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AIM ASIAN GROWTH FUND
(A SERIES PORTFOLIO OF AIM INTERNATIONAL FUNDS, INC.)
Supplement dated November 12, 1997
to the Prospectus dated November 12, 1997
Currently, shares of AIM Asian Growth Fund (the "Portfolio") are only available
to employees of A I M Management Group Inc., AMVESCAP PLC and their affiliates
and to the directors/trustees of The AIM Family of Funds--Registered
Trademark-- ("eligible purchasers"). Eligible purchasers do not include any
member of the purchaser's family including spouse, children, parents and
parents of spouse. Also, shares of the Portfolio are not available for exchange
pursuant to the exchange privilege or for automatic dividend reinvestment
pursuant to the Automatic Dividend Investment Plan from other portfolios in The
AIM Family of Funds--Registered Trademark--, except for the eligible purchasers
as described above.
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[AIM LOGO
APPEARS HERE]
THE AIM FAMILY OF FUNDS --REGISTERED TRADEMARK--
AIM ASIAN GROWTH FUND
(A SERIES PORTFOLIO OF AIM INTERNATIONAL FUNDS, INC.)
PROSPECTUS
NOVEMBER 12, 1997
AIM ASIAN GROWTH 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. There is no
assurance that the Fund will attain its investment objective. The
Fund seeks to achieve its objective by investing in a diversified
portfolio of equity securities, the issuers of which are located in
Asia and which are considered by the Fund's investment advisor to
have strong earnings momentum or demonstrate other potential for
capital appreciation.
The Fund has the ability to invest all of its assets in securities of
Asian issuers located in "emerging markets." See "Risk Factors."
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 November 12, 1997, has been filed with the
United States Securities and Exchange Commission (the "SEC") 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 or by calling
(800) 347-4246. The SEC maintains a Web site at http://www.sec.gov
that contains the Statement of Additional Information, material
incorporated by reference, and other information regarding the Fund.
Additional information about the Fund may also be obtained from
http://www.aimfunds.com.
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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY.................................. 2 INVESTOR'S GUIDE TO THE AIM FAMILY OF
THE FUND................................. 4 FUNDS--Registered Trademark--.......... A-1
Table of Fees and Expenses............. 4 Introduction to The AIM Family of
Performance............................ 5 Funds............................... A-1
Investment Objective and Policies...... 5 How to Purchase Shares................. A-1
Hedging Strategies and Other Investment Terms and Conditions of Purchase of the
Policies............................ 6 AIM Funds........................... A-2
Risk Factors........................... 9 Special Plans.......................... A-9
Investment Restrictions................ 10 Exchange Privilege..................... A-11
Management............................. 11 How to Redeem Shares................... A-13
Organization of the Company............ 13 Determination of Net Asset Value....... A-17
Dividends, Distributions and Tax
Matters............................. A-18
General Information.................... A-20
APPLICATION INSTRUCTIONS................. B-1
</TABLE>
SUMMARY
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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 six separate series portfolios. This Prospectus
relates to AIM ASIAN GROWTH FUND (the "Fund"). The company also offers
other classes of shares in five other investment portfolios, AIM EUROPEAN
DEVELOPMENT FUND ("EUROPEAN FUND"), AIM INTERNATIONAL EQUITY FUND ("EQUITY
FUND"), AIM GLOBAL AGGRESSIVE GROWTH FUND ("AGGRESSIVE GROWTH FUND"), AIM GLOBAL
GROWTH FUND ("GROWTH FUND"), and AIM GLOBAL INCOME FUND ("INCOME FUND"),
(collectively, with AIM ASIAN GROWTH FUND, the "Funds") each of which pursues
unique investment objectives. All such other Funds offer multiple classes of
shares to different types of investors. The shares of the other Funds of
the Company have different sales charges and expenses, which may affect
performance. To obtain information about EUROPEAN FUND, AGGRESSIVE GROWTH FUND,
GROWTH FUND, INCOME FUND or EQUITY FUND, call (800) 347-4246. See "General
Information."
The investment objective of the Fund is to provide long-term growth of
capital. The Fund seeks to achieve its objective by investing in a diversified
portfolio of equity securities, the issuers of which are located in Asia,
and which are considered by the Fund's investment advisor to have strong
earnings momentum or demonstrate other potential for capital appreciation. 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 stock, depositary receipts
for stock and other securities having the characteristics of stock) of Asian
companies. The Fund will not invest in Japanese securities. The Fund may
satisfy the foregoing requirement in part by investing up to 20% of its total
assets in securities exchangeable for or convertible into equity securities.
Under normal market conditions, at least three countries will be represented in
the Fund's portfolio of investments. The Fund may invest, without limit, in
securities of issuers located in "developing" countries or "emerging markets."
The Fund may invest up to 20% of its total assets in securities of non-Asian
companies.
The Fund intends to achieve its investment objective by using a fully managed
investment policy providing for the selection of securities which meet certain
quantitative standards determined by AIM. 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 Policies."
RISK FACTORS. THE FUND IS DESIGNED FOR LONG-TERM INVESTORS SEEKING
INTERNATIONAL DIVERSIFICATION AND WILLING TO BEAR THE RISKS ASSOCIATED WITH (a)
INVESTMENT IN FOREIGN SECURITIES, INCLUDING CURRENCY RISK, POLITICAL AND
ECONOMIC RISK, REGULATORY RISK AND MARKET RISK; AND (b) INVESTMENTS IN "EMERGING
MARKETS," WHICH INVOLVE EXPOSURE TO ECONOMIC STRUCTURES THAT ARE GENERALLY LESS
DIVERSE AND MATURE THAN IN THE UNITED STATES, AND TO POLITICAL SYSTEMS THAT MAY
BE LESS STABLE. 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, together with its subsidiaries, manages or advises 56
investment company portfolios. 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 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 transfer
agency, dividend distribution and disbursement an shareholder services for the
Fund. Under the terms of a sub-advisory agreement (the "Sub-Advi-
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sory Agreement") between AIM and INVESCO Global Asset Management Limited
("IGAM"), IGAM has been appointed by AIM to serve as investment sub-advisor to
the Fund. IGAM is an indirect, wholly owned subsidiary of AMVESCAP PLC, the
indirect parent of AIM. Under the terms of a sub-sub-advisory agreement (the
"Sub-Sub-Advisory Agreement") between IGAM and INVESCO Asia Limited ("IAL"),
IAL has been appointed by IGAM to serve as investment sub-sub-advisor to the
Fund. IAL is also an indirect, wholly owned subsidiary of AMVESCAP PLC. The
Sub-Advisory Agreement and Sub-Sub-Advisory Agreement provides that IGAM and
IAL will furnish AIM with international economic and market research,
securities analyses and investment recommendations for the Fund's portfolio.
Neither IGAM nor IAL are responsible for actual portfolio investment
decisions for the Fund or for the execution of transactions on behalf of the
Fund. Under the Sub-Advisory Agreement, AIM compensates IGAM for its services
through the payment of a portion of the fees paid by the Fund to AIM. Under the
Sub-Sub-Advisory Agreement IGAM compensates IAL for its services through the
payment of all the fees paid by AIM to IGAM. See "Management."
MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A, Class B or Class C
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 date
on 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.
Class C Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a contingent deferred sales charge
of 1% on certain redemptions made within one year of the date such shares
were purchased. Class C 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 or Class C shares 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 or Class C shares to the
investor who qualifies for reduced initial sales charges, as described below. A
I M Distributors, Inc. ("AIM Distributors") intends to reject any order for
purchase of more than $250,000 for Class B shares.
PURCHASING SHARES. Initial investments in any 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., 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 (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Fund may be exchanged for shares of other funds in The AIM
Family of Funds in the manner and subject to the policies and charges set forth
herein. 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 date on which a purchase was
made. Class B shares redeemed after six years following the date of purchase
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Holders of Class C shares of the Fund may redeem all or a portion of their
shares at net asset value on any business day, less a 1% contingent deferred
sales charge for redemptions made within one year from the date such shares were
purchased. Class C shares redeemed after one year from the date such shares were
purchased 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 of the Fund may be reinvested at net
asset value without payment of a sales charge in the Fund's shares or may be
invested in shares of the other funds in The AIM Family of Funds. See
"Dividends, Distributions and Tax Matters" and "Special Plans."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E, THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, LA FAMILIA AIM DE
FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED SERVICE MARKS AND
AIMFUNDS.COM AND INVEST WITH DISCIPLINE ARE SERVICE MARKS OF A I M MANAGEMENT
GROUP INC.
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THE FUND
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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 are based on the estimated average net
assets of the respective classes of the Fund for the first period of operation.
The rules of the SEC 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 CLASS C
------- ------- -------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchase of shares (as a %
of offering price)...................................... 5.50% None None
Maximum sales load on reinvested dividends and
distributions........................................... None None None
Deferred sales load (as a % of original purchase price or
redemption proceeds, whichever is lower)................ None* 5.00% 1.00%
Redemption fee............................................ None None None
Exchange fee.............................................. None None None
Annual Fund Operating Expenses (as a % of average net
assets)
Management fees........................................... 0.95% 0.95% 0.95%
Rule 12b-1 distribution plan payments..................... 0.35% 1.00% 1.00%
Other expenses............................................ 0.71% 0.78% 0.78%
----- ----- -----
Total fund operating expenses......................... 2.01% 2.73% 2.73%
===== ===== =====
</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 FROM THE DATE SUCH SHARES WERE PURCHASED.
See the Investor's Guide, under the caption "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases."
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.................................................... $ 74
3 years................................................... $115
</TABLE>
THE EXAMPLES ABOVE ASSUME PAYMENT OF A SALES CHARGE AT THE TIME OF PURCHASE;
ACTUAL EXPENSES MAY VARY FOR 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 DATE SUCH SHARES WERE PURCHASED.
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.................................................... $ 78
3 years................................................... $115
</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.................................................... $ 28
3 years................................................... $ 85
</TABLE>
An investor would pay the following expenses on a $1,000 investment in Class C
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.................................................... $ 38
3 years................................................... $ 85
</TABLE>
An investor would pay the following expenses on the same $1,000 investment in
Class C shares of the Fund, assuming no redemption at the end of each time
period:
<TABLE>
<S> <C>
1 year.................................................... $ 28
3 years................................................... $ 85
</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, Class B shares and Class C 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.
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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.
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 will be 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
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.
Standardized total return for Class C shares reflects the deduction of a 1%
contingent deferred sales charge, if applicable, 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 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.
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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. The Fund intends to seek to achieve its investment
objective by investing in a diversified portfolio of equity securities, the
issuers of which are located in Asia, and which are considered by AIM to have
strong earnings momentum or demonstrate other potential for capital
appreciation. 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 stock, preferred
stock, depositary receipts for stock and other securities having the
characteristics of stock (such as an equity or ownership interest in a company)
of Asian companies. The Fund may satisfy the foregoing requirement in part by
investing 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 Asian issuers. The
Fund may also satisfy such requirement by investing up to 20% of its total
assets in securities exchangeable for or convertible into equity securities of
Asian companies. The Fund will not invest in Japanese securities. Any change to
such policy must be submitted by AIM to the Company's Board of Directors prior
to the effectiveness of such change.
The Fund considers an issuer of securities to be an Asian company if: (i) it
is organized under the laws of a country in Asia and has a principal office in
a country in Asia; (ii) it derives a significant portion (i.e., 50% or more) of
its total revenues from business in Asia; or (iii) its equity securities are
traded principally on a stock exchange in Asia or in an over-the-counter market
in Asia. The Fund also considers shares of Asian closed-end management
investment companies, the assets of which are invested primarily in Asian
equity securities, to be securities, of Asian companies.
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
5
<PAGE> 7
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 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 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.
There are no prescribed limits on geographic asset distribution within Asia.
Under normal market conditions, at least three countries will be represented in
the Fund's portfolio of investments. The Fund intends to invest in securities
of issuers in Asia as well as countries such as Australia and New Zealand. The
Fund may invest, without limit, in "developing" countries or "emerging
markets." The Fund may invest up to 100% of its total assets in securities of
issuers located in "developing" countries or "emerging markets." For a
description of the risk factors associated with investments in emerging
markets, see "Risk Factors -- Emerging Markets." The Fund may invest up to 20%
of its total assets in securities of non-Asian companies.
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 Asian equity investment portfolio than to a portfolio of domestic
equity securities.
AIM may invest a portion of the Fund's assets in (i) cash or high-grade
short-term securities, including repurchase agreements, commercial paper, time
deposits and master notes, denominated either in U.S. dollars or foreign
currencies, (ii) U.S. government obligations or investment grade corporate bonds
or other debt securities, and (iii) taxable municipal securities, when such
positions are deemed advisable in light of economic or market conditions or for
daily cash management purposes. In addition, AIM may invest, for temporary
defensive purposes, all or substantially all of the Fund's assets in the
securities described above. To the extent that the Fund is invested to a
significant degree in cash, high-grade short-term securities, U.S. government
obligations, investment grade corporate bonds or other debt securities, or
taxable municipal securities, its ability to achieve its investment objective of
growth of capital may be adversely affected. Under normal circumstances, the
Fund will invest no more than 20% of the value of its total assets in high-grade
short-term securities. 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."
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HEDGING STRATEGIES AND OTHER INVESTMENT POLICIES
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 and
may purchase 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. Any change to such policy must be
submitted by AIM to the Company's Board of Directors prior to the effectiveness
of such change.
OPTIONS. The Fund may purchase put or call options. 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 call option is "covered" if the Fund owns the
underlying security covered by the call. A
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<PAGE> 8
put option is "covered" if the Fund's custodian segregates cash or liquid
securities with a value equal to the exercise price of the put option. If a
"covered" call or put option expires unexercised, the writer realizes 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 "collar."
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.
Options purchased or written by the Fund may be traded on the national
securities exchanges or negotiated with a dealer. Options traded in the
over-the-counter market may not be as actively traded as those on an exchange,
so it may be more difficult to value such options. In addition, it may be
difficult to enter into closing transactions with respect to such options. Such
options and the securities used as "cover" for such options, unless otherwise
indicated, would be considered illiquid securities.
