of one or more
Multiple Class Funds; (iv) tax-free returns of excess contributions or returns
of excess deferral amounts; and (v) distributions upon the death or disability
(as defined in the Code) of the participant or beneficiary.

CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B shares of a Multiple Class Fund and purchases of shares of
the No Load Funds, a contingent deferred sales charge of 1% applies to purchases
of $1,000,000 or more that are redeemed within 18 months of the end of the
calendar month of the date of purchase. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. No such
charge will be imposed upon exchanges unless the shares acquired by exchange are
redeemed within 18 months of the end of the calendar month in which the shares
were purchased. In determining whether a contingent deferred sales charge is
payable, and the amount of any such charge, shares not subject to the contingent
deferred sales charge are redeemed first (including shares purchased by
reinvestment of dividends and capital gains distributions and amounts
representing increases from capital appreciation), and then other shares are
redeemed in the order of purchase. The charge will be waived in the following
circumstances:

(1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under
Section 403(b) of the Code and sponsored by nonprofit organizations as
defined under Section 501(c)(3) of the Code, where (a) the initial amount
invested by a Plan in one or more of the AIM Funds is at least $1,000,000,
(b) the sponsor of a Plan signs a letter of intent to invest at least
$1,000,000 in one or more of the AIM Funds, or (c) the shares being
redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section
403(b) of the Code which are sponsored by public educational institutions
shall qualify under (a), (b) or (c) above on the basis of the value of each
Plan participant's aggregate investment in the AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible
employees;

(2) redemptions of shares following the registered shareholder's (or
in the case of joint accounts, all registered joint owners') death or
disability, as defined in Section 72(m)(7) of the Code; and

(3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at
least $1,000,000.

REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to either
the Transfer Agent or AIM Distributors. Upon receipt of a redemption request in
proper form, payment will be made as soon as practicable, but in any event will
normally be made within seven days after receipt. However, in the event of a
redemption of shares purchased by check, the investor may be required to wait up
to ten days before the redemption proceeds are sent. See "Timing of Purchase
Orders."

Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.

MCF 05/95

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<PAGE> 26

In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59 1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.

REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA-SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth at that item of the account application if they reasonably believe such
request to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions. Procedures for verification of
telephone transactions may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security number and current address, and mailings of confirmations
promptly after the transaction.

EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to 4:15 p.m. Eastern Time, the redemption will be made at the net asset
value determined at 4:15 p.m. Eastern Time and payment will generally be
transmitted on the next business day.

REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND and Class C Shares of AIM MONEY
MARKET FUND). After completing the appropriate authorization form, shareholders
may use checks to effect redemptions from AIM TAX-EXEMPT CASH FUND and the Class
C Shares of AIM MONEY MARKET FUND. This privilege does not apply to retirement
accounts or qualified plans. Checks may be drawn in any amount of $250 or more.
Checks drawn against insufficient shares in the account or against shares held
less than ten days, or in amounts of less than the applicable minimum will be
returned to the payee. The payee of the check may cash or deposit it in the same
way as an ordinary bank check. When a check is presented to the Transfer Agent
for payment, the Transfer Agent will cause a sufficient number of shares of such
fund to be redeemed to cover the amount of the check. Shareholders are entitled
to dividends on the shares redeemed through the day on which the check is
presented to the Transfer Agent for payment.

TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds are
redeemed at their net asset value next computed after a request for redemption
in proper form (including signature guarantees and other required documentation
for written redemptions) is received by the Transfer Agent or AIM Distributors,
except that Class B shares of the Multiple Class Funds, and Class A shares of
the Multiple Class Funds and shares of the other AIM Funds that are subject to
the contingent deferred sales charge program for large purchases described
above, may be subject to the imposition of deferred sales charges that will be
deducted from the redemption proceeds. See "Multiple Distribution System" and
"Contingent Deferred Sales Charge Program for Large Purchases." Orders for the
redemption of shares received in proper form by dealers prior to 4:15 p.m.
Eastern Time on any business day of an AIM Fund and either received by AIM
Distributors in its Houston, Texas office prior to 5:00 p.m. Central Time on
that day or transmitted by dealers to the Transfer Agent through the facilities
of NSCC by 7:00 p.m. Eastern Time on that day, will be confirmed at the price
determined as of the close of that day. Orders received by dealers after 4:15
p.m. Eastern Time will be confirmed at the price determined on the next business
day of an AIM Fund. It is the responsibility of the dealer to ensure that all
orders are transmitted on a timely basis to AIM Distributors or to the Transfer
Agent through the facilities of NSCC. Any resulting loss from the dealer's
failure to submit a request for redemption within the prescribed time frame will
be borne by that dealer. Telephone redemption requests must be made by 4:15 p.m.
Eastern Time on any business day of an AIM Fund and will be confirmed at the
price determined as of the close of that day. No AIM Fund will accept requests
which specify a particular date for redemption or which specify any special
conditions.

Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Timing of Purchase
Orders." A charge for special handling (such as wiring of funds or expedited
delivery services) may be made by the Transfer Agent. The right of redemption
may not be suspended or the date of payment upon redemption postponed except
under unusual circumstances such as when trading on the New York Stock Exchange
is restricted or suspended. Payment of the proceeds of redemptions relating to
shares for which checks sent in payment have not yet cleared will be delayed
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received.

SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when

MCF 05/95

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<PAGE> 27

signature guarantees are required are: (1) redemptions by mail in excess of
$50,000; (2) redemptions by mail if the proceeds are to be paid to someone other
than the name(s) in which the account is registered; (3) written redemptions
requesting proceeds to be sent by wire to other than the bank of record for the
account; (4) redemptions requesting proceeds to be sent to a new address or an
address that has been changed within the past 30 days; (5) requests to transfer
the registration of shares to another owner; (6) telephone exchange and
telephone redemption authorization forms; (7) changes in previously designated
wiring instructions; and (8) written redemptions or exchanges of shares
previously reported as lost, whether or not the redemption amount is under
$50,000 or the proceeds are to be sent to the address of record. These
requirements may be waived or modified upon notice to shareholders.

Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission, and further provided that such guarantor institution is
listed in one of the reference guides contained in the Transfer Agent's current
Signature Guarantee Standards and Procedures, such as certain domestic banks,
credit unions, securities dealers, or securities exchanges. The Transfer Agent
will also accept signatures with either: (1) a signature guaranteed with a
medallion stamp of the STAMP Program, or (2) a signature guaranteed with a
medallion stamp of the New York Stock Exchange Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AIM Distributors.

REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in shares of the
AIM Fund from which the redemption was made at the net asset value next computed
after receipt by AIM Distributors of the funds to be reinvested. The shareholder
must ask AIM Distributors for such privilege at the time of reinvestment. A
realized gain on the redemption is taxable, and reinvestment will not alter any
capital gains payable. If there has been a loss on the redemption, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in (or exchanged for) shares of the same fund
within 90 days of the payment of the sales charge, the shareholder's basis in
the fund shares redeemed may not include the amount of the sales charge paid,
thereby reducing the loss or increasing the gain recognized from the redemption.
Each AIM Fund may amend, suspend or cease offering this privilege at any time as
to shares redeemed after the date of such amendment, suspension or cessation.
This privilege may only be exercised once each year by a shareholder with
respect to each AIM Fund.

Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares of the Multiple Class Funds or shares of
any other AIM Fund, and who subsequently reinvest a portion or all of the value
of the redeemed shares in shares of the same AIM Fund within 90 days after such
redemption may do so at net asset value if such privilege is claimed at the time
of reinvestment. Such reinvested proceeds will not be subject to either a
front-end sales charge at the time of reinvestment or an additional contingent
deferred sales charge upon subsequent redemption. In order to exercise this
reinvestment privilege, the shareholder must notify AIM Distributors of his or
her intent to do so at the time of reinvestment. This reinvestment privilege
does not apply to Class B shares.

- --------------------------------------------------------------------------------

DETERMINATION OF NET ASSET VALUE

The net asset value per share (or share price) of each AIM Fund is determined
as of 4:15 p.m. Eastern Time (12:00 noon and 4:15 p.m. Eastern Time with respect
to AIM MONEY MARKET FUND), on each "business day" of a fund as previously
defined. In the event the New York Stock Exchange closes early (i.e. before 4:00
p.m. Eastern Time) on a particular day, the net asset value of an AIM Fund's
share will be determined 15 minutes following the close of the New York Stock
Exchange on such day. The net asset value per share is calculated by subtracting
a fund's liabilities from its assets and dividing the result by the total number
of fund shares outstanding. The determination of each fund's net asset value per
share is made in accordance with generally accepted accounting principles. Among
other items, a fund's liabilities include accrued expenses and dividends
payable, and its total assets include portfolio securities valued at their
market value, as well as income accrued but not yet received. Securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the fund's officers and
in accordance with methods which are specifically authorized by its governing
Board of Directors or Trustees. Short-term obligations with maturities of 60
days or less, and the securities held by the Money Market Funds, are valued at
amortized cost as reflecting fair value. AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT and AIM TAX-FREE INTERMEDIATE SHARES 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.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, 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 an AIM Fund's
shares are determined as of such times. 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

MCF 05/95

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<PAGE> 28

which will not be reflected in the computation of an AIM 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 or Trustees.

- --------------------------------------------------------------------------------

DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS

Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.

<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
- ---------------------------------------- ----------------------- --------------- ---------------
<S> <C> <C> <C>
AIM AGGRESSIVE GROWTH FUND.............. declared and paid annually annually annually
AIM BALANCED FUND....................... declared and paid quarterly quarterly annually
AIM CHARTER FUND........................ declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................. declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND....... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................. declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................. declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND............... declared daily; paid monthly annually annually
AIM GOVERNMENT SECURITIES FUND.......... declared daily; paid monthly annually annually
AIM GROWTH FUND......................... declared and paid annually annually annually
AIM HIGH YIELD FUND..................... declared daily; paid monthly annually annually
AIM INCOME FUND......................... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND........... declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY SHARES.... declared daily; paid monthly quarterly annually
AIM MONEY MARKET FUND................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................. declared daily; paid monthly annually annually
IM TAX-EXEMPT BOND FUND OF
CONNECTICUT........................... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND................ declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE SHARES........ declared daily; paid monthly annually annually
AIM VALUE FUND.......................... declared and paid annually annually annually
AIM WEINGARTEN FUND..................... declared and paid annually annually annually

</TABLE>

In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.

All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Class A, Class B or Class C shares
are reinvested in additional shares of such Class, absent an election by a
shareholder to receive cash or to have such dividends and distributions
reinvested in Class A or Class B shares of another Multiple Class Fund, to the
extent permitted. For funds that do not declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date. Shareholders may elect, by written notice to AIM
Distributors, to receive such distributions, or the dividend portion thereof, in
cash, or to invest such dividends and distributions in shares of another fund in
the AIM Funds; provided that (i) dividends and distributions attributable to
Class B shares may only be reinvested in Class B shares, (ii) dividends and
distributions attributable to Class A shares may not be reinvested in Class B
shares, and (iii) dividends and distributions attributable to the Class C shares
of AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that
Fund or in any Class B shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact AIM Distributors
at any time to obtain a form to authorize such reinvestments in another AIM
Fund. Such reinvestments into the AIM Funds are not subject to sales charges,
and shares so purchased are automatically credited to the account of the
shareholder.

Dividends on Class B shares are expected to be lower than those for Class A or
Class C shares because of higher distribution fees paid by Class B shares.
Dividends on Class A, Class B and Class C shares may also be affected by other
class-specific expenses.

Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to AIM Distributors and are effective as to
any subsequent payment if such notice is received by AIM Distributors prior to
the record date of such pay-

MCF 05/95

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<PAGE> 29

ment. Any dividend and distribution election remains in effect until AIM
Distributors receives a revised written election by the shareholder.

Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.

TAX MATTERS

Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gain net income that are distributed to
shareholders. Each fund, for purposes of determining taxable income,
distribution requirements and other requirements of Subchapter M, is treated as
a separate corporation. Therefore, no fund may offset its gains against another
fund's losses and each fund must individually comply with all of the provisions
of the Code which are applicable to its operations.

TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE
INTERMEDIATE SHARES (the "Tax-Exempt Funds") which are exempt from federal tax.
Dividends paid by a fund (other than capital gain distributions) may qualify for
the federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM
GOVERNMENT SECURITIES FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY SHARES, AIM MONEY
MARKET FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT,
AIM TAX-EXEMPT CASH FUND or AIM TAX-FREE INTERMEDIATE SHARES will qualify for
this dividends received deduction. Shortly after the end of each year,
shareholders will receive information regarding the amount and federal income
tax treatment of all distributions paid during the year. No gain or loss will be
recognized by shareholders upon the automatic conversion of Class B shares of a
Multiple Class Fund into Class A shares of such Fund.

For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.

TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.

Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on income dividends and distributions (other than
exempt-interest dividends and capital gain dividends). Under applicable treaty
law, residents of treaty countries may qualify for a reduced rate of withholding
or a withholding exemption.

DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.

TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and other taxable securities. For additional
information concerning the alternative minimum tax and certain collateral tax
consequences of the receipt of exempt-interest dividends, see the Statements of
Additional Information applicable to the Tax-Exempt Funds.

MCF 05/95

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<PAGE> 30

The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually and will be applied uniformly to all dividends declared
during the year. This percentage may differ from the actual percentages for any
particular day.

To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.

From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.

AIM GOVERNMENT SECURITIES FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.

AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND and AIM GLOBAL INCOME FUND -- SPECIAL TAX INFORMATION. For taxable
years in which it is eligible to do so, each of these funds may elect to pass
through to shareholders credits for foreign taxes paid. If the fund makes such
an election, a shareholder who receives a distribution (1) will be required to
include in gross income his proportionate share of foreign taxes allocable to
the distribution and (2) may claim a credit or deduction for such share for his
taxable year in which the distribution is received, subject to the general
limitations imposed on the allowance of foreign tax credits and deductions.
Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of the fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the fund would not be able to pay ordinary income dividends.

- --------------------------------------------------------------------------------

GENERAL INFORMATION

CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM LIMITED MATURITY
TREASURY SHARES, for which The Bank of New York, 110 Washington Street, New
York, New York 10286, serves as custodian. Texas Commerce Bank National
Association, P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian
for retail purchases of the AIM Funds.

A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a
wholly-owned subsidiary of AIM, serves as each AIM Fund's transfer agent and
dividend payment agent.

LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and has passed
upon the legality of the shares offered pursuant to this Prospectus.

SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (713) 626-1919 (extension 5224) (in Houston), or toll-free at (800)
959-4246 (elsewhere). The Transfer Agent may impose certain copying charges for
requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.

OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. A Statement of Additional Information has been filed with the Securities
and Exchange Commission and is available upon request and without charge, by
writing or calling AIM Distributors. This Prospectus omits certain information
contained in the registration statement filed with the Securities and Exchange
Commission. Copies of the registration statement, including items omitted from
this Prospectus, may be obtained from the Securities and Exchange Commission by
paying the charges prescribed under its rules and regulations.

MCF 05/95

A-18
<PAGE> 31

(This page intentionally left blank)

<PAGE> 32

[AIM LOGO] THE AIM FAMILY OF FUNDS(R)

Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173

Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston TX 77210-4739

Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739

Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Bldg.
Houston, TX 77002

For more complete information about any other Fund in The AIM Family of
Funds(R), including charges and expenses, please call (800) 347-1919, (713)
626-1919 or write to A I M Distributors, Inc. and request a free prospectus.
Please read the prospectus carefully before you invest or send money.
<PAGE> 33

STATEMENT OF ADDITIONAL INFORMATION

AIM INTERNATIONAL EQUITY FUND

(A SERIES PORTFOLIO OF AIM INTERNATIONAL FUNDS, INC.)

11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
(713) 626-1919

_________________________

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE ABOVE-NAMED FUND,
A COPY OF WHICH MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P.O. BOX 4739, HOUSTON, TEXAS 77210-4739,
OR BY CALLING (713) 626-1919 (IN HOUSTON)
OR (800) 347-4246 (ELSEWHERE)

_________________________

Statement of Additional Information Dated: March 1, 1995 as revised May 2, 1995
Relating to the Prospectus Dated: March 1, 1995 as revised May 2, 1995
<PAGE> 34
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

GENERAL INFORMATION ABOUT THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company and its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Total Return Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Brokerage Commissions Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

HEDGING STRATEGIES AND OTHER INVESTMENT TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Hedging Foreign Currency Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Writing Covered Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Writing Covered Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Purchasing Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Purchasing Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Combined Option Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Stock Index Options and Futures and Financial Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Restrictions on the Use of Futures Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Restrictions on OTC Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Asset Coverage for Futures and Options Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Risk Factors in Options, Futures, Forward and Currency Transactions . . . . . . . . . . . . . . . . . . . . 11
Repurchase Agreements and Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Remuneration of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AIM Funds Retirement Plan for Eligible Directors/Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 21
Deferred Compensation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Investment Advisory and Administrative Services Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 22

THE DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

NET ASSET VALUE DETERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>

i
<PAGE> 35
<TABLE>
<S> <C>
Reinvestment of Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>

ii
<PAGE> 36
INTRODUCTION

AIM International Funds, Inc. (the "Company") is a series mutual fund.
The rules and regulations of the Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information, which relates to the Company's AIM International Equity Fund
series (the "Fund"), is included in a Prospectus, dated March 1, 1995 as
revised May 2, 1995 (the "Prospectus"). Copies of the Prospectus and
additional copies of this Statement of Additional Information may be obtained
without charge by writing the distributor of the Fund's shares, A I M
Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston, Texas
77210-4739, or by calling (713) 626-1919 (in Houston) or (800) 347-4246
(elsewhere). Investors must receive a Prospectus before they invest in the
Fund.

This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Fund. Some of
the information required to be in this Statement of Additional Information is
also included in the Fund's current Prospectus, and in order to avoid
repetition, reference will be made herein to sections of the Prospectus.
Additionally, the Prospectus and this Statement of Additional Information omit
certain information contained in the Company's Registration Statement filed
with the SEC. Copies of the Registration Statement, including items omitted
from the Prospectus and this Statement of Additional Information, may be
obtained from the SEC by paying the charges prescribed under its rules and
regulations.

GENERAL INFORMATION ABOUT THE COMPANY

THE COMPANY AND ITS SHARES

The Company was organized in 1991 as a Maryland corporation, and is
registered with the SEC as a diversified, open-end, series, management
investment company. The Company currently consists of four portfolios, one of
which is the Fund. Other portfolios of the Company, whose shares are offered
through a separate prospectus and statement of additional information are: AIM
Global Aggressive Growth Fund, AIM Global Growth Fund and AIM Global Income
Fund. Each portfolio of the Company offers both Class A shares and Class B
shares.