The Fund will not write options if, immediately after such sale, the aggregate
value of the securities or obligations underlying the outstanding options would
exceed 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 to be paid for such options would 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 hedge the value of its
portfolio against changes in market conditions or in exchange rates between
currencies (including the U.S. dollar). 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 and asset
coverage requirements 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
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<PAGE> 9
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.
TEMPORARY DEFENSIVE MEASURES. 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.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
institutions believed by the Company's Board of Directors to present minimal
credit risk. 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 (such as the
sellers' failure to repurchase the obligation in accordance with the terms of
the agreement), a 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 (d) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Fund under the Investment Company
Act of 1940, as amended (the "1940 Act"). Repurchase agreements will be secured
by U.S. Treasury securities, U.S. Government agency securities (including, but
not limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper. For additional information on
the use of repurchase agreements, see the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the sale
by the Fund of a portfolio security with a simultaneous obligation to repurchase
the security at an agreed upon price, date and interest payment. The Fund will
enter into reverse repurchase agreements solely for temporary or defensive
purposes to facilitate the orderly sale of portfolio securities to accommodate
abnormally heavy redemption requests should they occur. The Fund will use
reverse repurchase agreements when the interest income to be earned from the
securities that would otherwise have to be liquidated to meet redemption
requests is greater than the interest expense of the reverse repurchase
transaction. The Fund may enter into reverse repurchase agreements in amounts
not exceeding 33-1/3% of the value of its total assets. Reverse repurchase
agreements involve the risk that the market value of securities retained by the
Fund in lieu of liquidation may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. This risk, if
encountered, could cause a reduction in the net asset value of the Fund's
shares. Reverse repurchase agreements are considered to be borrowings under the
1940 Act.
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.
BORROWING. The Fund may borrow money to a limited extent from banks (including
the Fund's custodian bank) for temporary or emergency purposes subject to the
limitations under the 1940 Act. The current provisions of the 1940 Act restrict
borrowings (including reverse repurchase agreements) to an aggregate of 33-1/3%
of the Fund's total assets at the time of the transaction. In addition, the Fund
does not intend to engage in leverage; therefore, consistent with current
interpretations of the Securities and Exchange Commission, the Fund will not
purchase additional securities while borrowings from banks exceed 5% of the
Fund's total assets.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may
purchase securities on a "when-issued" basis, that is, delivery of and payment
of the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within forty-five days after the date of the
transaction). The Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. The Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. If the Fund purchases a when-issued
security or enters into a delayed delivery agreement, the Fund's custodian bank
will segregate cash or liquid securities in an amount at least equal to the
when-issued commitment or delayed delivery agreement commitment.
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 total assets at any given time.
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<PAGE> 10
ILLIQUID SECURITIES AND RULE 144A SECURITIES. The Fund will not invest more
than 15% of its total 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 total assets in illiquid securities. See the Statement of
Additional Information.
CLOSED-END INVESTMENT COMPANIES. The Fund may invest up to 10% of its total
assets in the securities of certain closed-end investment companies. Shares of
closed-end investment companies are often traded at market prices that are less
than the net asset values of their shares. Such investments will involve the
payment of duplicative fees through the indirect payment of a portion of the
expenses, including advisory fees, of such closed-end investment companies.
PORTFOLIO TURNOVER. Any particular security will be sold, and the proceeds
reinvested, whenever such action is deemed prudent from the viewpoint of the
Fund's investment objectives, regardless of the holding period of that security.
The estimated portfolio turnover rate for the Fund is less than 100%. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to the Fund, the portion
of the Fund's distributions constituting taxable capital gains may increase.
Reference is made to the Statement of Additional Information for additional
descriptions of the Fund's investment policies and the risks associated with the
permitted investments of the Fund.
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RISK FACTORS
FOREIGN SECURITIES. 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,
deterioration of diplomatic relations, expropriation, nationalization or
confiscatory taxation, and limitations on the removal of funds or other assets
could also adversely affect the value of the Fund's investments. Individual
foreign economies may also differ favorably or unfavorably from the United
States economy in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency, and balance of
payments position, which may likewise affect the Fund's investments. Moreover,
foreign legal systems may be affected by the prevailing political climate and
the Fund may not be able to obtain legal remedies or enforce judgments in those
courts.
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.
EMERGING MARKETS. A developing country or emerging market country can be
considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the developed European countries (primarily in
Western Europe), the United States, Canada, Japan, Australia, New Zealand, Hong
Kong and Singapore. The characteristics of markets can change over time.
Currently, investing in many emerging markets may not be desirable or feasible
because of the lack of adequate custody arrangements for the Fund's assets,
overly burdensome repatriation and similar restrictions, the lack of organized
and liquid securities markets, unacceptable political risks or other reasons.
As desirable
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<PAGE> 11
opportunities to invest in securities in emerging markets develop, the Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past, markets of developing countries have been more volatile than the
markets of developed countries; however, such markets often have provided higher
rates of return to investors. AIM believes that these characteristics can be
expected to continue in the future.
Many of the risks described above relating to foreign securities generally
will be greater for emerging markets than for developed countries. Many emerging
markets have experienced substantial rates of inflation for many years.
Inflation and rapid fluctuations in inflation rates have had and may continue to
have very negative effects on the economies and securities markets of certain
developing markets. Economies in emerging markets generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be affected adversely by economic conditions in the
countries with which they trade.
Also, the securities markets of developing countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the United States and other more developed countries. Disclosure,
regulatory and accounting standards in many respects are less stringent than in
the United States and other developed markets. There also may be a lower level
of monitoring and regulation of developing markets and the activities of
investors in such markets, and enforcement of existing regulations has been
extremely limited.
In addition, brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive than in
the United States; this is particularly true with respect to emerging markets.
Such markets have different settlement and clearance procedures. In certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct such
transactions. Such settlement problems may cause emerging market securities to
be illiquid. The inability of the Fund to make intended securities purchases due
to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. Certain
emerging markets may lack clearing facilities equivalent to those in developed
countries. Accordingly, settlements can pose additional risks in such markets
and ultimately can expose the Fund to the risk of losses resulting from the
Fund's inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Fund's portfolio securities in such
markets may not be readily available. The Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Directors.
Investment in certain emerging market securities is restricted or controlled
to varying degrees. These restrictions or controls may at times limit or
preclude foreign investment in certain emerging market securities and increase
the costs and expenses of the Fund. Emerging markets may require governmental
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if a deterioration occurs
in an emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
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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 except securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, and except that a Fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order.
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,
except that the Fund may purchase securities of other investment companies
to the extent permitted by applicable law or exemptive order.
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 SEC permits their exclusion.
4. Issue senior securities, except to the extent permitted by the 1940
Act, including permitted borrowings.
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.
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<PAGE> 12
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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 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.
Information concerning the Board of Directors may be found in the Statement of
Additional Information. 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. AIM Management is an indirect, wholly owned
subsidiary of AMVESCAP PLC, a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis.