As used in the Prospectus, the term "majority of the outstanding
shares" of the Company, the Fund, or a class of the Fund means, respectively,
the vote of the lesser of (i) 67% or more of the shares of the Company, the
Fund or such class present at a meeting of shareholders, if the holders of more
than 50% of the outstanding shares of the Company, the Fund or such class are
present or represented by proxy or (ii) more than 50% of the outstanding shares
of the Company, the Fund or such class.

Each share of the Fund is entitled to one vote, to participate equally
in dividends and distributions declared by the Board of Directors with respect
to the Fund and, upon liquidation of the Fund, to participate proportionately
in the Fund's net assets remaining after satisfaction of the Fund's outstanding
liabilities. Fractional shares have proportionately the same rights, including
voting rights, as are provided for full shares.

PERFORMANCE

TOTAL RETURN CALCULATIONS

Total returns quoted in advertising reflect all aspects of the Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value per share

1
<PAGE> 37
over the period. Average annual total returns are calculated by determining
the growth or decline in value of a hypothetical investment in the Fund over a
stated period of time, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. While average annual total returns
are a convenient means of comparing investment alternatives, investors should
realize that the Fund's performance is not constant over time, but changes from
year to year, and that average annual total return does not represent the
actual year-to-year performance of the Fund.

In addition to average annual total return, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions, over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns and other performance information
may be quoted numerically or in tables, graphs or similar illustrations. Total
returns may be quoted with or without taking the Class A shares' 5.50% maximum
sales charge, or the Class B shares' 5% maximum contingent deferred sales
charge ("CDSC") into account. Excluding sales charges from a total return
calculation produces a higher total return figure.

HISTORICAL PORTFOLIO RESULTS

The total returns were as follows:

Class A shares of the Fund for the one-year period ended October 31, 1994 and
the period April 7, 1992 (date of effectiveness of the Fund's registration
statement) through October 31, 1994 -

<TABLE>
<CAPTION>
Average Annual
Total Return Cumulative Return
---------------- -----------------
<S> <C> <C>
One year ended 10/31/94 4.83% 4.83%
4/7/92 - 10/31/94 16.00% 46.44%
</TABLE>

Class B shares of the Fund for the period September 15, 1994 (date operations
commenced) through October 31, 1994 -

<TABLE>
<CAPTION>
Average Annual
Total Return* Cumulative Return
----------------- -----------------
<S> <C> <C>
Period 09/15/94-10/31/94 - -4.48%
</TABLE>

During the one-year period ended October 31, 1994, a hypothetical
$1,000 investment in the Class A shares of the Fund at the beginning of such
period would have been worth $1,048.25. For the period from April 7, 1992
through October 31, 1994, a hypothetical $1,000 investment in the Class A
shares of the Fund would have been worth $1,464.36. Both of such figures
assume the maximum sales charge was paid and all distributions were reinvested.
During the period September 15, 1994 through October 31, 1994, a hypothetical
$1,000 investment in the Class B shares of the Fund at the beginning of such
period would have been worth $955.22.

__________________________________

* The Funds do not provide average annual total return for periods of
less than one year.

2
<PAGE> 38
The Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper Analytical Services, Inc. and other independent services
which monitor the performance of mutual funds. The Fund may also advertise
mutual fund performance rankings which have been assigned to the Fund by such
monitoring services. The Fund's performance may also be compared in
advertising to the performance of comparative benchmarks such as the Consumer
Price Index, the Standard and Poor's 500 Stock Index, The Financial Times -
Actuaries World Indices (a wide range of comprehensive measures of stock price
performance for the world's major stock markets and regional areas), Morgan
Stanley Capital International Indices, including the EAFE Index, Pacific Basin
Index and Pacific Ex Japan Index (a widely recognized series of indices in
international market performance), and indices of stocks comparable to those in
which the Fund invests.

From time to time, the Fund's advertising may include discussions of
general domestic and international economic conditions and interest rates, and
may make reference to international economic sources such as The Bundesbank
(the German equivalent of the U.S. Federal Reserve Board). The Fund's
advertising may also include references to the use of the Fund as part of an
individual's overall retirement investment program.

From time to time, the Fund's sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information
about mutual funds, variable annuities, dollar-cost averaging, stocks, bonds,
money markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning and inflation. Also from time
to time, sales literature and/or advertisements for the Fund may disclose the
largest holdings in the Fund's portfolio.

PORTFOLIO TRANSACTIONS AND BROKERAGE

GENERAL BROKERAGE POLICY

Subject to policies established by the Board of Directors of the
Company, A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and
sell securities for the Fund, for the selection of broker-dealers, for the
execution of the Fund's investment portfolio transactions, for the allocation
of brokerage fees in connection with such transactions, and where applicable,
for the negotiation of commissions and spreads on transactions. AIM's primary
consideration in effecting a security transaction is to obtain the best net
price and the most favorable execution of the order. While AIM generally seeks
reasonably competitive commission rates, the Fund does not necessarily pay the
lowest commission or spread available.

A portion of the securities in which the Fund invests are traded in
over-the-counter ("OTC") markets, and in such transactions, the Fund deals
directly with the dealers who make markets in the securities involved, except
in those circumstances where better prices and executions are available
elsewhere. Portfolio transactions placed through dealers serving as primary
market makers are effected at net prices, generally without commissions as
such, but which include compensation in the form of mark up or mark down.

Traditionally, commission rates have not been negotiated on stock
markets outside the United States. In recent years, however, an increasing
number of overseas stock markets have adopted a system of negotiated rates,
although a number of markets continue to be subject to an established schedule
of minimum commission rates.

Foreign equity securities may be held by the Fund in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or
other securities representing underlying securities of

3
<PAGE> 39
foreign issuers, or securities convertible into foreign equity securities.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs are receipts
issued in Europe which evidence a similar ownership arrangement. Generally,
ADRs, in registered form, are designed for use in the United States securities
markets, and EDRs, in bearer form, are designed for use in European securities
markets. ADRs and EDRs may be listed on stock exchanges, or traded in OTC
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated
commission rates.

AIM may from time to time determine target levels of commission
business for AIM to transact with various brokers on behalf of its clients
(including the Fund) over a certain time period. The target levels will be
determined based upon the following factors, among others: (1) the execution
services provided by the broker; (2) the research services provided by the
broker; and (3) the broker's attitude toward and interest in mutual funds in
general and in the Fund and other mutual funds advised by AIM or A I M Capital
Management, Inc. (collectively, the "AIM Funds") in particular. No specific
formula will be used in connection with any of the foregoing considerations in
determining the target levels. However, if a broker has indicated a certain
level of desired commissions in return for certain research services provided
by the broker, this factor will be taken into consideration by AIM.

Subject to the overall objective of obtaining best net price and most
favorable execution for the Fund, AIM may also consider sales of shares of the
Fund and of the other AIM Funds as a factor in the selection of broker-dealers
to execute portfolio transactions for the Fund.

AIM will seek, whenever possible, to recapture for the benefit of the
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which may be recaptured are the
soliciting dealer fees on the tender of an account's portfolio securities in a
tender or exchange offer.

The Fund is not under any obligation to deal with any broker or group
of brokers in the execution of transactions in portfolio securities. Brokers
who provide supplemental investment research to AIM may receive orders for
transactions by the Fund. Information so received will be in addition to and
not in lieu of the services required to be performed by AIM under its
agreements with the Fund, and the expenses of AIM will not necessarily be
reduced as a result of the receipt of such supplemental information. Certain
research services furnished by broker-dealers may be useful to AIM in
connection with its services to other advisory clients, including the other AIM
Funds. Also, the Fund may pay a higher price for securities or higher
commissions in recognition of research services furnished by broker-dealers.

Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Fund from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The
Fund has obtained an order of exemption from the SEC which permits the fund to
engage in certain transactions with such 5% holders, if the Fund complies with
conditions and procedures designed to ensure that such transactions are
executed at fair market value and present no conflicts of interest.

AIM and its affiliates manage several other investment accounts, some
of which may have investment objectives similar to those of the Fund. It is
possible that, at times, identical securities will be appropriate for
investment by the Fund and by one or more of such investment accounts. The
position of each account, however, in the securities of the same issue may vary
and the length of time that each account may choose to hold its investment in
the securities of the same issue may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities is consistent with the investment policies of
the Fund and one or more of these accounts, and is considered at or about the
same time, transactions in such securities will be allocated among the

4
<PAGE> 40
Fund and such accounts in a manner deemed equitable by AIM. AIM may combine
such transactions, in accordance with applicable laws and regulations, in order
to obtain the best net price and most favorable execution. Simultaneous
transactions could, however, adversely affect the ability of the Fund to obtain
or dispose of the full amount of a security which it seeks to purchase or sell.

In some cases the procedure for allocating portfolio transactions
among the various investment accounts advised by AIM could have an adverse
effect on the price or amount of securities available to the Fund. In making
such allocations, the main factors considered by AIM are the respective
investment objectives and policies of its advisory clients, the relative size
of portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
judgments of the persons responsible for recommending the investment.

SECTION 28(E) STANDARDS

Under Section 28(e) of the Securities Exchange Act of 1934, AIM shall
not be deemed to have acted unlawfully or to have breached its fiduciary duty
solely because under certain circumstances it has caused an account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), AIM must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided ... viewed in terms of either that particular transaction or [AIM's]
overall responsibilities with respect to the accounts as to which it exercises
investment discretion," and that the services provided by a broker provide AIM
with lawful and appropriate assistance in the performance of its investment
decision-making responsibilities.

Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered.

Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM to be beneficial to the
Fund's investment program. Research services received from brokers supplement
AIM's own research (and the research of sub-advisors to other clients of AIM),
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to United States and foreign economies,
securities, markets, specific industry groups and individual companies;
information on political developments; portfolio management strategies;
performance information on securities and information concerning prices of
securities; and information supplied by specialized services to AIM and to the
Company's directors with respect to the performance, investment activities and
fees and expenses of other mutual funds. Such information may be communicated
electronically, orally or in written form. Research services may also include
the providing of equipment used to communicate research information, the
arranging of meetings with management of companies and the providing of access
to consultants who supply research information.

The outside research assistance is useful to AIM since the brokers
utilized by AIM as a group tend to follow a broader universe of securities and
other matters than AIM's staffs can follow. In addition, this research
provides AIM with a diverse perspective on financial markets. Research
services which are provided to AIM by brokers are available for the benefit of
all accounts managed or advised by AIM or by sub-advisors to accounts managed
or advised by AIM. In some cases, the research services are available only
from the broker providing such services. In other cases, the research services
may be obtainable from alternative sources in return for cash payments. AIM is
of the opinion that because the broker research supplements rather than
replaces its research, the receipt of such research does not tend to decrease
its expenses, but tends to improve the quality of its investment advice.
However, to the extent that AIM would have purchased any such research services
had such services not been provided by brokers, the expenses of such services
to AIM could be considered to have been reduced accordingly. Certain research
services furnished by broker-dealers may be useful to AIM in advising clients
other than the Fund. Similarly, any

5
<PAGE> 41
research services received by AIM through the placement of portfolio
transactions of other clients may be of value to AIM in fulfilling its
obligations to the Fund. AIM is of the opinion that this material is
beneficial in supplementing AIM's research and analysis and therefore it may
benefit the Fund by improving the quality of AIM's investment advice. The
advisory fee paid by the Fund is not reduced because AIM receives such
services.

Some broker-dealers may indicate that the provision of research
services is dependent upon the generation of certain specified levels of
commissions and underwriting concessions by AIM's clients, including the Fund.

BROKERAGE COMMISSIONS PAID

For the years ended October 31, 1994 and October 31, 1993 and the
period from November 5, 1991 (date operations commenced) through October 31,
1992, the Fund paid brokerage commissions of $3,253,649, $1,303,108 and
$578,072, respectively. The increase in brokerage commissions from October 31,
1992 through October 31, 1994 was due to the increase in the Fund's net assets
during such period. Substantially all of such commissions were directed to
broker-dealers that provided AIM with certain research, statistical and other
information.

HEDGING STRATEGIES AND OTHER INVESTMENT TECHNIQUES

The following discussion of certain investment strategies supplements
the discussion set forth in the Prospectus under the heading "Hedging
Strategies and Other Investment Techniques."

The Fund may seek to hedge its portfolio against movements in the
equity markets, interest rates and exchange rates between currencies through
the use of options, futures transactions, options on futures and foreign
forward exchange transactions. The Fund has authority to write (sell) covered
call and put options on its portfolio securities, purchase put and call options
on securities and engage in transactions in stock index options, stock index
futures and financial futures, and related options on such futures. The Fund
may also deal in certain forward contracts, including forward foreign exchange
transactions, foreign currency options and futures, and related options on such
futures. The Fund is authorized to enter into such options and futures
transactions either on exchanges or in the OTC markets. Although certain risks
are involved in options and futures transactions (as discussed in the
Prospectus and below), AIM believes that, because the Fund will only engage in
these transactions for hedging purposes, the options and futures portfolio
strategies of the Fund will not subject the Fund to the risks frequently
associated with the speculative use of options and futures transactions. While
the Fund's use of hedging strategies is intended to reduce the volatility of
the net asset value of the Fund's shares, the Fund's net asset value will
nevertheless fluctuate. There can be no assurance that the Fund's hedging
transactions will be effective.

HEDGING FOREIGN CURRENCY RISKS

Generally, the foreign exchange transactions of the Fund will be
conducted on a spot (cash) basis at the spot rate then prevailing for
purchasing or selling currency in the foreign exchange market. However, the
Fund has authority to deal in forward foreign exchange between currencies
(including the U.S. dollar) as a hedge against possible variations in the
foreign exchange rate between such currencies. This is accomplished through
individually negotiated contractual agreements to purchase or to sell a
specified currency at a specified future date and price set at the time of the
contract. The Fund's dealings in forward foreign exchange may be with respect
to a specific purchase or sale of a security, or with respect to its portfolio
positions generally.

The Fund may not position hedge with respect to the currency of a
particular country to an extent greater than the aggregate market value (at the
time of making such sale) of the securities held in its

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<PAGE> 42
portfolio denominated or quoted in that particular foreign currency. The Fund
will not attempt to hedge all of its portfolio positions and will enter into
such transactions only to the extent, if any, deemed appropriate by AIM. The
Fund will not enter into a position hedging commitment if, as a result thereof,
the Fund would have more than 10% of the value of its total assets committed to
such contracts. The Fund will not enter into a forward contract with a term of
more than one year.

In addition to the forward exchange contracts, the Fund may also
purchase or sell listed or OTC foreign currency options, foreign currency
futures and related options as a short or long hedge against possible
variations in foreign exchange rates. The cost to the Fund of engaging in
foreign currency transactions varies with such factors as the currencies
involved, the length of the contract period and the market conditions then
prevailing. Since transactions in foreign currency exchange usually are
conducted on a principal basis, no fees or commissions are involved.
Transactions involving forward exchange contracts and futures contracts and
options thereon are subject to certain risks. A detailed discussion of such
risks appears under the caption "Risk Factors in Options, Futures, Forward and
Currency Transactions."

WRITING COVERED CALL OPTIONS

The Fund is authorized to write (sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to such options. Writing a call option obligates the
Fund to sell or deliver the option's underlying security, in return for the
strike price, upon exercise of the option. By writing a call option, the Fund
receives an option premium from the purchaser of the call option. Writing
covered call options is generally a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, the Fund would seek to
mitigate the effects of a price decline. By writing covered call options,
however, the Fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price. In addition, the Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects
a closing purchase transaction.

WRITING COVERED PUT OPTIONS

The Fund is authorized to write (sell) covered put options on its
portfolio securities and to enter into closing transactions with respect to
such options.

When the Fund writes a put option, it takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the premium,
the Fund assumes the obligation to pay the strike price for the option's
underlying instrument if the other party to the option chooses to exercise it.
The Fund may seek to terminate its position in a put option it writes before
exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for an option the Fund has
written, however, the Fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must continue
to set aside assets to cover its position.

The Fund may write put options as an alternative to purchasing actual
securities. If security prices rise, the Fund would expect to profit from a
written put option, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is
likely that the Fund will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the Fund would expect to
suffer a loss. This loss should be less than the loss the Fund would have
experienced from purchasing the underlying instrument directly, however,
because the premium received for writing the option should mitigate the effects
of the decline.

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<PAGE> 43
PURCHASING PUT OPTIONS

The Fund is authorized to purchase put options to hedge against a
decline in the market value of its portfolio securities. By buying a put
option the Fund has the right (but not the obligation) to sell the underlying
security at the exercise price, thus limiting the Fund's risk of loss through a
decline in the market value of the security until the put option expires. The
amount of any appreciation in the value of the underlying security will be
partially offset by the amount of the premium paid by the Fund for the put
option and any related transaction costs. Prior to its expiration, a put
option may be sold in a closing sale transaction and profit or loss from the
sale will depend on whether the amount received is more or less than the
premium paid for the put option plus the related transaction costs. A closing
sale transaction cancels out the Fund's position as the purchaser of an option
by means of an offsetting sale of an identical option prior to the expiration
of the option it has purchased. The Fund will not purchase put options on
securities (including stock index options discussed below) if as a result of
such purchase, the aggregate cost of all outstanding options on securities held
by the Fund would exceed 5% of the market value of the Fund's total assets.

PURCHASING CALL OPTIONS

The Fund is also authorized to purchase call options. The features of
call options are essentially the same as those of put options, except that the
purchaser of a call option obtains the right to purchase, rather than sell, the
underlying instrument at the option's strike price (call options on futures
contracts are settled by purchasing the underlying futures contract). The Fund
will purchase call options only in connection with "closing purchase
transactions."

COMBINED OPTION POSITIONS

The Fund, for hedging purposes, may purchase and write options in
combination with each other to adjust the risk and return characteristics of
the Fund's overall position. For example, the Fund may purchase a put option
and write a covered call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics are similar
to selling a futures contact. This technique, called a "straddle," enables the
Fund to offset the cost of purchasing a put option with the premium received
from writing the call option. However, by selling the call option, the Fund
gives up the ability for potentially unlimited profit from the put option.
Another possible combined position would involve writing a covered call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written covered call option in the event of a
substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.

STOCK INDEX OPTIONS AND FUTURES AND FINANCIAL FUTURES

The Fund is authorized to engage in transactions in stock index
options and futures and financial futures, and related options. The Fund may
purchase or write put and call options on stock indices to hedge against the
risks of market-wide stock price movements in the securities in which the Fund
invests. Options on indices are similar to options on securities except that
on exercise or assignment, the parties to the contract pay or receive an amount
of cash equal to the difference between the closing value of the index and the
exercise price of the option times a specified multiple. The Fund may invest
in stock index options based on a broad market index, such as the S&P 500
Index, or on a narrow index representing an industry or market segment, such as
the AMEX Oil & Gas Index. The Fund's investments in foreign stock index
futures contracts and foreign interest rate futures contracts, and related
options, are limited to only those contracts and related options that have been
approved by the Commodities Futures Trading Commission ("CFTC") for investment
by United States investors. Additionally, with respect to the Fund's
investments in foreign options, unless such options are specifically authorized
for investment by order of

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<PAGE> 44
the CFTC or meet the definition of "trade option" as set forth in CFTC
Regulation 32.4, the Fund will not make such investments.

The Fund may also purchase and sell stock index futures contracts and
other financial futures contracts ("futures contracts") as a hedge against
adverse changes in the market value of its portfolio securities as described
below. A futures contract is an agreement between two parties which obligates
the purchaser of the futures contract to buy and the seller of a futures
contract to sell a security for a set price on a future date. Unlike most
other futures contracts a stock index futures contract does not require actual
delivery of securities, but results in cash settlement based upon the
difference in value of the index between the time the contract was entered into
and the time of its settlement. The Fund may effect transactions in stock
index futures contracts in connection with equity securities in which it
invests and in financial futures contracts in connection with the debt
securities in which it invests, if any. Transactions by the Fund in stock
index futures and financial futures are subject to limitations as described
below under "Restrictions on the Use of Futures Transactions."

The Fund may sell futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. When the Fund is not fully
invested in the securities markets and anticipates a significant market
advance, the Fund may purchase futures in order to gain rapid market exposure
that may in part or entirely offset increases in the cost of securities that
the Fund intends to purchase. As such purchases are made, an equivalent amount
of futures contracts will be terminated by offsetting sales. The Fund does not
consider purchases of futures contracts to be a speculative practice under
these circumstances. It is anticipated that, in a substantial majority of
these transactions, the Fund will purchase such securities upon termination of
the long futures position, whether the long position results from the purchase
of a futures contract or the purchase of a call option, but under unusual
circumstances (e.g., the Fund experiences a significant amount of redemptions)
a long futures position may be terminated without the corresponding purchase of
securities.

The Fund also is authorized to purchase and write call and put options
on futures contracts and stock indices in connection with its hedging
activities. Generally, these strategies would be utilized under the same
market and market sector conditions (i.e., conditions relating to specific
types of investments) in which the Fund enters into futures transactions. The
Fund may purchase put options or write call options on futures contracts and
stock indices rather than selling the underlying futures contract in
anticipation of a decrease in the market value of securities. Similarly, the
Fund can purchase call options, or write put options on futures contracts and
stock indices, as a substitute for the purchase of such futures to hedge
against the increased cost resulting from an increase in the market value of
securities which the Fund intends to purchase.

The Fund is also authorized to engage in options and futures
transactions on U.S. and foreign exchanges and in options in the OTC markets
("OTC options"). In general, exchange traded contracts are third-party
contracts (i.e., performance of the parties' obligations is guaranteed by an
exchange or clearing corporation) with standardized strike prices and
expiration dates. OTC options transactions are two-party contracts with price
and terms negotiated by the buyer and seller. See "Restrictions on OTC
Options" below for information as to restrictions on the use of OTC options.

The Fund is authorized to purchase or sell listed or OTC foreign
security or currency options, foreign security or currency futures and related
options as a short or long hedge against possible variations in foreign
exchange rates and market movements. Such transactions could be effected with
respect to hedges on non-U.S. dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund. As an illustration, the Fund may use such techniques to
hedge the stated value in U.S. dollars of an investment in a yen-denominated
security. In such circumstances, for example, the Fund can purchase a foreign
currency put option enabling it to sell a specified amount of yen for U.S.
dollars at a specified price by a future date. To the extent the hedge

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<PAGE> 45
is successful, a loss in the value of the yen relative to the U.S. dollar will
tend to be offset by an increase in the value of the put option.

Certain differences exist between these hedging instruments. For
example, foreign currency options provide the holder thereof the rights to buy
or sell a currency at a fixed price on a future date. A futures contract on a
foreign currency is an agreement between two parties to buy and sell a
specified amount of a currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on boards of trade or
futures exchanges. The Fund will not speculate in foreign security or currency
options, futures or related options. The Fund will not hedge a currency
substantially in excess of the market value of securities which it has
committed or anticipates to purchase which are denominated in such currency,
and in the case of securities which have been sold by the Fund but not yet
delivered, the proceeds thereof in its denominated currency. The Fund will not
incur potential net liabilities of more than 25% of its total assets from
foreign security or currency options, futures or related options.

RESTRICTIONS ON THE USE OF FUTURES TRANSACTIONS

The purchase or sale of a futures contract differs from the purchase
or sale of a security in that no price or premium is paid or received.
Instead, an amount of cash or securities acceptable to the broker and the
relevant contract market, which varies, but is generally about 5% of the
contract amount, must be deposited with the broker. This amount is known as
"initial margin" and represents a "good faith" deposit assuring the performance
of both the purchaser and seller under the futures contract. Subsequent
payments to and from the broker, called "variation margin," are required to be
made on a daily basis as the price of the futures contract fluctuates making
the long and short positions in the futures contracts more or less valuable, a
process known as "marking to market." At any time prior to the settlement date
of the futures contract, the position may be closed out by taking an opposite
position which will operate to terminate the position in the futures contract.
A final determination of variation margin is then made, additional cash is
required to be paid to or released by the broker and the purchaser realizes a
loss or gain. In addition, a nominal commission is paid on each completed sale
transaction.

Regulations of the CFTC applicable to the Fund require that all of the
Fund's futures and options on futures transactions constitute bona fide hedging
transactions and that the Fund not enter into such transactions if, immediately
thereafter, the sum of the amount of initial margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed
5% of the market value of the Fund's total assets. However, if an option is
"in-the-money" (the price of the option exceeds the strike price), the
in-the-money portion may be excluded in computing the 5% limit.

RESTRICTIONS ON OTC OPTIONS

The Fund will engage in transactions involving OTC options, including
over-the-counter stock index options, over-the-counter foreign security and
currency options and options on foreign security and currency futures, only
with member banks of the Federal Reserve System and primary dealers in U.S.
Government securities or with affiliates of such banks or dealers which have
capital of at least $50 million or whose obligations are guaranteed by an
entity having capital of at least $50 million. The Fund will acquire only
those OTC options for which AIM believes the Fund can receive on each business
day at least two independent bids or offers (one of which will be from an
entity other than a party to the option).

The Staff of the SEC has taken the position that purchased OTC options
and the assets used as cover for written OTC options are illiquid securities.
Therefore, the Fund has adopted an operating policy pursuant to which it will
not purchase or sell OTC options (including OTC options on futures contracts)
if, as a result of such transaction, the sum of (i) the market value of OTC
options currently outstanding which are held by the Fund, (ii) the market value
of the underlying securities covered by OTC call options currently outstanding
which were sold by the Fund, (iii) margin deposits on the Fund's existing OTC
options on futures contracts, and (iv) the market value of all other assets of
the Fund which are illiquid or are not

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<PAGE> 46
otherwise readily marketable, would exceed 15% of the net assets of the Fund,
taken at market value. However, if an OTC option is sold by the Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve
Bank of New York, and the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities as is
equal to the repurchase price less the amount by which the option is
"in-the-money" (current market value of the underlying security minus the
option's strike price). The repurchase price with primary dealers is typically
a formula price which is generally based on a multiple of the premium received
for the option, plus the amount by which the option is "in-the-money." This
policy as to OTC options is not a fundamental policy of the Fund and may be
amended by the Board of Directors of the Company without approval of the Fund's
shareholders. However, the Fund will not change or modify this policy prior to
the change or modification by the SEC staff of its position.

ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS

The Fund will not use leverage in its options and futures strategies.
Such investments will be made for hedging purposes only. The Fund will hold
securities or other options or futures positions whose values are expected to
offset its obligations under the hedge strategies. The Fund will not enter
into an option or futures position that exposes the Fund to an obligation to
another party unless it owns either (i) an offsetting position in securities or
other options or futures contracts or (ii) cash, receivables and short-term
debt securities with a value sufficient to cover its potential obligations.
The Fund will comply with guidelines established by the SEC with respect to
coverage of options and futures strategies by mutual funds, and if the
guidelines so require will segregate cash and high grade liquid debt securities
with its custodian bank in the amount prescribed. The Fund's custodian shall
maintain the value of such segregated assets equal to the prescribed amount by
segregating additional cash or liquid securities to account for fluctuations in
the value of the segregated securities. Securities which are segregated will
not be sold while the futures or option strategy is outstanding, unless they
are replaced with similar securities. As a result, there is a possibility that
segregation of a large percentage of the Fund's assets could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.

RISK FACTORS IN OPTIONS, FUTURES, FORWARD AND CURRENCY TRANSACTIONS

The use of options and futures transactions to hedge the Fund's
portfolio involves the risk of imperfect correlation in movements in the price
of options and futures and movements in the price of securities or currencies
which are the subject of the hedge. If the price of the options or futures
moves more or less than the price of hedged securities or currencies, the Fund
will experience a gain or loss which will not be completely offset by movements
in the price of the subject of the hedge. The successful use of options and
futures also depends on AIM's ability to correctly predict price movements in
the market involved in a particular options or futures transaction. To
compensate for imperfect correlations, the Fund may purchase or sell stock
index options or futures contracts in a greater dollar amount than the hedged
securities if the volatility of the hedged securities is historically greater
than the volatility of the stock index options or futures contracts.
Conversely, the Fund may purchase or sell fewer stock index options or futures
contracts, if the historical price volatility of the hedged securities is less
than that of the stock index options or futures contracts. The risk of
imperfect correlation generally tends to diminish as the maturity date of the
stock index option or futures contract approaches. Options are also subject to
the risks of an illiquid secondary market, particularly in strategies involving
writing options, which the Fund cannot terminate by exercise. In general,
options whose strike prices are close to their underlying instruments' current
value will have the highest trading volume, while options whose strike prices
are further away may be less liquid.

The Fund intends to enter into options and futures transactions, on an
exchange or in the OTC market, only if there appears to be a liquid secondary
market for such options or futures or, in the case of OTC transactions, AIM
believes the Fund can receive on each business day at least two independent
bids or offers. However, there can be no assurance that a liquid secondary
market will exist at any specific

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<PAGE> 47
time. Thus, it may not be possible to close an options or futures position.
The inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge its portfolio. There is also
the risk of loss by the Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in an option, a
futures contract or related option.

The exchanges on which options on portfolio securities and currency
options are traded have generally established limitations governing the maximum
number of call or put options on the same underlying security or currency
(whether or not covered) which may be written by a single investor, whether
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written in one or
more account or through one or more brokers). "Trading limits" are imposed on
the maximum number of contracts which any person may trade on a particular
trading day. AIM does not believe that these trading and position limits will
have any adverse impact on the portfolio strategies for hedging the Fund's
portfolio.

Because the Fund will engage in the options and futures transactions
described above solely in connection with its hedging activities, AIM does not
believe such options and futures transactions necessarily will have any
significant effect on the Fund's portfolio turnover rate.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements and reverse repurchase
agreements. A repurchase agreement is an instrument under which the Fund
acquires ownership of a debt security and the seller (usually a broker or bank)
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the Fund's
holding period. In the event of bankruptcy or other default of a seller of a
repurchase agreement, the Fund may experience both delays in liquidating the
underlying securities and losses, including: (a) a possible decline in the
value of the underlying security during the period in which the Fund seeks to
enforce its rights thereto; (b) a possible subnormal level of income and lack
of access to income during this period; and (c) expenses of enforcing its
rights. A repurchase agreement is collateralized by the security acquired by
the Fund and its value is marked to market daily in order to minimize the
Fund's risk. Repurchase agreements usually are for short periods, such as one
or two days, but may be entered into for longer periods of time.

A reverse repurchase agreement involves the sale of securities held by
the Fund, with an agreement that the Fund will repurchase such securities at an
agreed-upon price, date, and interest payment. It is the current operating
policy of the Fund to enter into reverse repurchase agreements (which are
considered to be borrowings under the Investment Company Act of 1940, as
amended (the "1940 Act")) only for temporary or emergency purposes and not as a
means to increase income. The Fund will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds of the transaction is greater than the interest expense of the
transaction. During the time a reverse repurchase agreement is outstanding,
the Fund will segregate U.S. Treasury obligations having a value equal to the
repurchase price under such reverse repurchase agreement. Any investment gains
made by the Fund with monies borrowed through reverse repurchase agreements
will cause the net asset value of the Fund's shares to rise faster than would
be the case if the Fund had no such borrowings. On the other hand, if the
investment performance resulting from the investment of borrowings obtained
through reverse repurchase agreements fails to cover the cost of such
borrowings to the Fund, the net asset value of the Fund will decrease faster
than would otherwise be the case.

LENDING OF PORTFOLIO SECURITIES

For the purpose of realizing additional income, the Fund may make
secured loans of portfolio securities amounting to not more than 33-1/3% of its
total assets. Securities loans are made to banks, brokers and other financial
institutions pursuant to agreements requiring that the loans be continuously

12
<PAGE> 48
secured by collateral at least equal at all times to the value of the
securities lent marked to market on a daily basis. The collateral received
will consist of cash, U.S. Government securities, letters of credit or such
other collateral as may be permitted under the Fund's investment program.
While the securities are being lent, the Fund will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities,
as well as interest on the investment of the collateral or a fee from the
borrower. The Fund has a right to call each loan and obtain the securities on
five business days' notice or, in connection with securities trading on foreign
markets, within such longer period of time which coincides with the normal
settlement period for purchases and sales of such securities in such foreign
markets. The Fund will not have the right to vote securities while they are
being lent, but it will call a loan in anticipation of any important vote. The
risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. Loans will only be made to persons deemed by
AIM to be of good standing and will not be made unless, in the judgment of AIM,
the consideration to be earned from such loans would justify the risk.

SHORT SALES

The Fund may from time to time enter into short sales transactions.
The Fund will not make short sales of securities or maintain a short position
unless at all times when a short position is open, the Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short. This is a technique
known as selling short "against the box." Such short sales will be used by the
Fund for the purpose of deferring recognition of gain or loss for federal
income tax purposes. In no event may more than 10% of the value of the Fund's
total assets be deposited or pledged as collateral for such sales at any time.

RULE 144A SECURITIES

The Fund may purchase securities which, while privately placed, are
eligible for purchase and sale pursuant to Rule 144A under the Securities Act
of 1933 (the "1933 Act"). This Rule permits certain qualified institutional
buyers, such as the Fund, to trade in privately placed securities even though
such securities are not registered under the 1933 Act. AIM, under the
supervision of the Company's Board of Directors, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the
Fund's restriction of investing no more than 15% of its total assets in
illiquid securities. Determination of whether a Rule 144A security is liquid
or not is a question of fact. In making this determination AIM will consider
the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition, AIM could consider
the (i) frequency of trades and quotes, (ii) number of dealers and potential
purchasers, (iii) dealer undertakings to make a market, and (iv) nature of the
security and of marketplace trades (for example, the time needed to dispose of
the security, the method of soliciting offers and the mechanics of transfer).
The liquidity of Rule 144A securities will also be monitored by AIM and, if as
a result of changed conditions, it is determined that a Rule 144A security is
no longer liquid, the Fund's holdings of illiquid securities will be reviewed
to determine what, if any, action is required to assure that the Fund does not
invest more than 15% of its total assets in illiquid securities. Investing in
Rule 144A securities could have the effect of increasing the amount of the
Fund's investments in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities. At the present time, it is not possible
to predict with certainty how the market for Rule 144A securities will develop.
See the information under the caption "Restrictions on OTC Options" above.

13
<PAGE> 49
INVESTMENT RESTRICTIONS

The following fundamental policies and investment restrictions have
been adopted by the Fund and, except as noted, such policies cannot be changed
without approval by the vote of a majority of the outstanding voting securities
of the Fund, as defined in the 1940 Act.

The Fund may not:

1. Purchase or sell real estate or interests in real
estate (except that this restriction does not
preclude investments in marketable securities of
companies engaged in real estate activities).

2. Purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell stock
index and currency options, stock index futures,
financial futures and currency futures contracts and
related options on such futures.

3. Purchase any security on margin, except that the Fund
may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of
portfolio securities. The payment by the Fund of
initial or variation margin in connection with
futures or related options transactions shall not be
considered the purchase of a security on margin.

4. Make loans, although the Fund may (a) purchase money
market securities and enter into repurchase
agreements, (b) acquire bonds, debentures, notes and
other debt securities, governmental obligations and
certificates of deposit, and (c) lend portfolio
securities.

5. Borrow money, except that the Fund may borrow from
banks (including the Fund's custodian bank) and enter
into reverse repurchase agreements as a temporary
defensive measure for extraordinary or emergency
purposes, and then only in amounts not exceeding 10%
of its total assets, taken at market value, and may
pledge amounts of up to 20% of its total assets,
taken at market value, to secure such borrowings. For
purposes of this restriction, collateral arrangements
with respect to the writing of options, futures
contracts, options on futures contracts, and
collateral arrangements with respect to initial and
variation margin are not deemed to be a pledge of
assets, and neither such arrangements nor the
purchase and sale of options, futures or related
options shall be deemed to be the issuance of a
senior security. Whenever bank borrowings and the
value of the Fund's reverse repurchase agreements
exceed 5% of the value of the Fund's total assets,
the Fund will not make any additional purchases of
securities for investment purposes.

6. Underwrite securities of other persons, except to the
extent that the Fund may be deemed to be an
underwriter within the meaning of the 1933 Act in
connection with the purchase and sale of its
portfolio securities in the ordinary course of
pursuing its investment program.

7. Purchase or sell interests in oil, gas or other
mineral exploration or development programs.

8. Invest in securities of an issuer (including
predecessors and unconditional guarantors) which has
a record of less than three years of continuous
operations.

14
<PAGE> 50
9. Purchase the securities of any issuer if, as a
result, more than 25% of the value of the Fund's
total assets, taken at market value, would be
invested in the securities of issuers having their
principal business activities in the same industry.
This restriction does not apply to obligations issued
or guaranteed by the U.S. Government or by any of its
agencies or instrumentalities but will apply to
foreign government obligations unless the Securities
and Exchange Commission permits their exclusion.