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046, serves as the investment advisor to the Fund pursuant to
an investment advisory agreement dated as of February 28, 1997, as amended,
(the "Advisory Agreement"). AIM was organized in 1976 and, together with its
subsidiaries, manages or advises 56 investment company portfolios (including
the Fund).
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.
SUB-ADVISOR AND SUB-SUB-ADVISOR. INVESCO Global Asset Management Limited, 41
Cedar House, 41 Cedar Avenue, Hamilton, HM12 Bermuda, serves as sub-advisor to
the Fund pursuant to a sub-advisory agreement between AIM and IGAM, dated as of
November 1, 1997 (the "Sub-Advisory Agreement"). INVESCO Asia Limited, Suite
2106, Two Pacific Place, 88 Queensway, Hong Kong, serves as sub-sub-advisor to
the Fund pursuant to a sub-sub-advisory agreement between IGAM and IAL, dated
as of November 1, 1997 (the "Sub-Sub-Advisory Agreement"). By the terms of the
Sub-Advisory Agreement and Sub-Sub-Advisory Agreement, AIM has appointed IGAM
and IGAM has appointed IAL to provide AIM with international economic and
market research, securities analyses and investment recommendations with
respect to the Fund's investment portfolio. IGAM has delegated certain of its
responsibilities to IAL through the Sub-Sub-Advisory Agreement. IAL provides
international economic and market research, securities analyses and investment
recommendations with respect to the Fund's investment portfolio. The
Sub-Advisory Agreement and Sub-Sub-Advisory Agreement provide that neither IGAM
nor IAL are responsible for the actual portfolio investment decisions of the
Fund or for the execution of portfolio transactions on behalf of the Fund. The
Fund's portfolio investment decisions and the execution of securities
transactions to carry out such decisions are solely the responsibility of AIM
as the Fund's investment advisor. The professional investment staffs of IGAM
and IAL include experienced portfolio managers and research staffs. IGAM and
IAL are indirect, wholly owned, investment advisory subsidiaries of AMVESCAP
PLC.
ADMINISTRATOR. AIM and the Company have entered into an Administrative
Services Agreement, dated as of February 28, 1997, pursuant to which AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Fund. 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.
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 approximately 125
individuals. 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
who are primarily responsible for the day-to-day management of the Fund are A.
Dale Griffin, III and Barrett K. Sides. Mr. Griffin is Vice President of A I M
Capital Management, Inc. ("AIM Capital"), a wholly owned subsidiary of AIM, and
has been responsible for the Fund since its inception. Mr. Griffin has been
associated with AIM since 1989 and has a total of ten years of experience as an
investment professional. Mr. Sides is Assistant Vice President of AIM Capital
and has been responsible for the Fund since its inception. Mr. Sides has been
associated with AIM since 1990 and has a total of seven years of experience as
an investment professional.
FEES AND EXPENSES. Pursuant to the Advisory Agreement, AIM is entitled to
receive a fee from the Fund calculated at the annual rate 0.95% of the first
$500 million of net assets and 0.90% of net assets over $500 million. AIM is
also entitled to receive reimbursement of administrative costs incurred on
behalf of the Fund. Pursuant to the Sub-Advisory Agreement between AIM and IGAM
with respect to the Fund, IGAM is entitled to receive 0.20% of the first $500
million of net assets and 0.175% of net assets over
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<PAGE> 13
$500 million. Pursuant to the Sub-Sub-Advisory Agreement between IGAM and IAL
with respect to the Fund, IAL is entitled to receive an annual fee equal to
100% of the fee received by IGAM with respect to the Fund.
In addition, the Company and A I M Fund Services, Inc. P.O. Box 4739, Houston,
TX 77210-4739, a wholly owned subsidiary of AIM and registered transfer agent,
have entered into a Transfer Agency and Service Agreement, pursuant to which AFS
provides transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund.
FEE WAIVERS. AIM may from time to time voluntarily waive or reduce its fees,
while retaining its ability to be reimbursed for such fees prior to the end of
each fiscal year. Any fee waivers will be shared proportionately by AIM and
IGAM. 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.
DISTRIBUTOR. The Company has entered into Master Distribution Agreements on
behalf of the Fund (the "Distribution Agreements") with AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, to act as the
distributor of Class A, Class B and Class C 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. Class A and C Plan. The Company has adopted a Master
Distribution Plan applicable to Class A and Class C shares of the Fund (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of the Fund.
Under the Class A and C Plan, the Company may compensate AIM Distributors an
aggregate amount of 0.35% of the average daily net assets of Class A shares of
the Fund on an annualized basis and an aggregate amount of 1.00% of the average
daily net assets of Class C shares of the Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of the Fund. Payments
can also be directed by AIM Distributors to selected institutions who have
entered into service agreements with respect to Class A and Class C shares of
the Fund and who provide continuing personal services to their customers who own
Class A and Class C shares of the Fund. The service fees payable to selected
institutions are calculated at the annual rate of 0.25% of the average daily net
asset value of those Fund shares that are held in such institution's customers'
accounts which were purchased on or after a prescribed date set forth in the
Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions, are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Company with respect to the
Fund. The Class A and C Plan does not obligate the Fund to reimburse AIM
Distributors for the actual expenses AIM Distributors may incur in fulfilling
its obligations under the Class A and C Plan on behalf of the Fund. Thus, under
the Class A and C Plan, 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.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc.
Class B Plan. 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 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.
12
<PAGE> 14
Activities that may be financed under the Class A and C 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 SEC as an open-end series management investment company. The Company
currently consists of six investment portfolios: the Fund, AIM EUROPEAN
DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM
GLOBAL INCOME FUND and AIM INTERNATIONAL EQUITY 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 separate prospectuses. The
authorized capital stock of the Company consists of 4,000,000,000 shares of
common stock with a par value of $0.001 per share, of which 200,000,000 shares
are designated Class A shares, 200,000,000 shares are designated Class B shares
and 200,000,000 shares are designated Class C shares of each investment
portfolio of the Company, and the balance of which are unclassified.
Class A shares, Class B shares and Class C 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 (such as those associated with
the shareholder servicing of their shares) and is subject to differing sales
loads (which may affect performance), 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, Class B
shares and Class C 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.
13
<PAGE> 15
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR CASH MANAGEMENT FUND(2) AIM GLOBAL INCOME FUND
AIM ADVISOR FLEX FUND AIM GLOBAL UTILITIES FUND
AIM ADVISOR INCOME FUND(2) AIM GROWTH FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM INCOME FUND
AIM ADVISOR MULTIFLEX FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERNATIONAL EQUITY FUND
AIM AGGRESSIVE GROWTH FUND AIM LIMITED MATURITY TREASURY SHARES
AIM ASIAN GROWTH FUND AIM MONEY MARKET FUND(1)
AIM BALANCED FUND AIM MUNICIPAL BOND FUND
AIM BLUE CHIP FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CAPITAL DEVELOPMENT FUND AIM TAX-EXEMPT CASH FUND(1)
AIM CHARTER FUND AIM TAX-FREE INTERMEDIATE FUND
AIM CONSTELLATION FUND AIM VALUE FUND
AIM EUROPEAN DEVELOPMENT FUND AIM WEINGARTEN FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND
AIM GLOBAL GROWTH FUND
</TABLE>
(1) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve 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, Class B and Class C 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.