10. Purchase a security if, as a result, with respect to
75% of the value of the Fund's total assets, taken at
market value, more than 5% of the Fund's total
assets, taken at market value, would be invested in
the securities of any one issuer (including
repurchase agreements with any one entity), except
securities issued or guaranteed by the U.S.
Government or any of its agencies or
instrumentalities.

11. Purchase a security if, as a result, more than 10% of
the outstanding voting securities of any issuer would
be held by the Fund.

12. Issue senior securities, except as provided in
restriction number 5 above.

The following restrictions are non-fundamental and may be changed by
the Company's Board of Directors. Pursuant to such restrictions, the Fund will
not:

13. Make investments for the purpose of exercising
control or management.

14. Lend its portfolio securities in excess of 33-1/3% of
its total assets, taken at market value; provided
that loans of portfolio securities shall be made in
accordance with the guidelines set forth under the
heading "Lending of Portfolio Securities."

15. Invest in securities which cannot be readily resold
because of legal or contractual restrictions or which
are not otherwise readily marketable if, regarding
all such securities, more than 15% of the Fund's
total assets, taken at market value, would be
invested in such securities.

16. Effect short sales of securities, except that the
Fund may make short sales "against the box" to the
extent that the value of the securities sold short,
in the aggregate, does not represent more than 10% of
the Fund's total assets, taken at market value, at
any given time.

Percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total
assets.

Subject to investment restriction number 14 above, the Fund may from
time to time lend securities from its portfolio to brokers, dealers and
financial institutions such as banks and trust companies and receive collateral
in cash or securities issued or guaranteed by the U.S. Government which will be
maintained in an amount equal to at least 100% of the current market value of
the loaned securities. Such cash will be invested in short-term securities,
which will increase the current income of the Fund. Such loans will not be for
more than 30 days and will be terminable at any time. The Fund will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. The Fund may pay reasonable fees to persons
unaffiliated with the Fund for services in arranging such loans. With respect
to the lending of portfolio securities, there is the risk of failure by the
borrower to return the securities involved in such transactions. See the
information under the caption "Hedging Strategies and Other Investment
Techniques -- Lending of Portfolio Securities" above.

15
<PAGE> 51
The Fund may invest in warrants, valued at the lower of cost or
market, to the extent that the value of such warrants, in the aggregate, does
not exceed 5% of the value of the Fund's net assets. Included in that amount,
but not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on national exchanges.

In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments that are more restrictive than
the restrictions described above. For example, as of the date of this
Statement of Additional Information, the Fund has undertaken (1) that it will
not invest more than 15% of its average net assets at the time of purchase in
investments which are not readily marketable (Texas) and (2) that it will not
purchase or retain securities of any issuer if the directors and officers of
the Company and AIM who own more than 0.5% of the securities of such issuer
together beneficially own more than 5% of the securities of such issuer (Ohio).
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, the Fund will revoke the commitment
by terminating sales of its shares in the states involved.

The Fund's ability and decisions to purchase or sell portfolio
securities may be affected by laws or regulations relating to the
convertibility and repatriation of assets. Because the shares of the Fund are
redeemable on a daily basis in U.S. dollars, the Fund intends to manage its
portfolio so as to give reasonable assurance that it will be able to obtain
U.S. dollars to the extent necessary to meet anticipated redemptions. Under
present conditions, it is not believed that these considerations will have any
significant effect on its portfolio strategy.

MANAGEMENT

DIRECTORS AND OFFICERS

The directors and officers of the Company and their principal
occupations during the last five years are set forth below. Unless otherwise
indicated, the address of each director and officer is 11 Greenway Plaza, Suite
1919, Houston, Texas 77046.

*CHARLES T. BAUER, Director and Chairman (76)

Director and Chairman and Chief Executive Officer, A I M Management
Group Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc.,
A I M Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Director, AIM Global
Advisors Limited, A I M Global Management Company Limited and AIM Global
Ventures Co.

BRUCE L. CROCKETT, Director (51)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817

Director, President and Chief Executive Officer, COMSAT Corporation
(includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of

__________________________________

* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.

16
<PAGE> 52
INTELSAT; (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).

OWEN DALY II, Director (70)
Six Blythewood Road
Baltimore, MD 21210

Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF & I Steel Corp., Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the Board of Equitable
Bancorporation.

**CARL FRISCHLING, Director (58)
919 Third Avenue
New York, NY 10022

Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).

*ROBERT H. GRAHAM, Director and President (48)

Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; Director and
Executive Vice President, A I M Distributors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M Fund Services, Inc., A I M
Global Associates, Inc., A I M Global Holdings, Inc., AIM Global Ventures Co.,
A I M Institutional Fund Services, Inc. and Fund Management Company; and Senior
Vice President, AIM Global Advisors Limited.

JOHN F. KROEGER, Director (70)
Box 464
24875 Swan Road - Martingham
St. Michaels, MD 21663

Trustee, Flag Investors International Trust; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Quality Growth Fund, Inc., Flag Investors Total Return
U.S. Treasury Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc.,
Managed Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag
Investors Maryland Intermediate Tax-Free Income Fund, Inc., Alex. Brown Cash
Reserve Fund, Inc. and North American Government Bond Fund, Inc. (investment
companies). Formerly, Consultant, Wendell & Stockel Associates, Inc.
(consulting firm).

LEWIS F. PENNOCK, Director (52)
8955 Katy Freeway, Suite 204
Houston, TX 77024

Attorney in private practice in Houston, Texas.

__________________________________

** A director who is an "interested person" of the Company as defined in
the 1940 Act.

* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.

17
<PAGE> 53
IAN W. ROBINSON, Director (72)
183 River Drive
Tequesta, FL 33469

Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management
services to telephone companies); Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone companies); and Vice President and Chief
Financial Officer, Bell Telephone Company of Pennsylvania and Diamond State
Telephone Company.

LOUIS S. SKLAR, Director (55)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056

Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).

JOHN J. ARTHUR, Senior Vice President and Treasurer (50)

Senior Vice President and Treasurer, A I M Advisors, Inc.; and Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc.,
and AIM Global Ventures Co.

GARY T. CRUM, Senior Vice President (47)

Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc., AIM
Global Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings,
Inc., and AIM Global Ventures Co.; and Director, A I M Distributors, Inc.

WILLIAM H. KLEH, Senior Vice President (49)

Director, Chairman and President, AIM Global Ventures Co.; Director
and Managing Director, AIM Global Advisors Limited; Director and President, A
I M Global Associates, Inc. and A I M Global Holdings, Inc.; Director and
Senior Vice President, A I M Advisors, Inc.; Director and Vice President, A I M
Capital Management, Inc. and Fund Management Company; Director, A I M Global
Management Company Limited; Senior Vice President, A I M Management Group Inc.;
and Vice President, A I M Distributors, Inc. and A I M Fund Services, Inc.

CAROL F. RELIHAN, Vice President and Secretary (40)

Vice President, General Counsel and Secretary, A I M Advisors, Inc.,
A I M Fund Services, Inc., A I M Institutional Fund Services, Inc., A I M
Management Group Inc. and Fund Management Company; Vice President and
Secretary, A I M Distributors, Inc., A I M Global Associates, Inc., and A I M
Global Holdings, Inc.; Vice President and Assistant Secretary, AIM Global
Advisors Limited and AIM Global Ventures Co.; and Secretary, A I M Capital
Management, Inc.

18
<PAGE> 54
DANA R. SUTTON, Vice President and Assistant Treasurer (36)

Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.

ROBERT G. ALLEY, Vice President (46)

Senior Vice President, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc. Formerly, Senior Fixed Income Money Manager,
Waddell and Reed, Inc.

MELVILLE B. COX, Vice President (51)

Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors; Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance
Officer, Charles Schwab Investment Management, Inc.; and Vice President,
Integrated Resources Life Insurance Co. and Capitol Life Insurance Co.

A. DALE GRIFFIN III, Vice President (36)

Vice President, A I M Capital Management, Inc.

PAUL A. ROGGE, Vice President (28)

Vice President, A I M Capital Management, Inc. Formerly, Global
Strategy Analyst, Union Bank of Switzerland; Assistant Portfolio Manager,
Economic Researcher, Commerce Investment Management, Inc.; and prior thereto
attended University of Texas.

JONATHAN C. SCHOOLAR, Vice President (33)

Director and Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.

The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.

The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for
meeting with the Company's auditors to review audit procedures and results and
to consider any matters arising from an audit to be brought to the attention of
the directors as a whole with respect to the Company's fund accounting or its
internal accounting controls, and for considering such matters as may from time
to time be set forth in a charter adopted by the Board of Directors and such
committee.

The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investments Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such committee.

The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating
individuals to stand for election as directors who are not interested persons

19
<PAGE> 55
as long as the Company maintains a distribution plan pursuant to Rule 12b-1
under the 1940 Act, reviewing from time to time the compensation payable to the
disinterested directors, and considering such matters as may from time to time
be set forth in a charter adopted by the Board of Directors and such committee.

REMUNERATION OF DIRECTORS

Each director is reimbursed for expenses incurred in attending each
meeting of the Board of Directors or any committee thereof. Each director who
is not also an officer of the Company is compensated for his or her services
according to a fee schedule which recognizes the fact that such director also
serves as a director or trustee of other AIM Funds advised or managed by AIM.
Each such director receives a fee, allocated among the AIM Funds, which
consists of an annual retainer component and a meeting fee component.

Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1994 for each director of the Company:

<TABLE>
<CAPTION>
============================================================================================================
Director AGGREGATE RETIREMENT TOTAL
-------- COMPENSATION BENEFITS COMPENSATION
FROM COMPANY(1) ACCRUED FROM ALL AIM FUNDS(3)
--------------- BY ALL AIM ---------------------
FUNDS(2)
----------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
Bruce L. Crockett 1,320.99 2,814.00 45,093.75
- ------------------------------------------------------------------------------------------------------------
Owen Daly II 1,300.46 14,375.00 45,843.75
- ------------------------------------------------------------------------------------------------------------
Carl Frischling 1,309.53 7,542.00 45,093.75
- ------------------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ------------------------------------------------------------------------------------------------------------
John F. Kroeger 1,300.46 20,517.00 45,843.75
- ------------------------------------------------------------------------------------------------------------
Lewis F. Pennock 1,300.46 5,093.00 45,843.75
- ------------------------------------------------------------------------------------------------------------
Ian W. Robinson 1,323.85 10,396.00 45,093.75
- ------------------------------------------------------------------------------------------------------------
Louis S. Sklar 1,309.53 4,682.00 45,093.75
============================================================================================================
</TABLE>

________________

(1) The total amount of compensation deferred by all Directors of the
Company during the fiscal year ended October 31, 1994, including interest
earned thereon, was $5,414.39.

(2) During the fiscal year ended October 31, 1994, the total amount of
expenses allocated to the Company in respect of such retirement benefits was
$1,294.60.

(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as
Director or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as Director or Trustee of a total of 10 AIM
Funds. Data reflect total compensation earned during the calendar year ended
December 31, 1994.

20
<PAGE> 56
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES

Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "AIM
Funds"). Each eligible director is entitled to receive an annual benefit from
the AIM Funds commencing on the first day of the calendar quarter coincident
with or following his date of retirement equal to 5% of such Director's
compensation paid by the AIM Funds multiplied by the number of such Director's
years of service (not in excess of 10 years of service) completed with respect
to any of the AIM Funds. Such benefit is payable to each eligible director in
quarterly installments for a period of no more than five years. If an eligible
director dies after attaining the normal retirement date but before receipt of
any benefits under the Plan commences, the director's surviving spouse (if any)
shall receive a quarterly survivor's benefit equal to 50% of the amount payable
to the deceased director, for no more than five years beginning the first day
of the calendar quarter following the date of the director's death. Payments
under the Plan are not secured or funded by any AIM Fund.

Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service
for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar
are 7, 8, 17, 17, 13, 7 and 5 years, respectively.

<TABLE>
<CAPTION>
Annual Compensation Paid By All AIM Funds

$40,000 $45,000 $50,000 $55,000
====================================================================================
<S> <C> <C> <C> <C> <C>

Number of 10 $20,000 $22,500 $25,000 $27,500
Years of ------------------------------------------------------------------------------------
Service With 9 $18,000 $20,250 $22,500 $24,750
the AIM Funds ------------------------------------------------------------------------------------
8 $16,000 $18,000 $20,000 $22,000
------------------------------------------------------------------------------------
7 $14,000 $15,750 $17,500 $19,250
------------------------------------------------------------------------------------
6 $12,000 $13,500 $15,000 $16,500
------------------------------------------------------------------------------------
5 $10,000 $11,250 $12,500 $13,750
====================================================================================
</TABLE>

DEFERRED COMPENSATION AGREEMENTS

Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Company, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of his deferral account shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will
be paid in cash, in generally equal quarterly installments over a period of
five years beginning on the date the deferring director's retirement benefits
commence under the Plan. The Company's Board of Directors, in its sole
discretion, may accelerate or extend the distribution of such deferral accounts
after the deferring director's termination of service as a director of the
Company. If a deferring director dies prior to the distribution of amounts in
his deferral account, the balance of the deferral account will be distributed
to his designated beneficiary in a single lump sum payment as soon as
practicable after such deferring director's

21
<PAGE> 57
death. The Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the deferring directors have the status
of unsecured creditors of the Company and of each other AIM Fund from which
they are deferring compensation.

During the year ended October 31, 1994, the Fund paid $45,758 in legal
fees to Reid & Priest, as counsel to the Company's directors. Mr. Carl
Frischling, a director of the Company was a partner in such firm during the
term services were provided to the Fund. Effective September 1994, Kramer,
Levin, Naftalis, Nessen, Kamin & Frankel was appointed as counsel to the Board
of Directors. Mr. Frischling, a partner of counsel to the Board of Directors,
is also a Director.

INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS

AIM is a wholly-owned subsidiary of A I M Management Group, Inc., a
holding company that has been engaged in the financial services business since
1976.

AIM and the Company have adopted a Code of Ethics which requires
investment personnel (a) to pre-clear all personal securities transactions, (b)
to file reports regarding such transactions, and (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and (iii) transactions involving securities being considered for
investment by an AIM Fund. The Code also prohibits investment personnel from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Directors reviews annually
such reports (including information on any substantial violations of the Code).
Violations of the Code may result in censure, monetary penalties, suspension or
termination of employment.

The Company, on behalf of the Fund, has entered into an Investment
Advisory Agreement and an Administrative Services Agreement with AIM. See
"Management" in the Prospectus.

The Investment Advisory Agreement provides that the Fund will pay or
cause to be paid all expenses of the Fund not assumed by AIM, including,
without limitation: brokerage commissions; taxes, legal, accounting, auditing
or governmental fees; the cost of preparing share certificates; custodian,
transfer and shareholder service agent costs; expenses of issue, sale,
redemption and repurchase of shares; expenses of registering and qualifying
shares for sale; expenses relating to directors and shareholders meetings; the
cost of preparing and distributing reports and notices to shareholders; the
fees and other expenses incurred by the Company on behalf of the Fund in
connection with membership in investment company organizations; the cost of
printing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders; and all other charges and costs of the
Fund's operations unless otherwise expressly provided.

The Investment Advisory Agreement provides that if, for any fiscal
year, the total of all ordinary business expenses of the Fund, including all
investment advisory fees, but excluding brokerage commissions and fees, taxes,
interest and extraordinary expenses, such as litigation costs, exceed the
applicable expense limitations imposed by state securities regulations in any
state in which the Fund's shares are qualified for sale, as such limitations
may be raised or lowered from time to time, the aggregate of all such
investment advisory fees shall be reduced by the amount of such excess. The
amount of any such reduction to be borne by AIM shall be deducted from the
monthly investment advisory fee otherwise payable to AIM during such fiscal
year. If required pursuant to such state securities regulations, AIM will
reimburse the Fund no later than the last day of the first month of the next
succeeding fiscal year for any such annual operating expenses (after reduction
of all investment advisory fees in excess of such limitation).

The Investment Advisory Agreement for the Fund provides that such
agreement will continue in effect until June 30, 1995, and from year to year
thereafter only if such continuance is specifically approved

22
<PAGE> 58
at least annually by the Company's Board of Directors and by the affirmative
vote of a majority of the directors who are not parties to the agreement or
"interested persons" of any such party (the "Non-Interested Directors") by
votes cast in person at a meeting called for such purpose. The Investment
Advisory Agreement was approved by the Company's Board of Directors (including
the affirmative vote of all of the Non-Interested Directors) on July 19, 1993,
and was approved by the Fund's shareholders on September 27, 1993. The
agreement became effective as of October 18, 1993. The agreement provides that
the Fund or AIM may terminate such agreement on sixty (60) days' written notice
without penalty. The Investment Advisory Agreement terminates automatically in
the event of its assignment. Under the agreement, AIM is entitled to receive
from the Fund a fee calculated at the annual rates of 0.95% of the first $1
billion of the Fund's average daily net assets, plus 0.90% of the Fund's
average daily net assets in excess of $1 billion. AIM has voluntarily agreed
to waive advisory fees under the Investment Advisory Agreement in order to
achieve the following annual fee structure for the Fund: 0.95% of the first
$500 million of the Fund's average daily net assets; 0.90% of the next $500
million of the Fund's average daily net assets; and 0.85% of the Fund's average
daily net assets exceeding $1 billion. AIM may terminate such fee waiver at
any time without notice to Shareholders.

The Administrative Services Agreement for the Fund provides that AIM
may perform, or arrange for the performance of, certain accounting, shareholder
servicing and other administrative services to the Fund which are not required
to be performed by AIM under the Investment Advisory Agreement. For such
services, AIM is entitled to receive from the Fund reimbursement of AIM's costs
or such reasonable compensation as may be approved by the Company's Board of
Directors. The Administrative Services Agreement provides that such agreement
will continue in effect until June 30, 1995, and shall continue in effect from
year to year thereafter only if such continuance is specifically approved at
least annually by the Company's Board of Directors, including the
Non-Interested Directors, by votes cast in person at a meeting called for such
purpose. The Administrative Services Agreement was approved by the Company's
Board of Directors (including the Non-Interested Directors) on July 19, 1993.
The agreement became effective as of October 18, 1993.

In addition, the Transfer Agency and Service Agreement for the Fund
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent
and wholly-owned subsidiary of AIM, will perform certain shareholder services
for the Fund for a fee per account serviced. The Transfer Agency and Service
Agreement provides that AFS will process orders for purchases, redemptions and
exchanges of shares, prepare and transmit payments for dividends and
distributions declared by the Fund, maintain shareholder accounts and provide
shareholders with information regarding the Fund and their accounts. The
Transfer Agency and Service Agreement became effective on November 1, 1994.

For the fiscal years ended October 31, 1994 and October 31, 1993 and
for the period April 7, 1992 through October 31, 1992, AIM received advisory
fees from the Fund of $5,526,858, $1,698,154 and $480,628, respectively. For
the fiscal year ended October 31, 1994 and the period April 7, 1992 (effective
date of registration statement) through October 31, 1992, AIM waived advisory
fees for the Fund in the amount of $43,159 and $10,375, respectively. Pursuant
to a sub-advisory agreement which has since been terminated, AIM paid to
Nationale-Nederlanden International Investment Advisors B.V. sub-advisory fees
during the years ended October 31, 1994 and October 31, 1993, and for the
period April 7, 1992 through October 31, 1992 of $429,520, $625,636 and
$177,073, respectively. For the fiscal year ended October 31, 1994, AIM
received reimbursement of administrative services costs, including accounting
and shareholder servicing costs, from the Fund pursuant to the Administrative
Services Agreement in the amount of $381,864. For the fiscal year ended
October 31, 1993 and for the period April 7, 1992 through October 31, 1992, AIM
received reimbursement of administrative services costs from the Fund pursuant
to a prior, substantially similar, administrative services agreement in the
amounts of $102,269 and $31,368, respectively.

23
<PAGE> 59
For the fiscal year ended October 31, 1994, AIM reimbursed AFS
$351,680 pursuant to a services agreement which was terminated during the
fourth quarter of 1994 for providing shareholder servicing for the Fund.

THE DISTRIBUTION PLANS

THE CLASS A PLAN. The Company has adopted a Master Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act relating to the Class A shares of the
Fund (the "Class A Plan"). The Class A Plan provides that the Class A shares
pay 0.30% per annum of their average daily net assets as compensation to AIM
Distributors for the purpose of financing any activity which is primarily
intended to result in the sale of Class A shares. Activities appropriate for
financing under the Class A Plan include, but are not limited to, the
following: printing of prospectuses and statements of additional information
and reports for other than existing shareholders; overhead; preparation and
distribution of advertising material and sales literature; expenses of
organizing and conducting sales seminars; supplemental payments to dealers and
other institutions such as asset-based sales charges or as payments of service
fees under shareholder service arrangements; and costs of administering the
Class A Plan.

THE CLASS B PLAN. The Company has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
the Fund (the "Class B Plan", and collectively with the Class A Plan, the
"Plans"). Under the Class B Plan, the Fund pays compensation to AIM
Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class B shares. Of such amount, the Fund pays a service fee of
0.25% of the average daily net assets attributable to Class B shares to
selected dealers and other institutions which furnish continuing personal
shareholder services to their customers who purchase and own Class B shares.
Amounts paid in accordance with the Class B Plan may be used to finance any
activity primarily intended to result in the sale of Class B shares, including
but not limited to printing of prospectuses and statements of additional
information and reports for other than existing shareholders; overhead;
preparation and distribution of advertising material and sales literature;
expenses of organizing and conducting sales seminars; supplemental payments to
dealers and other institutions such as asset-based sales charges or as payments
of service fees under shareholder service arrangements; and costs of
administering the Class B Plan. AIM Distributors may transfer and sell its
rights to payments under the Class B Plan in order to finance distribution
expenditures in respect of Class B shares.

BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment
dealers selected from time to time by AIM Distributors for the provision of
distribution assistance in connection with the sale of the Fund's shares to
such dealers' customers, and for the provision of continuing personal
shareholder services to customers who may from time to time directly or
beneficially own shares of the Fund. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: distributing sales literature; answering routine customer inquiries
concerning the Fund; assisting customers in changing dividend options, account
designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of the Fund's shares;
assisting in the establishment and maintenance of customer accounts and records
and in the processing of purchase and redemption transactions; investing
dividends and any capital gains distributions automatically in the Fund's
shares; and providing such other information and services as the Fund or the
customer may reasonably request.

Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the

24
<PAGE> 60
following: answering shareholder inquiries regarding the Fund and the Company;
performing sub-accounting; establishing and maintaining shareholder accounts
and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Fund reasonably
may request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.

Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.

Under a Shareholder Service Agreement, the Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment
period for each business day of the Fund during such period at the annual rate
of 0.25% of the average daily net asset value of the Fund's shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only
to those selected dealers or other institutions who are dealers or institutions
of record at the close of business on the last business day of the applicable
payment period for the account in which the Fund's shares are held.

Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments made
to dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund
to no more than 0.25% per annum of the average daily net assets of the fund
attributable to the customers of such dealers or financial institutions, and by
imposing a cap on the total sales charges, including asset bassed sales charges
that may be paid by the Fund and its classes.

AIM Distributors does not act as principal, but rather as agent for
the Fund, in making dealer incentive and shareholder servicing payments under
the Plans. These payments are an obligation of the Fund and not of AIM
Distributors.

The Fund's Class A shares had a different Rule 12b-1 plan (the "Former
Plan") for the period prior to September 27, 1993. The Former Plan provided
that the Class A shares of the Fund would pay AIM Distributors a fee of up to
0.30% of the average daily net asset value of such shares to reimburse AIM
Distributors for its distribution expenses.

For the year ended October 31, 1994, the Fund paid a total of
$1,758,051 under the Class A Plan, which constituted 0.30% of the class'
average daily net assets. For the period September 15, 1994 through October
31, 1994 the Fund paid $3,006 under the Class B Plan which constituted 1.00%
(annualized) of the class' average daily net assets. The fees paid by the Fund
under the Class A Plan and Class B Plan during the year ended October 31, 1994
were allocated as follows:

25
<PAGE> 61
<TABLE>
<CAPTION>
Class A Plan Class B Plan
------------ ------------
<S> <C> <C>
Advertising . . . . . . . . . . . . . . . . . . . . . . . . $ 68,923 $ -0-
Printing and mailing prospectuses (other than to
current shareholders . . . . . . . . . . . . . . . . $ 349,210 $ -0-
Seminars . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,354 $ -0-
Compensation to Underwriters . . . . . . . . . . . . . . . . $ -0- $ 2,255
Compensation to Dealers . . . . . . . . . . . . . . . . . . . $ 1,298,564 $ 751
Compensation to Sales Personnel . . . . . . . . . . . . . . . $ -0- $ -0-
</TABLE>

The Plans require AIM Distributors to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plans and the purposes for which such expenditures were made. The Board of
Directors reviews these reports in connection with their decisions with respect
to the Plans.

As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Directors, including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of the Company and who have no direct or indirect financial interest
in the operation of the Plans or in any agreements related to the Plans
("Qualified Directors"). In approving the Plans in accordance with the
requirements of Rule 12b-1, the directors considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of the Fund and its respective shareholders.

The Plans do not obligate the Fund to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the
fee payable to AIM Distributors thereunder at any given time, the Fund will not
be obligated to pay more than that fee. If AIM Distributors' expenses are less
than the fee it receives, AIM Distributors will retain the full amount of the
fee.

Unless terminated earlier in accordance with their terms, the Plans
continue in effect until June 30, 1995 and thereafter, as long as such
continuance is specifically approved at least annually by the Board of
Directors, including a majority of the Qualified Directors.

The Plans may be terminated by the vote of a majority of the
Independent Directors, or, with respect to a particular class, by the vote of
a majority of the outstanding voting securities of that class.

Any change in the Plans that would increase materially the
distribution expenses paid by the applicable class requires shareholder
approval; otherwise, it may be amended by the directors, including a majority
of the Qualified Directors, by votes cast in person at a meeting called for the
purpose of voting upon such amendment. As long as the Plans are in effect, the
selection or nomination of the Qualified Directors is committed to the
discretion of the Qualified Directors. In the event the Class A Plan is
amended in a manner which the Board of Directors determines would materially
increase the charges paid under the Class A Plan, the Class B shares of the
Fund will no longer convert into Class A shares of the Fund unless the Class B
shares, voting separately, approve such amendment. If the Class B shareholders
do not approve such amendment, the Board of Directors will (i) create a new
class of shares of the Fund which is identical in all material respects to the
Class A shares as they existed prior to the implementation of the amendment and
(ii) ensure that the existing Class B shares of the Fund will be exchanged or
converted into such new class of shares no later than the date the Class B
shares were scheduled to convert into Class A shares.

The principal differences between the Class A Plan, on the one hand,
and the Class B Plan, on the other hand, are: (i) the Class A Plan allows
payment to AIM Distributors or to dealers or financial institutions of up to
0.30% of average daily net assets of the Fund's Class A shares as compared to
1.00%

26
<PAGE> 62
of such assets of the Fund's Class B shares; (ii) the Class B Plan
obligates Class B shares to continue to make payments to AIM Distributors
following the termination of the Class B shares Distribution Agreement with
respect to Class B shares sold by or attributable to the distribution efforts
of AIM Distributors unless there has been a complete termination of the Class B
Plan (as defined in such Plan) and (iii) the Class B Plan expressly authorizes
AIM Distributors to assign, transfer or pledge its rights to payments pursuant
to the Class B Plan.

THE DISTRIBUTOR

Information concerning AIM Distributors and the continuous offering of
the Fund's shares is set forth in the Prospectus under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." A
Master Distribution Agreement with AIM Distributors relating to the Class A
shares of the Fund was approved by the Board of Directors on September 10,
1994. A Master Distribution Agreement with AIM Distributors relating to the
Class B shares of the Fund was also approved by the Board of Directors on
September 10, 1994. Both such Master Distribution Agreements are hereinafter
collectively referred to as the "Distribution Agreements."

The Distribution Agreements provide that AIM Distributors will bear
the expenses of printing from the final proof and distributing the Fund's
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Fund's shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Fund.

AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of the Fund at
the time of such sales. Payments with respect to Class B shares will equal
4.0% of the purchase price of the Class B shares sold by the dealer or
institution, and will consist of a sales commission equal to 3.75% of the
purchase price of the Class B shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. The portion of the payments
to AIM Distributors under the Class B Plan which constitutes an asset-based
sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a
portion of such sales commissions plus financing costs. AIM Distributors
anticipates that it will require a number of years to recoup from Class B Plan
payments the sales commissions paid to dealers and institutions in connection
with sales of Class B shares. In the future, if multiple distributors serve the
Fund, each such distributor (or its assignee or transferee) would receive a
share of the payments under the Class B Plan based on the portion of the Fund's
Class B shares sold by or attributable to the distribution efforts of that
distributor.

The Company (on behalf of any class of the Fund) or AIM Distributors
may terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate automatically in
the event of their assignment. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset based distribution fees in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments to AIM Distributors. Termination of the
Class B Plan or Distribution Agreement does not affect the obligation of the
Fund and its Class B shareholders to pay Contingent Defered Sales Charges.

For the fiscal years ended October 31, 1994 and October 31, 1993 and
the period April 7, 1992 through October 31, 1992, the total sales charges paid
in connection with the sale of Class A shares of the

27
<PAGE> 63
Fund were $8,535,232, $3,026,960 and $6,300,554, respectively, of which AIM
Distributors retained $1,177,691, $474,270 and $138,924, respectively. During
the period September 15, 1994 (date sales commenced) through October 31, 1994,
AIM Distributors received commissions of $336 in contingent deferred sales
charges imposed on redemptions of Class B shares of the Fund.

HOW TO PURCHASE AND REDEEM SHARES

A complete description of the manner by which shares of the Fund may
be purchased appears in the Prospectus under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."

The sales charge normally deducted on purchases of Class A shares is
used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of the Fund's Class A
shares. Since there is little expense associated with unsolicited orders
placed directly with AIM Distributors by persons who, because of their
relationship with the Fund or with AIM and its affiliates, are familiar with
the Fund, or whose programs for purchase involve little expense (e.g., because
of the size of the transaction and shareholder records required), AIM
Distributors believes that it is appropriate and in the Fund's best interest
that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase Class A
shares through AIM Distributors without payment of a sales charge. The persons
who may purchase Class A shares without a sales charge are set forth in the
Prospectus.

Complete information concerning the method of exchanging shares of the
Fund for shares of the other AIM Funds is set forth in the Prospectus under the
heading "Exchange Privilege."

Information concerning redemption of the Fund's shares is set forth in
the Prospectus under the heading "How to Redeem Shares." In addition to the
Fund's obligation to redeem shares, AIM Distributors may also repurchase shares
as an accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone
orders to the order desk of the Fund (Telephone: (713) 626-1919 (Houston) or
(800) 959-4246 (elsewhere)) and guarantee delivery of all required documents in
good order. A repurchase is effected at the net asset value per share of the
Fund next determined after the repurchase order is received. Such arrangement
is subject to timely receipt by A I M Fund Services, Inc. (a wholly-owned
subsidiary of A I M Advisors, Inc.), the Fund's transfer agent, of all required
documents in good order. If such documents are not received within a
reasonable time after the order is placed, the order is subject to
cancellation. While there is no charge imposed by the Fund or by AIM
Distributors (other than any applicable CDSC) when shares are redeemed or
repurchased, dealers may charge a fair service fee for handling the
transaction.

The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange is restricted, as
determined by applicable rules and regulations of the SEC, (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings,
(c) the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.

NET ASSET VALUE DETERMINATION

In accordance with current SEC rules and regulations, the net asset
value of a share of the Fund is determined once daily as of 4:15 p.m. Eastern
time on each business day of the Fund. In the event the New York Stock
Exchange closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day,
the net

28
<PAGE> 64
asset value of a Fund share is determined 15 minutes following the close of the
New York Stock Exchange on such day. The Fund's net asset value per share is
determined by subtracting the Fund's liabilities (e.g., the expenses) from the
Fund's assets, and dividing the result by the total number of Fund shares
outstanding. Determination of the Fund's net asset value per share is made in
accordance with generally accepted accounting principles.

Securities listed or traded on U.S. or foreign securities exchanges or
included in a national market system are valued at the last quoted sales price.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost, which approximates fair market value.

Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securitiues and money market instruments, 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 times. 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 will 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.

DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS

REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS

Income dividends and capital gains distributions are automatically
reinvested in additional shares of the same class of the Fund unless the
shareholder has requested in writing to receive such dividends and
distributions in cash or that they be invested in shares of another AIM Fund,
subject to the terms and conditions set forth in the Prospectus under the
caption "Special Plans -- Automatic Dividend Investment Plan." If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.

TAX MATTERS

The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Fund's Prospectus is not intended as a substitute
for careful tax planning. Investors are urged to consult their tax advisors
with specific reference to their own tax situation.

Qualification as a Regulated Investment Company. As stated in the
Fund's Prospectus, the Fund intends to qualify each year as a regulated
investment company under Part I of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In order to qualify for tax treatment as a
regulated investment company under the Code, the Fund is required, among other
things, to derive at least 90% of its gross income in each taxable year from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
and other income (including but not limited to gains from options, futures or
forward contracts derived with respect to the Fund's business of investing in
such stock, securities or currencies) (the "Income

29
<PAGE> 65
Requirement"); and derive less than 30% of its gross income (exclusive
of certain gains from designated hedging transactions that are offset by
realized or unrealized losses on offsetting positions) in each taxable year
from the sale or other disposition of any of the following investments, if such
investments are held for less than three months (the "Short-Short Gain Test"):
(a) stock or securities (as defined in Section 2(a)(36) of the 1940 Act); (b)
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies); and (c) foreign currencies (or options,
futures or forward contracts on foreign currencies), but only if such
currencies (or options, futures or forward contracts) are not directly related
to the Fund's principal business of investing in stock or securities (or
options and futures with respect to stock or securities). Foreign currency
gains (including gains from options, futures or forward contracts on foreign
currencies) that are not "directly related" to the Fund's principal business
may, under regulations not yet issued, not be qualifying income for purposes of
the Income Requirement.

At the close of each quarter of its taxable year, at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which the Fund has not invested more than 5% of the
value of its total assets in securities of such issuer and as to which the Fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses (the "Asset Diversification Test"). For purposes of the Asset
Diversification Test, it is unclear under present law who should be treated as
the issuer of forward foreign currency exchange contracts, of options on
foreign currencies, or of foreign currency futures and related options. It has
been suggested that the issuer in each case may be the foreign central bank or
foreign government backing the particular currency. Consequently, the Fund may
find it necessary to seek a ruling from the Internal Revenue Service on this
issue or to curtail its trading in forward foreign currency exchange contracts
in order to stay within the limits of the Asset Diversification Test.

If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and
such distributions will be taxable as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions will
be eligible for the dividends received deduction in the case of corporate
shareholders.

Fund Distributions. Under the Code, the Fund is exempt from U.S.
federal income tax on its net investment income and realized capital gains
which it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (net investment income and the excess
of net short-term capital gain over net long-term capital loss) and its net
exempt interest income for the year. Distributions of investment company
taxable income will be taxable to shareholders as ordinary income, regardless
of whether such distributions are paid in cash or are reinvested in shares.

The Fund also intends to distribute to shareholders substantially all
of the excess of its net long-term capital gain over net short-term capital
loss as a capital gain dividend. Capital gain dividends are taxable to
shareholders as a long-term capital gain, regardless of the length of time a
shareholder has held his shares.

Treasury regulations permit a regulated investment company in
determining its investment company taxable income and undistributed net capital
gain for any taxable year to elect to treat all or part of any net capital
loss, any net long-term capital loss, or any net foreign currency loss incurred
after October 31 as if it had been incurred in the succeeding year.

A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute in each calendar year an amount equal to 98%
of their ordinary taxable income for the calendar year plus 98% of their
"capital gain net income" (excess of capital gains over capital losses) for the
one-year period

30
<PAGE> 66
ending on October 31 of such calendar year. The balance of such income must
be distributed during the next calendar year. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.

For purposes of the excise tax, a regulated investment company shall
(1) offset a net ordinary loss for any calendar year in determining its capital
gain net income for the one-year period ending on October 31 of such calendar
year and (2) exclude foreign currency gains and losses incurred after October
31 of any year in determining the amount of ordinary taxable income for the
current calendar year (and, instead, to include such gains and losses in
determining ordinary taxable income for the succeeding calendar year). The
Fund intends to make sufficient distributions or deemed distributions of its
ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments in order to make sufficient distributions to avoid excise
tax liability and that such liquidation may affect the ability of the Fund to
satisfy the Short-Short Gain Test.

Investment in Foreign Financial Instrument. Under Code Section 988,
gains or losses from certain foreign currency forward contracts or fluctuations
in exchange rates will generally be treated as ordinary income or loss. Such
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the
amount of the Fund's net capital gains. Additionally, if Code Section 988
losses exceed other investment company taxable income during a taxable year,
the Fund would not be able to pay any ordinary income dividends, and any such
dividends paid before the losses were realized, but in the same taxable year,
would be recharacterized as a return of capital to shareholders, thereby
reducing the tax basis of Fund shares.