(2) Fund closed to investments on October 3, 1997. Please refer to
"Exchange Privilege" herein and the Fund's prospectus dated August 4, 1997.
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 ("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 A I M Distributors, Inc. ("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 an Individual Retirement Arrangement ("IRA") is $250. There are
no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 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. A Salary Reduction SEP ("SARSEP")
may not be established after December 31, 1996; however existing SARSEP accounts
can remain in effect.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
MCF-1 09/97
A-1
<PAGE> 16
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
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 (800) 347-4246.
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:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE
CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM
AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND,
AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE
FUND and AIM WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH
FUND), AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE INTERMEDIATE
FUND the "Multiple Class Funds," may be purchased at their respective net asset
value plus a sales charge as indicated below, except that Class A shares of AIM
TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are
sold without a sales charge and Class B shares (the "Class B shares") and Class
C shares ("Class C 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, Class B or Class C shares (or, if applicable, AIM Cash
Reserve 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 (800) 347-4246. 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-1 09/97
A-2
<PAGE> 17
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 include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- 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> <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. See "All Groups of AIM Funds." 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 DATE SUCH SHARES WERE PURCHASED,
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: the Class A shares of each of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM ADVISOR REAL ESTATE FUND, AIM BALANCED FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL
BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- 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> <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. See "All Groups of AIM Funds." 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 DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF-1 09/97
A-3
<PAGE> 18
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 the Class A shares
of AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- 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 $ 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.
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 may 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 Class A shares of AIM
TAX-FREE INTERMEDIATE FUND 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. See "Contingent Deferred Sales Charge Program for
Large Purchases." 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), and which
are sold at net asset value and are not subject to a contingent deferred sales
charge, in an amount up to 0.10% of such purchases of shares of AIM LIMITED
MATURITY TREASURY SHARES, and in an amount up to 0.25% of such purchases of
Class A shares of AIM TAX-FREE INTERMEDIATE FUND.
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 4.00% 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 may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) (0.35% for AIM ADVISOR INCOME FUND) is intended
in part to permit AIM Distributors to recoup a portion of on-going sales
commissions to dealers plus financing costs, if any. After the first full year,
AIM Distributors will make such payments quarterly to dealers and institutions
based on the average net asset value of Class C shares which are attributable to
shareholders for whom the dealers and institutions are designated as dealers of
record.
MCF-1 09/97
A-4
<PAGE> 19
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close 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 the Transfer Agent.
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 NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
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 business 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
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents 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 System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
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, subject to the terms
and conditions described under the caption "Exchange Privilege -- Terms and
Conditions of Exchanges."
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 Rule 12b-1 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 date such shares were purchased 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 date such shares were purchased.
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 Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND)
are subject, however, to Rule 12b-1 Plan payments of 1.00% per annum on the
average daily net assets of a Multiple Class Fund attributable to Class C
shares. See the discussion under the caption "Management -- Distribution
Plans." In addition, Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) redeemed within one year from the date such shares
were purchased are subject to a 1.00% contingent deferred sales charge. No
contingent deferred sales charge will be imposed if Class C shares are
redeemed after one year from the date such shares were purchased.
Redemptions of Class C shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without an
initial sales charge and are not subject to a contingent deferred sales
charge. (A contingent deferred sales charge may be imposed upon redemptions
of Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND when such
shares were purchased in an exchange. See "How to Redeem Shares -- Multiple
Distribution System -- Class C Shares" and "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases"). AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are, however, subject to the other
fees and expenses described in the prospectus for AIM MONEY MARKET FUND.
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TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM ADVISOR CASH MANAGEMENT FUND, AIM MONEY
MARKET FUND, AND AIM TAX-EXEMPT CASH FUND (THE "MONEY MARKET FUNDS"). 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 each 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. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, 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.
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. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
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 Class A shares of AIM
TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class
B and Class C 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.
The term "purchaser" means:
- an individual and his or her spouse and 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 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) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP or
SARSEP accounts should be linked;
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- 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. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
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) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and (ii) Class B and Class C 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 attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
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) Class A shares of
AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii)
Class B and Class C 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) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C
shares of AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C 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
MCF-1 09/97
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<PAGE> 22
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 AFS 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 Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
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 Class A 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 Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A 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) A I M Management
Group Inc. ("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, 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,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholders Services Group, Inc.); (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, 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,
similar specialized investment services or investment company transaction
services for 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 total amount invested in the
plan is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the AIM Funds in connection
with such accounts. Section 403(b) plans sponsored by public educational
institutions will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the 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 for share purchases of the Load Funds (as defined on page A-10
herein) sold at net asset value to an employee benefit plan in accordance with
this paragraph 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 and up to 0.10% of the net asset value of any AIM Limited
Maturity Treasury Shares sold at net asset value to an employee benefit plan in
accordance with this paragraph.
Class A 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 Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A 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 Class A 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 Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A 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 Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided:
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<PAGE> 23
(a) that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND 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 Class A shares of 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 AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. 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 shares which are not subject to a contingent deferred sales charge, 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 shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first 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. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge 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
shares subject to a contingent deferred sales charge 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 account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
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.
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 or Class C Shares of the Multiple Class Funds and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND, 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 or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable 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
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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; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve 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 $5,000; (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 $5,000 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, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." 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 FUND, 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; IRA plans; SARSEP plans; and 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-1 09/97
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<PAGE> 25
- --------------------------------------------------------------------------------
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, listed below
and 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; Class A shares (or shares which normally involve the
payment of initial sales charges) of certain of the AIM Funds, listed below and
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 Class A shares or shares of certain other funds, listed
below and referred to herein as the "No Load Funds," are sold at net asset
value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY SHARES
CLASS A FUND -- CLASS A AIM TAX-FREE INTERMEDIATE
AIM ADVISOR INCOME FUND -- AIM GLOBAL INCOME FUND -- CLASS A
CLASS A FUND -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A AIM ADVISOR CASH MANAGEMENT FUND
AIM ADVISOR LARGE CAP AIM GROWTH FUND -- CLASS A -- CLASS A
VALUE FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM MONEY MARKET FUND
AIM ADVISOR MULTIFLEX AIM INCOME FUND -- CLASS A -- AIM CASH RESERVE SHARES
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT AIM TAX-EXEMPT CASH FUND -- CLASS A
AIM ADVISOR REAL ESTATE FUND -- CLASS A
FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM AGGRESSIVE GROWTH FUND -- CLASS A
FUND -- CLASS A AIM MONEY MARKET
AIM ASIAN GROWTH FUND -- CLASS A
FUND -- CLASS A AIM MUNICIPAL BOND
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM CAPITAL DEVELOPMENT OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
AIM CONSTELLATION
FUND -- CLASS A
AIM EUROPEAN DEVELOPMENT
FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH
FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) no share of any Load
Fund, Class C of a Multiple Class Fund, Lower Load Fund or No Load Fund may be
exchanged for shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM ADVISOR INCOME
FUND; (ii) Load Fund share purchases of $1,000,000 or more which are subject to
a contingent deferred sales charge may not be exchanged for Lower Load Funds or
for AIM TAX-EXEMPT CASH FUND; (iii) LOWER LOAD FUND SHARE PURCHASES OF
$1,000,000 OR MORE AND AIM Cash Reserve Shares of AIM MONEY MARKET FUND and AIM
TAX-EXEMPT CASH FUND PURCHASES MAY BE EXCHANGED FOR LOAD FUND SHARES IN AMOUNTS
OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A CONTINGENT DEFERRED SALES
CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE CONTINGENT DEFERRED SALES
CHARGE ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH PERIOD SHALL BE COMPUTED
FROM THE DATE OF SUCH EXCHANGE; (iv) Class A shares and AIM LIMITED MATURITY
TREASURY SHARES may be exchanged for Class A shares or AIM LIMITED MATURITY
TREASURY SHARES, (v) Class B shares may be exchanged only for Class B shares;
(vi) Class C shares may only be exchanged for Class C shares; (vii) Class A
shares of AIM ADVISOR CASH MANAGEMENT
FUND may be exchanged for Class A shares of any Load Fund, Lower Load Fund or
No-Load Fund at net asset value; (viii) Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND may be exchanged for Class C shares of any Multiple Class Fund
at net asset value; and (ix) AIM Cash Reserve Shares of AIM MONEY MARKET FUND
may not be exchanged for Class A shares of AIM MONEY MARKET FUND or for Class B
or Class C shares.