Some of the forward foreign currency exchange contracts, options and
futures contracts that the Fund may enter into will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts are treated as
if they are sold for their fair market value on the last business day of the
taxable year, regardless of whether a taxpayer's obligations (or rights) under
such contracts have terminated (by delivery, exercise, entering into a closing
transaction or otherwise) as of such date. Any gain or loss recognized as a
consequence of the year-end deemed disposition of Section 1256 contracts is
combined with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. The net amount
of such gain or loss for the entire taxable year (including gain or loss
arising as a consequence of the year-end deemed sale of such contracts) is
deemed to be 60% long-term and 40% short-term gain or loss. However, in the
case of Section 1256 contracts that are forward foreign currency exchange
contracts, the net gain or loss is separately determined and (as discussed
above) treated as ordinary income or loss.

Generally, the hedging transactions in which the Fund may engage may
result in "straddles" or "conversion transactions" for U.S. federal income tax
purposes. The straddle and conversion transaction rules may affect the
character of gains (or in the case of the straddle rules, losses) realized by
the Fund. In addition, losses realized by the Fund on positions that are part
of the straddle may be deferred under the straddle rules, rather than being
taken into account in calculating the taxable income for the taxable year in
which the losses are realized. Because only a few regulations implementing the
straddle rules and no regulations implementing the conversion transaction rules
have been promulgated, the tax consequences to the Fund of hedging transactions
are not entirely clear. The hedging transactions may increase the amount of
short-term capital gain realized by the Fund which is taxed as ordinary income
when distributed to shareholders.

The Fund may make one or more of the elections available under the
Code which are applicable to straddles. If the Fund makes any of the
elections, the amount, character, and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according

31
<PAGE> 67
to the election(s) made. The rules applicable under certain of
the elections may operate to accelerate the recognition of gains or losses from
the affected straddle positions.

Because application of the straddle and conversion transaction rules
may affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle positions, the amount
which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may be increased or
decreased as compared to a fund that did not engage in such hedging
transactions.

Requirements relating to the Fund's tax status as a regulated
investment company, including (in particular) the Short-Short Gain Test, may
limit the extent to which the Fund will be able to engage in transactions in
options and futures contracts.

PFIC Investments. The Fund may invest in stocks of foreign companies
that are classified under the Code as passive foreign investment companies
("PFICs"). In general, a foreign company is classified as a PFIC if at least
one-half of its assets constitute investment-type assets or 75% or more of its
gross income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund held the PFIC stock.
The Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax had
actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.

The Fund may be able to elect alternative tax treatment with respect
to PFIC stock. Under one such election, the Fund generally would be required
to include in its gross income its share of the earnings of a PFIC on a current
basis, regardless of whether any distributions are received from the PFIC. If
this election is made, the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition, other
elections may become available that would affect the tax treatment of PFIC
stock held by the Fund. The Fund's intention to qualify annually as a
regulated investment company may limit its elections with respect to PFIC
stock.

Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of
the recognition of income with respect to PFIC stock, as well as subject the
Fund itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gains, may be increased or decreased
substantially as compared to a fund that did not invest in PFIC stock.

Redemption or Exchange of Share. Upon a redemption or exchange of
shares, a shareholder will recognize a taxable gain or loss depending upon his
or her basis in the shares. Such gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's holding period for
the shares. Any loss recognized by a shareholder on the sale of Fund shares
held six months or less will be treated as a long-term capital loss to the
extent of any distributions of net capital gains received by the shareholder
with respect to such shares.

If a shareholder exercises the exchange privilege within 90 days of
acquiring Class A shares, then the loss such shareholder recognizes on the
exchange will be reduced (or the gain increased) to the extent the sales charge
paid upon the purchase of Class A shares reduces any charge such shareholder
would have owed upon purchase of the new Class A shares in the absence of the
exchange privilege. Instead, such sales charge will be treated as an amount
paid for the new Class A shares. In addition, any loss recognized on a sale or
exchange will be disallowed to the extent Class A shares or Class B shares
disposed of are replaced within the 61-day period beginning 30 days before and
ending 30 days after the

32
<PAGE> 68
shares are disposed of. In such a case, the basis of the shares acquired will
be increased to reflect the disallowed loss. Shareholders should particularly
note that this loss disallowance rule applies even where shares are
automatically replaced under the dividend reinvestment plan.

Foreign Income Taxes. Investment income received by the Fund from
sources within foreign countries may be subject to foreign income taxes
withheld at the source. The United States has entered into tax treaties with
many foreign countries which entitle the Fund to a reduced rate of, or
exemption from, taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the Fund's assets
to be invested in various countries is not known.

If more than 50% of the value of the Fund's total assets at the close
of each taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign income taxes paid by the Fund (the "Foreign Tax
Election"). Pursuant to the Foreign Tax Election, shareholders will be
required (i) to include in gross income, even though not actually received,
their respective pro-rata shares of the foreign income taxes paid by the Fund
that are attributable to any distributions they receive; and (ii) either to
deduct their pro-rata share of foreign taxes in computing their taxable income,
or to use it (subject to various Code limitations) as a foreign tax credit
against Federal income tax (but not both). No deduction for foreign taxes may
be claimed by a non-corporate shareholder who does not itemize deductions or
who is subject to alternative minimum tax.

Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax (determined without regard to
the availability of the credit) attributable to the shareholder's foreign
source taxable income. In determining the source and character of
distributions received from the Fund for this purpose, shareholders will be
required to allocate Fund distributions according to the source of the income
realized by the Fund. The Fund's gains from the sale of stock and securities
and certain currency fluctuation gains and losses will generally be treated as
derived from U.S. sources. In addition, the limitation on the foreign tax
credit is applied separately to foreign source "passive" income, such as
dividend income. Because of these limitations, shareholders may be unable to
claim a credit for the full amount of their proportionate shares of the foreign
income taxes paid by the Fund.

Backup Withholding. Under certain provisions of the Code, the Fund
may be required to withhold 31% of reportable dividends, capital gains
distributions and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom a certified
taxpayer identification number is not on file with the Company or who, to the
Company's knowledge, have furnished an incorrect number, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. When establishing an account, an investor must provide his or her
taxpayer identification number and certify under penalty of perjury that such
number is correct and that he or she is not otherwise subject to backup
withholding. Corporate shareholders and other shareholders specified in the
Code are exempt from backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against a shareholder's
U.S. federal income tax liability.

Foreign Shareholders. Dividends from the Fund's investment company
taxable income paid to a nonresident alien individual, a foreign trust or
estate, foreign corporation, or foreign partnership (a "foreign shareholder")
generally will be subject to U.S. withholding tax at a rate of 30% (or lower
treaty rate) upon the gross amount of the dividend. Foreign shareholders may
be subject to U.S. withholding tax at a rate of 30% on the income resulting
from the Fund's election to treat any foreign income taxes paid by it as paid
by its shareholders, but may not be able to claim a credit or deduction with
respect to the withholding tax for the foreign taxes treated as having been
paid by them.

A foreign shareholder generally will not be subject to U.S. taxation
on gain realized upon the redemption or exchange of shares of the Fund or on
capital gain dividends. In the case of a foreign shareholder who is a
nonresident alien individual, however, gain realized upon the sale of shares of
the Fund and capital gain dividends ordinarily will be subject to U.S. income
tax at a rate of 30% (or lower

33
<PAGE> 69
applicable treaty rate) if such individual is physically present in the U.S.
for 183 days or more during the taxable year and certain other conditions are
met. In the case of a foreign shareholder who is a nonresident alien
individual, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% unless proper notification of such shareholder's foreign status is
provided.

Notwithstanding the foregoing, if distributions by the Fund are
effectively connected with a U.S. trade or business of a foreign shareholder,
then dividends from the Fund's investment company taxable income, capital
gains, and any gains realized upon the sale of shares of the Fund will be
subject to U.S. income tax at the graduated rates applicable to U.S. citizens
or domestic corporations.

Transfers by gift of shares of the Fund by a foreign shareholder who
is a nonresident alien individual will not be subject to U.S. federal gift tax.
An individual who, at the time of death, is a foreign shareholder will
nevertheless be subject to U.S. federal estate tax with respect to shares at
the graduated rates applicable to U.S. citizens and residents, unless a treaty
exception applies. In the absence of a treaty, there is a $13,000 statutory
estate tax credit.

The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in the
Fund.

Miscellaneous Considerations; Effect of Future Legislation. The
foregoing general discussion of federal income tax consequences is based on the
Code and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. Future legislative or administrative
changes or court decisions may significantly change the conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.

Rules of state and local taxation of dividend and capital gain
distributions from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other U.S. state
and local tax rules affecting investments in the Fund.

MISCELLANEOUS INFORMATION

AUDIT REPORTS

The Board of Directors will issue to shareholders at least
semi-annually the Fund's financial statements. Financial statements, audited
by independent auditors, will be issued annually. The firm of KPMG Peat
Marwick LLP serves as the auditors of the Fund.

LEGAL MATTERS

Legal matters for the Company are passed upon by Ballard Spahr Andrews
& Ingersoll, Philadelphia, Pennsylvania.

CUSTODIAN AND TRANSFER AGENT

State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Fund. Under its contract with the Company relating to the Fund, the
Custodian is authorized to establish separate accounts in foreign currencies
and to cause foreign securities owned by the Fund to be held in its offices
outside the United States and with certain foreign banks and securities
depositories. The Custodian attends to the collection

34
<PAGE> 70
of principal and income, pays and collects all monies for securities bought and
sold by the Fund, and performs certain other ministerial duties. A I M Fund
Services, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of A I M
Advisors, Inc., P.O. Box 4739, Houston, Texas 77210-4739, is transfer and
dividend disbursing agent for the Class A and Class B shares of the Fund. The
Fund pays the Custodian and the Transfer Agent such compensation as may be
agreed upon from time to time.

Texas Commerce Bank National Association, P. O. Box 2558, Houston,
Texas 77252-8084, serves as Sub-Custodian for retail purchases of the AIM
Funds.

SHAREHOLDER INQUIRIES

The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.

PRINCIPAL HOLDERS OF SECURITIES

To the best knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of each of the
Company's portfolios as of February 1, 1995, and the amount of outstanding
shares held by such holders are set forth below:

<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ----------- ------------
<S> <C> <C> <C>
AIM International Equity Fund - Merrill Lynch, Pierce, 33.3%** -0-%
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286

AIM Global Growth Fund - A I M Advisors, Inc. -0-% 17.4%
Class A shares 11 Greenway Plaza
Houston, TX 77046

AIM Global Income Fund - A I M Advisors, Inc. -0-% 45.3%**
Class A shares 11 Greenway Plaza
Houston, TX 77046

AIM International Equity Fund - Merrill, Lynch, Pierce, 14.9% -0-%
Class B shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286

</TABLE>
__________________________________

* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.

** A shareholder who holds 25% or more of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.

35
<PAGE> 71

<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ----------- ------------
<S> <C> <C> <C>
AIM Global Income Fund - Jody Reed 12.9% -0-%
Class B shares Michelle K. Reed
6310 MacLaurin Drive
Tampa, FL 33647

Vernon O. Williams 5.4% -0-%
15114 Dayton Street
Omaha, NE 68137

Cowen & Co. 5.0% -0-%
Financial Square
New York, NY 10005
</TABLE>

As of February 1, 1995, the directors and officers of the Company as a
group owned less than 1% of the outstanding shares of the Fund and the other
portfolios of the Company.

__________________________________

* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.

OTHER INFORMATION

The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the
portfolios of the Company have filed with the SEC under the 1933 Act and the
1940 Act, and reference is hereby made to the Registration Statement for
further information with respect to each portfolio of the Company and the
securities offered hereby. The Registration Statement is available for
inspection by the public at the Securities and Exchange Commission in
Washington, D.C.

36
<PAGE> 72
FINANCIAL STATEMENTS

FS
<PAGE> 73

INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM International Funds, Inc.:

We have audited the accompanying statement of assets and liabilities of AIM
International Equity Fund (a portfolio of AIM International Funds, Inc.),
including the schedule of investments, as of October 31, 1994, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the years in the two-year period then ended and
the period November 5, 1991 (date operations commenced) through October 31,
1992. 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 financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
International Equity Fund as of October 31, 1994, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the two-year period then ended and the period November 5, 1991 (date
operations commenced) through October 31, 1992, in conformity with generally
accepted accounting principles.

/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP

Houston, Texas
December 9, 1994

FS-1
<PAGE> 74
SCHEDULE OF INVESTMENTS

October 31, 1994

<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCK & OTHER EQUITY INTERESTS-93.82%
ARGENTINA-0.86%
83,000 Banco de Galicia y Buenos Aires-ADR (Banking) $ 2,251,375
- ------------------------------------------------------------------------------------------
640,000 Telecom Argentina S.A.-Class B (Telecommunications Equipment) 3,891,978
- ------------------------------------------------------------------------------------------
Total Argentina 6,143,353
- ------------------------------------------------------------------------------------------
AUSTRALIA-5.02%
415,002 Advance Bank Australia Ltd. (Banking) 2,681,011
- ------------------------------------------------------------------------------------------
365,809 Broken Hill Proprietary Co. Ltd. (Diversified) 5,606,518
- ------------------------------------------------------------------------------------------
798,990 Coca-Cola Amatil Ltd. (Beverages) 5,043,004
- ------------------------------------------------------------------------------------------
826,941 Email Ltd. (Consumer Durables) 2,486,902
- ------------------------------------------------------------------------------------------
192,400 ICI Australia Ltd. (Chemicals) 1,658,127
- ------------------------------------------------------------------------------------------
421,466 National Australia Bank Ltd. (Banking) 3,329,916
- ------------------------------------------------------------------------------------------
200,392 News Corp. Ltd. (The) (Consumer Services-Miscellaneous) 1,235,059
- ------------------------------------------------------------------------------------------
53,300 News Corp. Ltd. (The)-ADR (Consumer Services-Miscellaneous) 2,605,038
- ------------------------------------------------------------------------------------------
606,566 Pacific BBA Ltd. (Electrical Equipment) 1,698,042
- ------------------------------------------------------------------------------------------
1,464,000 Pioneer International Ltd. (Building Materials) 3,533,080
- ------------------------------------------------------------------------------------------
584,022 QBE Insurance Group Ltd. (Insurance) 2,038,244
- ------------------------------------------------------------------------------------------
250,000 Simsmetal Ltd. (Metals) 1,299,473
- ------------------------------------------------------------------------------------------
1,210,000 Woolworths Ltd. (Food Stores) 2,587,658
- ------------------------------------------------------------------------------------------
Total Australia 35,802,072
- ------------------------------------------------------------------------------------------
CANADA-2.44%
113,000 Alcan Aluminum Ltd. (Basic Industry-Multiple Industry) 3,028,427
- ------------------------------------------------------------------------------------------
115,000 GEAC Computer Corp. Ltd.(a) (Computer Software & Services) 1,179,672
- ------------------------------------------------------------------------------------------
60,500 Magna International Inc. (Auto Parts) 2,147,750
- ------------------------------------------------------------------------------------------
104,000 Northern Telecom Ltd.-ADR (Telecommunications Equipment) 3,757,000
- ------------------------------------------------------------------------------------------
117,000 Rogers Cantel Mobile Communications, Inc.-Class B-ADR(a)
(Telecommunication Services) 3,575,813
- ------------------------------------------------------------------------------------------
561,000 Stelco Inc.(a) (Steel) 3,732,810
- ------------------------------------------------------------------------------------------
Total Canada 17,421,472
- ------------------------------------------------------------------------------------------
CHILE-0.65%
30,500 Compania de Telefonos de Chile S.A.-ADR (Telephone) 2,870,813
- ------------------------------------------------------------------------------------------
83,000 Cristalerias de Chile-ADR (Containers-Metal & Glass) 1,784,500
- ------------------------------------------------------------------------------------------
Total Chile 4,655,313
- ------------------------------------------------------------------------------------------
DENMARK-0.25%
24,500 Danske Traelastkompagni(a) (Building Materials) 1,790,601
- ------------------------------------------------------------------------------------------
Total Denmark 1,790,601
- ------------------------------------------------------------------------------------------
FINLAND-1.83%
65,400 Nokia Corp. (Telecommunications Equipment) 9,866,073
- ------------------------------------------------------------------------------------------
150,000 Outokumpu OY(a) (Metals) 3,174,517
- ------------------------------------------------------------------------------------------
Total Finland 13,040,590
- ------------------------------------------------------------------------------------------
</TABLE>

FS-2
<PAGE> 75
<TABLE>
<CAPTION>

SHARES MARKET VALUE
<S> <C> <C>
FRANCE-7.68%
40,025 Club Mediterranee S.A. (Leisure Time) $ 3,426,159
- ------------------------------------------------------------------------------------------
35,600 Compagnie De Saint Gobain (Building Materials) 4,517,450
- ------------------------------------------------------------------------------------------
25,880 Docks de France, S.A. (Food Stores) 3,590,812
- ------------------------------------------------------------------------------------------
26,400 ECCO Travail Temporaire (Business Services-Miscellaneous) 3,411,582
- ------------------------------------------------------------------------------------------
24,940 Essilor International-Compagnie Generale d'Optique (Health
Care) 3,731,792
- ------------------------------------------------------------------------------------------
26,200 Imetal S.A. (Building Materials) 2,800,233
- ------------------------------------------------------------------------------------------
53,700 Lafarge Coppee S.A. (Building Materials) 4,260,729
- ------------------------------------------------------------------------------------------
2,800 Legrand (Electrical Equipment) 3,754,372
- ------------------------------------------------------------------------------------------
17,000 L'Oreal S.A. (Cosmetics/Toiletries) 3,693,354
- ------------------------------------------------------------------------------------------
20,000 LVMH Moet Hennessy Louis Vuitton (Beverages) 3,225,806
- ------------------------------------------------------------------------------------------
20,900 Peugeot S.A.(a) (Automobile) 3,131,345
- ------------------------------------------------------------------------------------------
28,200 Pinault-Printemps, S.A.(a) (Food Stores) 5,090,906
- ------------------------------------------------------------------------------------------
13,500 Promodes S.A. (Food Stores) 2,631,267
- ------------------------------------------------------------------------------------------
37,600 Roussel-Uclaf (Drugs) 4,201,321
- ------------------------------------------------------------------------------------------
17,200 Sidel S.A. (Machinery) 3,275,554
- ------------------------------------------------------------------------------------------
Total France 54,742,682
- ------------------------------------------------------------------------------------------
GERMANY-3.13%
5,800 Buderus A.G. (Capital Goods-Miscellaneous) 2,873,961
- ------------------------------------------------------------------------------------------
6,300 Gehe A.G. (Drugs) 2,153,775
- ------------------------------------------------------------------------------------------
2,800 Kampa Haus A.G. (Residential Construction) 1,815,763
- ------------------------------------------------------------------------------------------
20,000 Mannesmann A.G. (Machinery) 5,347,522
- ------------------------------------------------------------------------------------------
6,200 Sap A.G. (Computer Software & Services) 3,583,505
- ------------------------------------------------------------------------------------------
11,500 Veba A.G. (Utilities-Multiple Industry) 3,855,005
- ------------------------------------------------------------------------------------------
4,030 Wella A.G. (Cosmetics/Toiletries) 2,693,814
- ------------------------------------------------------------------------------------------
Total Germany 22,323,345
- ------------------------------------------------------------------------------------------
HONG KONG-6.74%
550,000 Cheung Kong Holdings Ltd. (Real Estate) 2,647,687
- ------------------------------------------------------------------------------------------
329,000 China Light & Power Co. Ltd. (Electric Services) 1,711,523
- ------------------------------------------------------------------------------------------
1,106,000 Consolidated Electric Power of Asia (Utilities-Multiple
Industry) 2,583,409
- ------------------------------------------------------------------------------------------
71,000 Consolidated Electric Power of Asia-ADR (Utilities-Multiple
Industry) 1,650,750
- ------------------------------------------------------------------------------------------
5,554,000 First Pacific Co. (Diversified) 3,917,086
- ------------------------------------------------------------------------------------------
812,000 Guoco Group Ltd. (Financial-Multiple Industry) 3,835,393
- ------------------------------------------------------------------------------------------
1,398,000 Hutchison Whampoa Ltd. (Diversified) 6,458,570
- ------------------------------------------------------------------------------------------
370,283 Jardine Matheson Holdings Ltd. (Diversified) 3,078,704
- ------------------------------------------------------------------------------------------
6,000,000 Shanghai Petrochemical Co., Ltd. (Chemicals) 2,076,996
- ------------------------------------------------------------------------------------------
43,700 Shanghai Petrochemical Co., Ltd.-ADR (Chemicals) 1,474,875
- ------------------------------------------------------------------------------------------
1,819,000 Shangri-La Asia Ltd. (Leisure Time) 2,624,631
- ------------------------------------------------------------------------------------------
615,100 Sun Hung Kai Properties Ltd. (Real Estate) 4,696,331
- ------------------------------------------------------------------------------------------
1,296,000 Television Broadcasts Ltd. (Broadcast Media) 5,987,344
- ------------------------------------------------------------------------------------------
1,000,000 Vatronix International (Electronics) 1,481,721
- ------------------------------------------------------------------------------------------
9,578,000 Yizheng Chemical Fibre Company Ltd. (Textiles) 3,811,364
- ------------------------------------------------------------------------------------------
Total Hong Kong 48,036,384
- ------------------------------------------------------------------------------------------
</TABLE>

FS-3
<PAGE> 76
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
INDIA-0.38%
47,000 Arvind Mills Ltd.-GDR(a) (Textiles) $ 276,360
- ------------------------------------------------------------------------------------------
95,000 Reliance Industries Ltd.(a) (Diversified) 2,434,850
- ------------------------------------------------------------------------------------------
Total India 2,711,210
- ------------------------------------------------------------------------------------------
INDONESIA-1.47%
47,700 PT Indostat-ADR (Telecommunications Services) 1,872,225
- ------------------------------------------------------------------------------------------
746,000 PT Bank International Indonesia (Banking) 2,525,464
- ------------------------------------------------------------------------------------------
1,257,500 PT Hanjaya Mandala Sampoerna (Tobacco) 6,081,524
- ------------------------------------------------------------------------------------------
Total Indonesia 10,479,213
- ------------------------------------------------------------------------------------------
IRELAND-0.13%
24,600 Elan Corp. PLC-ADR(a) (Drugs) 907,125
- ------------------------------------------------------------------------------------------
Total Ireland 907,125
- ------------------------------------------------------------------------------------------
ISRAEL-0.21%
56,000 Teva Pharmaceutical Industries Ltd.-ADR (Drugs) 1,526,000
- ------------------------------------------------------------------------------------------
Total Israel 1,526,000
- ------------------------------------------------------------------------------------------
ITALY-1.55%
1,180,000 Fiat S.p.A. (Automobile) 4,821,340
- ------------------------------------------------------------------------------------------
36,800 Industrie Natuzzi S.p.A-ADR (Household
Appliances/Furnishings) 1,186,800
- ------------------------------------------------------------------------------------------
1,827,000 Telecom Italia S.p.A.(a) (Telecommunications Services) 5,016,225
- ------------------------------------------------------------------------------------------
Total Italy 11,024,365
- ------------------------------------------------------------------------------------------
JAPAN-19.12%
175,000 Aisin Seiki Co., Ltd. (Auto Parts) 2,655,758
- ------------------------------------------------------------------------------------------
98,000 Aiwa Co., Ltd. (Electronics-Instrumentation) 2,670,934
- ------------------------------------------------------------------------------------------
170,000 Alpine Electronics (Electrical Equipment) 3,474,939
- ------------------------------------------------------------------------------------------
92,000 Amway Japan, Ltd. (Consumer Nondurables-Multiple Industry) 1,472,000
- ------------------------------------------------------------------------------------------
370,000 Asahi Tec Corp. (Auto Parts) 3,552,367
- ------------------------------------------------------------------------------------------
45,300 Autobacs Seven (Specialty Stores) 5,705,466
- ------------------------------------------------------------------------------------------
120,000 Bridgestone Corp. (Tire & Rubber Goods) 1,982,140
- ------------------------------------------------------------------------------------------
224,000 Canon, Inc. (Computer & Office Equipment) 4,162,494
- ------------------------------------------------------------------------------------------
150,000 Daikin Manufacturing Co. (Auto Parts) 3,654,571
- ------------------------------------------------------------------------------------------
145,000 Daimei Telecom Engineering (Telecommunications Services) 1,916,069
- ------------------------------------------------------------------------------------------
100,000 Fanuc Ltd. (Machine Tools & Related Products) 4,852,114
- ------------------------------------------------------------------------------------------
175,000 Hino Motors Ltd. (Automobile) 1,725,339
- ------------------------------------------------------------------------------------------
314,000 Hitachi Ltd. (Electronics) 3,274,041
- ------------------------------------------------------------------------------------------
170,000 Honda Motor Co., Ltd. (Automobile) 2,965,984
- ------------------------------------------------------------------------------------------
142,000 Hoshden Electronics (Electronics) 3,269,086
- ------------------------------------------------------------------------------------------
280,000 Kayaba Industry Co., Ltd. (Capital Goods-Miscellaneous) 1,766,169
- ------------------------------------------------------------------------------------------
200,000 Koa Corp. (Electronics) 3,365,509
- ------------------------------------------------------------------------------------------
45,000 Kyocera Corp. (Electronics) 3,428,483
- ------------------------------------------------------------------------------------------
24,000 Mabuchi Motor (Electrical Equipment) 1,838,435
- ------------------------------------------------------------------------------------------
210,000 Minebea Co., Ltd. (Electrical Equipment) 1,823,259
- ------------------------------------------------------------------------------------------
24,000 Nemic-Lambda K.K. (Electronics) 1,660,042
- ------------------------------------------------------------------------------------------
</TABLE>

FS-4
<PAGE> 77
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
JAPAN-(continued)
250,000 NGK Spark Plug Co., Ltd (Machinery) $ 3,458,422
- ------------------------------------------------------------------------------------------
46,200 Nichiei Co., Ltd. (Business Credit) 2,980,953
- ------------------------------------------------------------------------------------------
12,000 Nippon Television Network (Broadcast Media) 3,072,317
- ------------------------------------------------------------------------------------------
90,000 Nissen (Specialty Stores) 3,679,348
- ------------------------------------------------------------------------------------------
300,000 NOK Corp. (Capital Goods-Miscellaneous) 2,892,686
- ------------------------------------------------------------------------------------------
150,000 Noritz Corp. (Household Appliances/Furnishings) 3,205,492
- ------------------------------------------------------------------------------------------
678,000 Oki Electric Industry Co., Ltd.(a) (Telecommunications
Equipment) 5,424,559
- ------------------------------------------------------------------------------------------
269,000 Onward Kashiyama Co., Ltd (Textiles) 3,860,114
- ------------------------------------------------------------------------------------------
45,000 Plenus Co., Ltd. (Restaurants) 3,298,405
- ------------------------------------------------------------------------------------------
332,000 Ricoh Co., Ltd. (Computer & Office Equipment) 3,307,490
- ------------------------------------------------------------------------------------------
129,800 Rinnai (Furniture/Home Appliances) 3,028,421
- ------------------------------------------------------------------------------------------
73,000 Rohm Co., Ltd. (Electronics) 3,217,984
- ------------------------------------------------------------------------------------------
77,000 Ryosan Co. (Wholesale) 2,098,591
- ------------------------------------------------------------------------------------------
57,000 Secom Co., Ltd. (Business Services-Miscellaneous) 3,807,257
- ------------------------------------------------------------------------------------------
117,000 Senshukai Co. (Specialty Stores) 3,442,420
- ------------------------------------------------------------------------------------------
175,000 Sharp Corp. (Electronics) 3,270,015
- ------------------------------------------------------------------------------------------
31,000 Shimamura Co., Ltd. (Specialty Stores) 1,462,551
- ------------------------------------------------------------------------------------------
235,000 SXL Corp. (Residential Construction) 2,423,631
- ------------------------------------------------------------------------------------------
218,000 Takuma Co., Ltd. (Machinery) 4,321,065
- ------------------------------------------------------------------------------------------
99,000 Tokyo Electron Ltd. (Electronics) 3,311,413
- ------------------------------------------------------------------------------------------
413,000 Toshiba Corp. (Electronics) 3,257,440
- ------------------------------------------------------------------------------------------
151,000 Toyota Motor Corp. (Automobile) 3,335,980
- ------------------------------------------------------------------------------------------
450,000 Tsugami Corp. (Machine Tools & Related Products) 2,940,691
- ------------------------------------------------------------------------------------------
Total Japan 136,312,444
- ------------------------------------------------------------------------------------------
MALAYSIA-4.60%
350,000 Aokam Perdana Berhad (Paper & Forest Products) 2,890,411
- ------------------------------------------------------------------------------------------
140,000 Aokam Perdana Berhad-Class A (Paper & Forest Products) 1,095,890
- ------------------------------------------------------------------------------------------
236,000 Edaran Otomobil Nasional Berhad (Automobile) 1,681,096
- ------------------------------------------------------------------------------------------
30,000 Ekran Berhad (Nonresidential Construction) 122,114
- ------------------------------------------------------------------------------------------
502,500 Genting Berhad (Ordinary) (Entertainment) 4,621,820
- ------------------------------------------------------------------------------------------
618,666 Hong Leong Industries Berhad (Business Credit) 3,680,518
- ------------------------------------------------------------------------------------------
462,000 Leader Universal Holdings (Telecommunications Equipment) 2,567,671
- ------------------------------------------------------------------------------------------
711,000 Malayan Banking Berhad (Banking) 4,842,035
- ------------------------------------------------------------------------------------------
288,000 Malaysian Helicopter Services (Transportation) 710,137
- ------------------------------------------------------------------------------------------
720,000 Technology Resources Industries Berhad (Telecommunications 2,803,913
Services)
- ------------------------------------------------------------------------------------------
250,000 Telecom Malaysia Berhad (Telephone) 2,025,440
- ------------------------------------------------------------------------------------------
606,000 United Engineers (Machinery) 3,273,111
- ------------------------------------------------------------------------------------------
355,000 Westmont Berhad (Business Services-Multiple Industry) 2,514,872
- ------------------------------------------------------------------------------------------
Total Malaysia 32,829,028
- ------------------------------------------------------------------------------------------
</TABLE>

FS-5
<PAGE> 78
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
MEXICO-1.44%
1,330,000 Cifra, S.A. de C.V.-Series C (Department Stores) $ 3,583,299
- ------------------------------------------------------------------------------------------
1,916,400 Grupo Industrial Maseca S.A.-Series B (Food Processing) 3,122,443
- ------------------------------------------------------------------------------------------
180,000 Kimberly-Clark de Mexico S.A. (Department Stores) 3,571,719
- ------------------------------------------------------------------------------------------
Total Mexico 10,277,461
- ------------------------------------------------------------------------------------------
NETHERLANDS-7.14%
27,500 Akzo N.V. (Chemicals) 3,475,248
- ------------------------------------------------------------------------------------------
140,000 Boskalis Westminster (Business Services-Multiple Industry) 3,182,762
- ------------------------------------------------------------------------------------------
39,000 DSM N.V. (Chemicals) 3,379,830
- ------------------------------------------------------------------------------------------
540,000 Elsevier N.V. (Publishing) 5,513,147
- ------------------------------------------------------------------------------------------
35,000 Hagemeyer N.V. (Business Services-Multiple Industry) 2,794,266
- ------------------------------------------------------------------------------------------
12,330 Hollandsche Beton Groep N.V. (Nonresidential Construction) 2,082,202
- ------------------------------------------------------------------------------------------
80,600 Hoogovens & Staalfabriken N.V.(a) (Steel) 3,760,408
- ------------------------------------------------------------------------------------------
74,000 Hunter Douglas N.V. (Household Appliances/Furnishings) 3,272,393
- ------------------------------------------------------------------------------------------
25,500 Koninklijke Bijenkorf Beheer KBB (Specialty Stores) 1,599,899
- ------------------------------------------------------------------------------------------
52,000 Oce Van Der Grinten N.V. (Computer & Office Equipment) 2,311,866
- ------------------------------------------------------------------------------------------
154,000 Philips Electronics N.V. (Household Appliances/Furnishings) 5,100,730
- ------------------------------------------------------------------------------------------
115,000 PolyGram N.V. (Entertainment) 5,119,606
- ------------------------------------------------------------------------------------------
48,100 Ver Ned Uitgevuer Bezit (Publishing) 5,139,194
- ------------------------------------------------------------------------------------------
58,000 Wolters Kluwer N.V. (Publishing) 4,196,711
- ------------------------------------------------------------------------------------------
Total Netherlands 50,928,262
- ------------------------------------------------------------------------------------------
NEW ZEALAND-1.34%
2,099,000 Fletcher Challenge Ltd. (Diversified) 5,658,656
- ------------------------------------------------------------------------------------------
1,111,000 Telecom Corp. of New Zealand Ltd. (Telecommunications
Services) 3,870,413
- ------------------------------------------------------------------------------------------
Total New Zealand 9,529,069
- ------------------------------------------------------------------------------------------
SINGAPORE-4.83%
830,000 Cerebos Pacific Ltd. (Food Processing) 4,747,701
- ------------------------------------------------------------------------------------------
791,000 City Developments Ltd. (Real Estate) 4,659,278
- ------------------------------------------------------------------------------------------
1,565,000 DBS Land Ltd. (Real Estate) 5,488,422
- ------------------------------------------------------------------------------------------
250,000 Development Bank of Singapore Ltd. (Banking) 2,655,771
- ------------------------------------------------------------------------------------------
118,500 Genting Berhad (Entertainment) 1,057,099
- ------------------------------------------------------------------------------------------
368,500 Jurong Engineering Ltd. (Nonresidential Construction) 2,496,816
- ------------------------------------------------------------------------------------------
721,000 Keppel Corp. Ltd. (Diversified) 6,628,192
- ------------------------------------------------------------------------------------------
22,000 Telecom Malaysia Berhad (Telephone) 178,277
- ------------------------------------------------------------------------------------------
593,500 United OverSeas Bank Ltd. (Banking) 6,506,878
- ------------------------------------------------------------------------------------------
Total Singapore 34,418,434
- ------------------------------------------------------------------------------------------
SPAIN-1.14%
38,000 Acerinox S.A. (Steel) 4,204,862
- ------------------------------------------------------------------------------------------
8,300 Banco de Santander S.A. (Banking) 337,288
- ------------------------------------------------------------------------------------------
78,160 Empresa Nacional de Electricidad, S.A. (Telephone) 3,581,800
- ------------------------------------------------------------------------------------------
Total Spain 8,123,950
- ------------------------------------------------------------------------------------------
</TABLE>
FS-6