MCF-1 09/97
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<PAGE> 26
Broker-dealers and institutions of record for Class A or Class C shares
purchased pursuant to an exchange from Class A or Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND will be compensated according to the sales commission or
concession that would apply if these Class A or Class C share purchases had been
purchased in a manner other than pursuant to an exchange.
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:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
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 Not Applicable
Lower Load
Funds.......... Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable 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 Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise, Of-
apply if No Load shares were fering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable 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, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve 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 Internal Revenue Service ("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 business 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. There is no fee for exchanges among the AIM Funds.
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.
MCF-1 09/97
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<PAGE> 27
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.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. 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, 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 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 business 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 AFS. 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 AFS at (800) 959-4246. If a shareholder is unable to reach
AFS 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 Transfer Agent as long as such request is received
prior to NYSE Close. 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 if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures 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 AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares (except for Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) 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. 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 date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
MCF-1 09/97
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<PAGE> 28
utable 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 and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C 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 a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME FUND, AIM
ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, and AIM ADVISOR REAL ESTATE FUND, by shareholders of record on
April 30, 1995 of these funds (shareholders whose broker/dealers maintain a
single omnibus account with the Transfer Agent on behalf of those shareholders,
perform sub-accounting functions with respect to those shareholders, and are
unable to segregate shareholders of record prior to April 30, 1995 from
shareholders whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996); or (v) on Class C shares of AIM
ADVISOR CASH MANAGEMENT FUND except in certain cases when the shares were
purchased in an exchange. Redemptions of shares of AIM ADVISOR CASH MANAGEMENT
FUND are generally not subject to a contingent deferred sales charge; however, a
contingent deferred sales charge may be applicable to redemptions of shares of
AIM ADVISOR CASH MANAGEMENT FUND if the redeemed shares were exchanged from
another Class C share fund and the one year holding period in such fund has not
been completed.
Contingent deferred sales charges on Class B and Class C shares will be waived
on redemptions (1) following the death or post-purchase disability, as defined
in Section 72(m)(7) of the Code, of a shareholder or a settlor of a living trust
(provided AIM Distributors is notified of such death or post-purchase disability
at the time of the redemption request and is provided with satisfactory evidence
of such death or post-purchase 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 or Class C 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, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the fifth paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
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;
MCF-1 09/97
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<PAGE> 29
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C 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 and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower 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 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. 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 reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund, Class A shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM Cash Reserve
Shares of AIM MONEY MARKET FUND which were acquired through an exchange of
shares which previously were subject to the 1% contingent deferred sales charge
will be credited with the period of time such exchanged shares were held, and
(ii) shares of any Load Fund which are subject to the 1% contingent deferred
sales charge and which were acquired through an exchange of shares of a Lower
Load Fund or a No Load Fund which previously were not subject to the 1%
contingent deferred sales charge will not be credited with the period of time
such exchanged shares were held. 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 shares are being redeemed in connection
with employee terminations or withdrawals, and (a) the total amount invested in
a Plan 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 death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (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; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) 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 A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. 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 business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- 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.
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
MCF-1 09/97
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<PAGE> 30
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 if they do not follow reasonable procedures for verification of
telephone transactions. Such reasonable procedures 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 NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT
FUND and AIM Cash Reserve 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, AIM ADVISOR CASH MANAGEMENT FUND and
the AIM Cash Reserve 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,
against shares held less than ten business 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
(other than AIM MONEY MARKET FUND) 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, except that shares that are subject to a contingent
deferred sales charge, 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 prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. 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 NYSE Close 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 "Terms and Conditions
of Purchase of the AIM Funds -- 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 NYSE 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 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.
MCF-1 09/97
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<PAGE> 31
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 ("SEC"), 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 NYSE 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 AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES AND AIM LIMITED MATURITY TREASURY
SHARES ONLY). Within 90 days of a redemption, a shareholder may invest all or
part of the redemption proceeds in Class A shares of any AIM Fund (except Class
A shares of AIM ADVISOR CASH MANAGEMENT FUND) and AIM LIMITED MATURITY TREASURY
SHARES at the net asset value next computed after receipt by the Transfer Agent
of the funds to be reinvested; provided, however, if the redemption was made
from AIM LIMITED MATURITY TREASURY SHARES or Class A shares of AIM TAX-FREE
INTERMEDIATE FUND, the reinvested proceeds will be subject to the difference in
sales charge between the shares redeemed and the shares the proceeds are
reinvested in. The shareholder must ask the Transfer Agent for such privilege at
the time of reinvestment. A realized gain on the redemption is taxable, and
reinvestment may alter any capital gains payable. If there has been a loss on
the redemption and shares of the same fund are repurchased, 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 another AIM Fund at a reduced
sales charge 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; however, the shareholder's basis in the fund
shares purchased will include the sales charge. 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 and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any 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 the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE 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 as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE. The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and 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 FUND value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. 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 NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE 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 of the
applicable AIM Fund.
MCF-1 09/97
A-17
<PAGE> 32
- --------------------------------------------------------------------------------
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 ADVISOR CASH MANAGEMENT FUND.......... declared daily; paid monthly annually annually
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INCOME FUND................... declared and paid monthly monthly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT 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 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 INTERMEDIATE GOVERNMENT 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 annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM 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 FUND............ 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 a class 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 like 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 the Transfer Agent, 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 C shares may only
be reinvested in Class C shares (iii) dividends and distributions attributable
to Class A shares or AIM Limited Maturity Treasury Shares may not be reinvested
in Class B or Class C shares, and (iv) dividends and distributions attributable
to the AIM Cash Reserve Shares of AIM MONEY MARKET FUND may not be reinvested in
the Class A shares of that Fund or in any Class B or Class C shares. Investors
who have not previously selected such a reinvestment option on the account
application form may contact the Transfer Agent 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 and Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) are expected to be lower than those for Class A shares or
AIM Cash Reserve Shares because of higher distribution fees paid by Class B and
Class C shares
MCF-1 09/97
A-18
<PAGE> 33
(except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND).
Dividends on all 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 the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent 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 gains 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 FUND (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 ADVISOR CASH
MANAGEMENT FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND,
AIM ADVISOR REAL ESTATE FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN DEVELOPMENT
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
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 FUND 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. Certain
dividends declared in October, November or December of a calendar year are
taxable to shareholders as though received on December 31 of that year if paid
to shareholders during January of the following calendar 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. With respect
to tax-exempt shareholders, distributions from the Funds will not be subject to
federal income taxation to the extent permitted under the applicable
tax-exemption.
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 ordinary income dividends and distributions (other
than exempt-interest dividends and capital gain dividends) and return of capital
distributions. 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 inter-
MCF-1 09/97
A-19
<PAGE> 34
est 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.
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. 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 INTERMEDIATE GOVERNMENT 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 ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH
FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND AND AIM GLOBAL UTILITIES
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 MUNICIPAL BOND
FUND, AIM LIMITED MATURITY TREASURY SHARES AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND, for
which The Bank of New York, 90 Washington Street, 11th Floor, 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 passes upon
legal matters.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. 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. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF-1 09/97
A-20
<PAGE> 35
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-1 09/97
B-1
<PAGE> 36
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions 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. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions 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 transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
MCF-1 09/97
B-2
<PAGE> 37
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Sub-Advisor
INVESCO Global Asset Management Limited
Cedar House, 41 Cedar Avenue
Hamilton HM12, Bermuda
Sub-Sub-Advisor
INVESCO Asia Limited
Suite 2106, Two Pacific Place
88 Queensway
Hong Kong
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--Registered Trademark--, including charges and expenses, please
call (800) 347-4246 or write to A I M Distributors, Inc. and request a free
prospectus. Please read the prospectus carefully before you invest or
send money.
AAG-PRO-1
<PAGE> 38
AIM EUROPEAN DEVELOPMENT FUND
(A SERIES PORTFOLIO OF AIM INTERNATIONAL FUNDS, INC.)
Supplement dated November 12, 1997
to the Prospectus dated November 12, 1997
Currently, shares of AIM European Development Fund (the "Portfolio") are only
available to employees of A I M Management Group Inc., AMVESCAP PLC and their
affiliates and to the directors/trustees of The AIM Family of Funds--Registered
Trademark-- ("eligible purchasers"). Eligible purchasers do not include any
member of the purchaser's family including spouse, children, parents and
parents of spouse. Also, shares of the Portfolio are not available for exchange
pursuant to the exchange privilege or for automatic dividend reinvestment
pursuant to the Automatic Dividend Investment Plan from other portfolios in The
AIM Family of Funds--Registered Trademark--, except for the eligible purchasers
as described above.
<PAGE> 39
[AIM LOGO
APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
AIM EUROPEAN DEVELOPMENT FUND
(A SERIES PORTFOLIO OF AIM INTERNATIONAL FUNDS, INC.)
PROSPECTUS
November 12, 1997
AIM EUROPEAN DEVELOPMENT 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. There is no
assurance that the Fund will attain its investment objective. The
Fund seeks to achieve its objective by investing in a diversified
portfolio of European equity securities, the issuers of which are
considered by the Fund's investment advisor to have strong earnings
momentum or demonstrate other potential for capital appreciation.
The Fund has the ability to invest a significant portion of its total
assets in securities of European issuers located in "emerging
markets." See "Risk Factors."
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 November 12, 1997, has been filed with the United
States Securities and Exchange Commission (the "SEC") 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 or by calling
(800) 347-4246. The SEC maintains a Web site at http://www.sec.gov
that contains the Statement of Additional Information, material
incorporated by reference, and other information regarding the Fund.
Additional information about the Fund may also be obtained from
http://www.aimfunds.com.
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> 40
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY.................................. 2 INVESTOR'S GUIDE TO THE AIM FAMILY OF
THE FUND................................. 4 FUNDS--Registered Trademark--.......... A-1
Table of Fees and Expenses............. 4 Introduction to The AIM Family of
Performance............................ 5 Funds............................... A-1
Investment Objective and Policies...... 5 How to Purchase Shares................. A-1
Hedging Strategies and Other Investment Terms and Conditions of Purchase of the
Policies............................ 6 AIM Funds........................... A-2
Risk Factors........................... 9 Special Plans.......................... A-9
Investment Restrictions................ 11 Exchange Privilege..................... A-11
Management............................. 11 How to Redeem Shares................... A-13
Organization of the Company............ 14 Determination of Net Asset Value....... A-17
Dividends, Distributions and Tax
Matters................................ A-18
General Information.................... A-20
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 six separate series portfolios. This Prospectus
relates to AIM EUROPEAN DEVELOPMENT FUND (the "Fund"). The Company also
offers other classes of shares in five other investment portfolios, AIM ASIAN
GROWTH FUND ("ASIAN FUND"), AIM GLOBAL AGGRESSIVE GROWTH FUND ("AGGRESSIVE
GROWTH FUND"), AIM GLOBAL GROWTH FUND ("GROWTH FUND"), AIM GLOBAL INCOME FUND
("INCOME FUND"), and AIM INTERNATIONAL EQUITY FUND ("EQUITY FUND"),
(collectively, with AIM EUROPEAN DEVELOPMENT FUND, the "Funds") each of which
pursues unique investment objectives. All such other Funds offer multiple
classes of shares to different types of investors. The shares of the other Funds
of the Company have different sales charges and expenses, which may affect
performance. To obtain information about ASIAN FUND, GLOBAL AGGRESSIVE GROWTH,
GLOBAL GROWTH, INCOME FUND or EQUITY FUND, call (800) 347-4246. See "General
Information."
The investment objective of the Fund is to provide long-term growth of
capital. The Fund seeks to achieve its objective by investing in a diversified
portfolio of European equity securities, the issuers of which are considered by
the Fund's investment advisor to have strong earnings momentum or demonstrate
other potential for capital appreciation. 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 stock, depositary receipts for stock and other securities having
the characteristics of stock) of European companies. The Fund may satisfy the
foregoing requirement in part by investing up to 20% of its total assets in
securities exchangeable for or convertible into equity securities. Under normal
market conditions, at least three European countries will be represented in the
Fund's portfolio of investments. The Fund may invest up to 65% of its total
assets in securities of European issuers located in "developing" countries or
"emerging markets." The Fund may invest up to 20% of its total assets in
securities of non-European companies.
The Fund intends to achieve its investment objective by using a fully managed
investment policy providing for the selection of securities which meet certain
quantitative standards determined by AIM. 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 Policies."