<PAGE> 79
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SWEDEN-5.14%
207,000 Astra AB (Drugs) $ 5,523,222
- ------------------------------------------------------------------------------------------
90,800 Autoliv AB (Auto Parts) 3,205,092
- ------------------------------------------------------------------------------------------
391,000 Avesta Sheffield (Steel) 3,885,113
- ------------------------------------------------------------------------------------------
78,500 Electrolux AB (Household Appliances/Furnishings) 4,074,564
- ------------------------------------------------------------------------------------------
90,000 Hennes and Mauritz AB (Specialty Stores) 4,977,904
- ------------------------------------------------------------------------------------------
218,000 Sandvik AB (Steel) 3,696,045
- ------------------------------------------------------------------------------------------
30,000 Stora Kopparbergs Bergslags AB (Paper & Forest Products) 1,867,756
- ------------------------------------------------------------------------------------------
61,200 Telefonaktiebolaget L.M. Ericsson-ADR (Telecommunications
Services) 3,729,375
- ------------------------------------------------------------------------------------------
286,500 Volvo AB (Automobile) 5,653,714
- ------------------------------------------------------------------------------------------
Total Sweden 36,612,785
- ------------------------------------------------------------------------------------------
SWITZERLAND-1.71%
17,000 ADIA SA (Business Services-Miscellaneous) 3,008,370
- ------------------------------------------------------------------------------------------
3,500 BBC Brown Boveri Ltd. (Engineering) 3,007,573
- ------------------------------------------------------------------------------------------
5,640 Ciba-Geigy Ltd. (Chemicals) 3,290,937
- ------------------------------------------------------------------------------------------
11,000 Merkur Holdings A.G. (Retail-Multiple Industry) 2,884,814
- ------------------------------------------------------------------------------------------
Total Switzerland 12,191,694
- ------------------------------------------------------------------------------------------
THAILAND-4.94%
230,400 Advanced Information Services (Telecommunications Services) 4,067,568
- ------------------------------------------------------------------------------------------
177,000 Finance One Public Co., Ltd. (Financial-Multiple Industry) 3,579,344
- ------------------------------------------------------------------------------------------
1,000,000 Krung Thai Bank PLC (Banking) 3,410,504
- ------------------------------------------------------------------------------------------
246,300 Land & House Company Ltd. (Residential Construction) 5,059,808
- ------------------------------------------------------------------------------------------
87,000 Phatra Thanakit Co., Ltd. (Financial Services) 893,632
- ------------------------------------------------------------------------------------------
348,000 Phatra Thanakit Company Ltd. (Financial Services) 2,904,305
- ------------------------------------------------------------------------------------------
69,000 Siam City Cement Co., Ltd (Building Materials) 3,981,142
- ------------------------------------------------------------------------------------------
675,600 Thai Farmers Bank (Banking) 5,963,648
- ------------------------------------------------------------------------------------------
183,000 United Communication Industry (Telecommunications Equipment) 5,374,794
- ------------------------------------------------------------------------------------------
Total Thailand 35,234,745
- ------------------------------------------------------------------------------------------
UNITED KINGDOM-10.08%
305,413 Barclays Bank PLC (Financial-Multiple Industry) 2,907,268
- ------------------------------------------------------------------------------------------
785,000 Barratt Developments PLC (Residential Construction) 2,105,658
- ------------------------------------------------------------------------------------------
228,000 BOC Group PLC (Chemicals) 2,509,715
- ------------------------------------------------------------------------------------------
725,000 BPB Industries (Building Materials) 3,557,409
- ------------------------------------------------------------------------------------------
517,000 British Petroleum (Oil & Gas) 3,678,361
- ------------------------------------------------------------------------------------------
492,110 Cable & Wireless Public Limited Co. (Telephone) 3,380,539
- ------------------------------------------------------------------------------------------
360,000 Farnell Electronics PLC (Electronics) 2,967,615
- ------------------------------------------------------------------------------------------
680,000 Granada Group PLC (Broadcast Media) 5,772,626
- ------------------------------------------------------------------------------------------
571,900 Kwik-Fit Holdings PLC (Consumer Services-Miscellaneous) 1,487,276
- ------------------------------------------------------------------------------------------
666,000 MAI PLC (Financial-Multiple Industry) 2,581,648
- ------------------------------------------------------------------------------------------
333,750 Meyer International PLC (Building Materials) 2,038,855
- ------------------------------------------------------------------------------------------
1,512,000 MFI Furniture PLC (Specialty Stores) 3,264,376
- ------------------------------------------------------------------------------------------
1,600,000 Morrison (Wm.) Supermarkets PLC (Food Stores) 3,478,704
- ------------------------------------------------------------------------------------------
341,700 Pearson PLC (Diversified) 3,543,307
- ------------------------------------------------------------------------------------------
</TABLE>
FS-7

<PAGE> 80
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
UNITED KINGDOM-(continued)
280,000 Peninsular and Oriental Steam Navigation Co. (The) $ 2,912,659
(Transportation)
- ------------------------------------------------------------------------------------------
402,181 Provident Financial PLC (Personal Credit) 3,512,670
- ------------------------------------------------------------------------------------------
484,750 Rank Organisation PLC (Entertainment) 3,211,052
- ------------------------------------------------------------------------------------------
649,000 Rentokil Group PLC (Business Services) 2,420,216
- ------------------------------------------------------------------------------------------
385,000 Smith (David S.) Holdings PLC (Paper & Forest Products) 3,211,482
- ------------------------------------------------------------------------------------------
218,600 Thorn EMI PLC (Entertainment) 3,475,289
- ------------------------------------------------------------------------------------------
915,000 T & N PLC (Auto Parts) 3,247,546
- ------------------------------------------------------------------------------------------
1,035,000 Vodafone Group PLC (Telephone) 3,584,801
- ------------------------------------------------------------------------------------------
240,550 Wolseley PLC (Building Materials) 3,053,106
- ------------------------------------------------------------------------------------------
Total United Kingdom 71,902,178
- ------------------------------------------------------------------------------------------
Total Common Stocks & Other Equity Interests 668,963,775
- ------------------------------------------------------------------------------------------

WARRANTS-0.10%
MALAYSIA-0.10%
180,000 YTL Corp. Berhad, expiring 1997 (Nonresidential Construction) 718,591
- ------------------------------------------------------------------------------------------
Total Warrants 718,591
- ------------------------------------------------------------------------------------------

<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENTS-2.57%(b)
$17,000,000 Daiwa Securities Inc., 4.80%, 11/01/94(c) 17,000,000
- ------------------------------------------------------------------------------------------
1,306,723 Goldman, Sachs & Co., 4.78%, 11/01/94(d) 1,306,723
- ------------------------------------------------------------------------------------------
Total Repurchase Agreements 18,306,723
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 96.49% 687,989,089
- ------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -- 3.51% 25,003,143
- ------------------------------------------------------------------------------------------
NET ASSETS -- 100.00% $712,992,232
- ------------------------------------------------------------------------------------------
</TABLE>

(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 as being 102 percent of the sales price
of the repurchase agreement.

(c) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$200,526,733. Collateralized by $202,124,000 U.S. Treasury obligations,
3.875% to 8.625% due 01/15/95 to 08/15/08. The aggregate market value of
the collateral at 10/31/94 was $204,510,916. The Fund's pro-rata interest
in the collateral at 10/31/94 was $17,340,078.

(d) Joint repurchase agreement entered into 10/31/94 with a maturing value of
$114,492,117. Collateralized by $119,992,000 U.S. Treasury obligations,
5.125% to 8.00% due 06/30/98 to 11/15/24. The aggregate market value of the
collateral at 10/31/94 was $116,879,377. The Fund's pro-rata interest in
the collateral at 10/31/94 was $1,334,146.

See Notes to Financial Statements.

FS-8
<PAGE> 81
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994

<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $601,204,342) $687,989,089
- ---------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $25,845,791) 26,304,991
- ---------------------------------------------------------------------------------------
Receivables for:
Investments sold 7,824,495
- ---------------------------------------------------------------------------------------
Capital stock sold 2,612,120
- ---------------------------------------------------------------------------------------
Dividends and interest 1,941,111
- ---------------------------------------------------------------------------------------
Foreign currency sold 1,017,912
- ---------------------------------------------------------------------------------------
Reimbursement from advisor 4,800
- ---------------------------------------------------------------------------------------
Investment for deferred compensation plan 2,248
- ---------------------------------------------------------------------------------------
Other assets 56,987
- ---------------------------------------------------------------------------------------
Total assets 727,753,753
- ---------------------------------------------------------------------------------------

LIABILITIES:
Payables for:
Investments purchased 10,780,507
- ---------------------------------------------------------------------------------------
Capital stock reacquired 1,475,843
- ---------------------------------------------------------------------------------------
Foreign currency purchased 1,012,840
- ---------------------------------------------------------------------------------------
Deferred compensation 2,248
- ---------------------------------------------------------------------------------------
Accrued advisory fees 551,257
- ---------------------------------------------------------------------------------------
Accrued administrative service fees 42,361
- ---------------------------------------------------------------------------------------
Accrued directors' fees 2,713
- ---------------------------------------------------------------------------------------
Accrued distribution fees 175,876
- ---------------------------------------------------------------------------------------
Accrued operating expenses 717,876
- ---------------------------------------------------------------------------------------
Total liabilities 14,761,521
- ---------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $712,992,232
=======================================================================================

NET ASSETS:
Class A $708,158,999
=======================================================================================
Class B $ 4,833,233
=======================================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ---------------------------------------------------------------------------------------
Outstanding 52,443,997
=======================================================================================
Class B:
Authorized 200,000,000
- ---------------------------------------------------------------------------------------
Outstanding 358,160
=======================================================================================
Class A:
Net asset value and redemption price per share $ 13.50
=======================================================================================
Offering price per share:
(Net asset value of $13.50 / 94.50%) $ 14.29
=======================================================================================
Class B:
Net asset value and offering price per share $ 13.49
=======================================================================================
</TABLE>

See Notes to Financial Statements.

FS-9
<PAGE> 82
STATEMENT OF OPERATIONS

For the year ended October 31, 1994

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,234,573 foreign withholding tax) $ 9,761,813
- ---------------------------------------------------------------------------------------
Interest 1,145,275
- ---------------------------------------------------------------------------------------
Total investment income 10,907,088
- ---------------------------------------------------------------------------------------

EXPENSES:
Advisory fees 5,526,858
- ---------------------------------------------------------------------------------------
Administrative service fees 381,864
- ---------------------------------------------------------------------------------------
Directors' fees 9,108
- ---------------------------------------------------------------------------------------
Distribution fees-Class A 1,758,051
- ---------------------------------------------------------------------------------------
Distribution fees-Class B 3,006
- ---------------------------------------------------------------------------------------
Custodian fees 827,906
- ---------------------------------------------------------------------------------------
Transfer agent fees 735,886
- ---------------------------------------------------------------------------------------
Other 393,936
- ---------------------------------------------------------------------------------------
Total expenses 9,636,615
- ---------------------------------------------------------------------------------------
Net investment income 1,270,473
- ---------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain on sales of:
Investment securities 27,037,072
- ---------------------------------------------------------------------------------------
Foreign currencies 898,641
- ---------------------------------------------------------------------------------------
27,935,713
- ---------------------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 23,171,734
- ---------------------------------------------------------------------------------------
Foreign currencies 594,602
- ---------------------------------------------------------------------------------------
23,766,336
- ---------------------------------------------------------------------------------------
Net gain on investment securities and foreign currencies 51,702,049
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $52,972,522
=======================================================================================
</TABLE>

See Notes to Financial Statements.

FS-10
<PAGE> 83
STATEMENT OF CHANGES IN NET ASSETS

For the years ended October 31, 1994 and 1993

<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,270,473 $ 507,646
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities and foreign currencies 27,935,713 (1,186,231)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 23,766,336 67,896,027
==========================================================================================
Net increase in net assets resulting from operations 52,972,522 67,217,442
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment
income-Class A (381,603) (172,845)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 283,363,359 182,575,263
- ------------------------------------------------------------------------------------------
Class B 4,755,554 --
- ------------------------------------------------------------------------------------------
Net increase in net assets 340,709,832 249,619,860
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 372,282,400 122,662,540
- ------------------------------------------------------------------------------------------
End of period $712,992,232 $372,282,400
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $599,529,243 $311,410,330
- ------------------------------------------------------------------------------------------
Undistributed net investment income 1,368,300 479,430
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and foreign currencies 24,808,427 (3,127,286)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 87,286,262 63,519,926
- ------------------------------------------------------------------------------------------
$712,992,232 $372,282,400
==========================================================================================
</TABLE>

See Notes to Financial Statements.

FS-11
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS

October 31, 1994

NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM International Equity Fund (the "Fund") is a series portfolio of AIM
International Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company consisting of four separate
series portfolios: AIM International Equity Fund, AIM Global Aggressive Growth
Fund, AIM Global Growth Fund and AIM Global Income Fund. The Fund currently
offers two different classes of shares: the Class A shares and the Class B
shares. Class A shares are sold with a front-end sales charge. Class B shares
are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class are 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 following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.

A. Security Valuations -- Investment securities are stated at the last sales
price on the exchange on which the securities are traded or, lacking any
sales, at the mean between the closing bid and asked prices on the day of
valuation. Securities traded in the over-the-counter market are valued at the
mean between the closing bid and asked prices on valuation date. Securities
for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the 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 times. 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 will 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 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.
C. Foreign Currency Contracts -- A forward 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 forward 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 forward 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 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 an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
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.
F. Organizational Costs -- Organizational costs of $23,098 were borne by the
Fund. Such costs are amortized to operations over sixty months. Prior to full
amortization of the organizational costs, the proceeds of any redemption of
the shares related to the Fund's initial formation (10,000 Class A shares)
will be reduced by a pro rata share of such unamortized organizational
expenses. The pro rata share of organizational expenses will be calculated by
dividing the number of initial shares redeemed by the remaining number of
initial shares outstanding at the time of the redemption and multiplying the
result by the unamortized organizational expenses.

FS-12
<PAGE> 85
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 0.95% of
the first $1 billion of the Fund's average daily net assets, plus 0.90% of the
Fund's average daily net assets in excess of $1 billion. AIM is currently
voluntarily waiving a portion of its advisory fees paid by the Fund to AIM to
the extent necessary to reduce the fees paid by the Fund at net asset levels
higher than those currently incorporated in the present advisory fee schedule.
AIM will receive a fee calculated at the annual rate of 0.95% of the first $500
million of the Fund's average daily net assets, plus 0.90% of the Fund's average
daily net assets in excess of $500 million to and including $1 billion, plus
0.85% of the Fund's average daily net assets in excess of $1 billion. The waiver
of fees is entirely voluntary and the Board of Directors of the Company would be
advised of any decision by AIM to discontinue the waiver. During the year ended
October 31, 1994, AIM waived fees of $43,159. Under the terms of the advisory
agreement, AIM will, if necessary, reduce its fee or make payments to the Fund
to the extent necessary to satisfy any expense limitations imposed by the
securities laws or regulations thereunder of any state in which the Fund's
shares are qualified for sale.

The Company has entered into a master administrative services agreement with
AIM with respect to the Fund. This agreement provides that AIM may perform, or
arrange for the performance of, certain accounting, shareholder servicing and
other administrative services to the Fund which are not required to be performed
by AIM under the investment advisory agreement. For such services, AIM is
entitled to receive from the Fund reimbursement of AIM's costs or such
reasonable compensation as is approved by the Company's Board of Directors.
During the year ended October 31, 1994, AIM was reimbursed $381,864 for such
services.

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 shares and the Class B shares of the Fund. The Company has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively the "Plans"). The Fund, pursuant to the Class A
Plan, will pay AIM Distributors at an annual rate of 0.30% of the average daily
net assets attributable to the Class A shares. The Class A Plan is designed to
compensate AIM Distributors for certain promotional and other sales related
costs and to implement a program which provides periodic payments to selected
dealers and financial institutions, in amounts of up to 0.25% of the average
daily net assets of the Class A shares attributable to the customers of such
dealers or financial institutions, who furnish continuing personal shareholder
services to their customers who purchase and own Class A shares of the Fund. The
Fund, pursuant to the Class B Plan, will pay AIM Distributors at an annual rate
of 1.00% of the average daily net assets attributable to the Class B shares. Of
this amount, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class B shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares of the Fund. Any amounts not paid as a service fee under
such 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 October 31, 1994 for the
Class A shares and the period September 15, 1994 (date sales commenced) through
October 31, 1994 for the Class B shares, the Class A shares and the Class B
shares paid AIM Distributors $1,758,051 and $3,006, respectively, as
compensation under the Plans.

AIM Distributors received commissions of $1,177,691 from sales of the Class A
shares of the Fund during the year ended October 31, 1994. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the period September 15, 1994
(date sales commenced) through October 31, 1994, AIM Distributors received
commissions of $336 in contingent deferred sales charges imposed on redemptions
of Class B shares. Certain officers and directors of the Company are officers
and directors of AIM and AIM Distributors.

During the year ended October 31, 1994, the Fund incurred legal fees of
$45,758 for services rendered by the law firm of Reid & Priest as counsel to the
Company's directors. Effective September 1994, Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel was appointed 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 the Company. The Company may invest directors'
fees, if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.

FS-13
<PAGE> 86
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1994 was
$629,774,857 and $364,068,083, respectively.

The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of October 31, 1994 is as follows:

<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $98,285,170
- -----------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (11,547,664)
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $86,737,506
=================================================================================================================
Cost of investments for tax purposes is $601,251,583.
</TABLE>

NOTE 5-CAPITAL STOCK
Changes in the Fund's capital stock outstanding for the years ended October 31,
1994 and 1993 were as follows:

<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold:
Class A 32,646,831 $422,295,820 20,054,338 $215,740,352
- ------------------------------------------------------------------------------------------------------------------------
Class B* 359,146 4,768,687 -- --
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 17,420 217,930 18,655 166,403
- ------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (10,785,235) (139,150,391) (3,322,492) (33,331,492)
- ------------------------------------------------------------------------------------------------------------------------
Class B* (986) (13,133) -- --
- ------------------------------------------------------------------------------------------------------------------------
22,237,176 $288,118,913 16,750,501 $182,575,263
========================================================================================================================
</TABLE>

* Sales of Class B shares commenced on September 15, 1994.

NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during the years ended October 31, 1994 and 1993 and the period
November 5, 1991 (date operations commenced) through October 31, 1992 and for a
Class B share outstanding during the period September 15, 1994 (date sales
commenced) through October 31, 1994.

CLASS A:
Net asset value, beginning of period $ 12.18 $ 8.88 $ 8.61(a)
- --------------------------------------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.02 0.02 0.03
- --------------------------------------------------------------------------- -------- -------- --------
Net gains (losses) on securities (both realized and unrealized) 1.31 3.29 0.26
- --------------------------------------------------------------------------- -------- -------- --------
Total from investment operations 1.33 3.31 0.29
- --------------------------------------------------------------------------- -------- -------- --------

Less distributions:
Dividends from net investment income (0.01) (0.01) (0.02)
- --------------------------------------------------------------------------- -------- -------- --------
Net asset value, end of period $ 13.50 $ 12.18 $ 8.88
=========================================================================== ======== ======== ========
Total return(b) 10.94% 37.36% 3.36%
=========================================================================== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $708,159 $372,282 $122,663
=========================================================================== ======== ======== ========
Ratio of expenses to average net assets 1.64%(c) 1.78% 1.80%(d)(e)
=========================================================================== ======== ======== ========
Ratio of net investment income to average net assets 0.22%(c) 0.28% 0.30%(d)(e)
=========================================================================== ======== ======== ========
Portfolio turnover rate 67% 62% 41%
=========================================================================== ======== ======== ========
</TABLE>

(a) Net asset value at the beginning of the period has been restated to reflect
a 1.1619 for 1 stock split, effected in the form of a dividend, on May 21,
1992.
(b) Does not include sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are based on average net assets of $586,016,976.
(d) After waiver of advisory fees.
(e) Annualized.

FS-14
<PAGE> 87
NOTE 6-(continued)

<TABLE>
<CAPTION>
1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
CLASS B:
Net asset value, beginning of period $ 13.42
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)
- -----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.08
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 0.07
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.49
=================================================================================================================
Total return(a) 0.52%
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,833
=================================================================================================================
Ratio of expenses to average net assets(b) 2.53%
=================================================================================================================
Ratio of net investment income (loss) to average net assets(b) (0.67)%
=================================================================================================================
Portfolio turnover rate 67%
=================================================================================================================
</TABLE>

(a) Total return is not annualized and does not include contingent deferred
sales charges.

(b) Ratios are annualized and based on average net assets of $2,334,163.

FS-15