RISK FACTORS. THE FUND IS DESIGNED FOR LONG-TERM INVESTORS SEEKING
INTERNATIONAL DIVERSIFICATION AND WILLING TO BEAR THE RISKS ASSOCIATED WITH (a)
INVESTMENT IN FOREIGN SECURITIES, INCLUDING CURRENCY RISK, POLITICAL AND
ECONOMIC RISK, REGULATORY RISK AND MARKET RISK; AND (b) INVESTMENT IN "EMERGING
MARKETS," WHICH INVOLVE EXPOSURE TO ECONOMIC STRUCTURES THAT ARE GENERALLY LESS
DIVERSE AND MATURE THAN IN THE UNITED STATES, AND TO POLITICAL SYSTEMS THAT MAY
BE LESS STABLE. 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, together with its subsidiaries, manages or advises 56
investment company portfolios. 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 and other
administrative services for the Fund. Under a Transfer Agency and Service
Agreement, AIM Fund Services, Inc. ("AFS"), AIM's wholly owned subsidiary and a
registered transfer agent, receives a fee for its provision of transfer agency,
dividend distribution and disbursement and shareholder services for the Fund.
Under the terms of a sub-advisory agreement (the "Sub-
2
<PAGE> 41
Advisory Agreement") between AIM and INVESCO Global Asset Management Limited
("IGAM"), IGAM has been appointed by AIM to serve as investment sub-advisor to
the Fund. IGAM is an indirect, wholly owned subsidiary of AMVESCAP PLC, the
indirect parent of AIM. Under the terms of a sub-sub-advisory agreement (the
"Sub-Sub-Advisory Agreement") between IGAM and INVESCO Asset Management Limited
("IAML"), IAML has been appointed by IGAM to serve as investment
sub-sub-advisor to the Fund. IAML is also an indirect, wholly owned subsidiary
of AMVESCAP PLC. The Sub-Advisory Agreement and Sub-Sub-Advisory Agreement
provide that IGAM and IAML will furnish AIM with international economic and
market research, securities analyses and investment recommendations for the
Fund's portfolio. Neither IGAM nor IAML are responsible for actual portfolio
investment decisions for the Fund or for the execution of transactions on
behalf of the Fund. Under the Sub-Advisory Agreement, AIM compensates IGAM for
its services through the payment of a portion of the fees paid by the Fund to
AIM. Under the Sub-Sub-Advisory Agreement IGAM compensates IAML for its
services through the payment of all the fees paid by AIM to IGAM. See
"Management."
MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A, Class B or Class C
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 date
on 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.
Class C Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a contingent deferred sales charge
of 1% on certain redemptions made within one year of the date such shares
were purchased. Class C 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 or Class C shares 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 or Class C shares to the
investor who qualifies for reduced initial sales charges, as described below.
A I M Distributors, Inc. ("AIM Distributors") intends to reject any order for
purchase of more than $250,000 for Class B shares.
PURCHASING SHARES. Initial investments in any 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., 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 (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Fund may be exchanged for shares of other funds in The AIM
Family of Funds in the manner and subject to the policies and charges set forth
herein. 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 date on which a purchase was
made. Class B shares redeemed after six years following the date of purchase
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Holders of Class C shares of the Fund may redeem all or a portion of their
shares at net asset value on any business day, less a 1% contingent deferred
sales charge for redemptions made within one year from the date such shares were
purchased. Class C shares redeemed after one year from the date such shares were
purchased 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 of the Fund may be reinvested at net
asset value without payment of a sales charge in the Fund's shares or may be
invested in shares of the other funds in The AIM Family of Funds. See
"Dividends, Distributions and Tax Matters" and "Special Plans."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E, THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, LA FAMILIA AIM DE
FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED SERVICE MARKS AND
AIMFUNDS.COM AND INVEST WITH DISCIPLINE ARE SERVICE MARKS OF A I M MANAGEMENT
GROUP INC.
3
<PAGE> 42
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 are based on the estimated average net
assets of the respective classes of the Fund for the first period of operation.
The rules of the SEC 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 CLASS C
------- ------- -------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchase of shares (as a %
of offering price)...................................... 5.50% None None
Maximum sales load on reinvested dividends and
distributions........................................... None None None
Deferred sales load (as a % of original purchase price or
redemption proceeds, whichever is lower)................ None* 5.00% 1.00%
Redemption fee............................................ None None None
Exchange fee.............................................. None None None
Annual Fund Operating Expenses (as a % of average net
assets)
Management fees........................................... 0.95% 0.95% 0.95%
Rule 12b-1 distribution plan payments..................... 0.35% 1.00% 1.00%
Other expenses............................................ 0.70% 0.77% 0.77%
----- ----- -----
Total fund operating expenses......................... 2.00% 2.72% 2.72%
===== ===== =====
</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 FROM THE DATE SUCH SHARES WERE PURCHASED.
See the Investor's Guide, under the caption "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases."
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.................................................... $ 74
3 years................................................... $114
</TABLE>
THE EXAMPLES ABOVE ASSUME PAYMENT OF A SALES CHARGE AT THE TIME OF PURCHASE;
ACTUAL EXPENSES MAY VARY FOR 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 DATE SUCH SHARES WERE PURCHASED.
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................................................... $ 78
3 years.................................................. $114
</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................................................... $ 28
3 years.................................................. $ 84
</TABLE>
An investor would pay the following expenses on a $1,000 investment in Class C
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.................................................... $38
3 years................................................... $84
</TABLE>
An investor would pay the following expenses on the same $1,000 investment in
Class C shares of the Fund, assuming no redemption at the end of each time
period.
<TABLE>
<S> <C>
1 year.................................................... $28
3 years................................................... $84
</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, Class B shares and Class C 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
4
<PAGE> 43
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.
- --------------------------------------------------------------------------------
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.
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 will be 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
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.
Standardized total return for Class C shares reflects the deduction of a 1%
contingent deferred sales charge, if applicable, 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 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. The Fund intends to seek to achieve its investment
objective by investing in a diversified portfolio of European equity securities,
the issuers of which are considered by AIM to have strong earnings momentum or
demonstrate other potential for capital appreciation. 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 stock, preferred stock,
depositary receipts for stock and other securities having the characteristics of
stock (such as an equity or ownership interest in a company) of European
companies. The Fund may satisfy the foregoing requirement in part by investing
in the securities of European issuers which are in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other
securities representing underlying securities of European issuers. The Fund may
also satisfy such requirement by investing up to 20% of its total assets in
securities exchangeable for or convertible into equity securities of European
issuers. Investments in foreign securities may include securities issued by
enterprises that have undergone or are currently undergoing privatization.
The Fund considers an issuer of securities to be a European company if: (i) it
is organized under the laws of a European country and has a principal office in
a European country; (ii) it derives a significant portion (i.e., 50% or more) of
its total revenues from business in Europe; or (iii) its equity securities are
traded principally on a stock exchange in Europe or in an over-the-counter
market in Europe. The Fund also considers European equity securities of
closed-end management investment companies, the assets of which are invested
primarily in European equity securities, to be securities of European companies.
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<PAGE> 44
In managing the Fund, AIM seeks to apply to a diversified portfolio of
European 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 European 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 European 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.
There are no prescribed limits on geographic asset distribution within the
European community. Under normal market conditions, at least three European
countries will be represented in the Fund's portfolio of investments. The Fund
intends to invest in securities of issuers in Western Europe (such as the United
Kingdom, Germany and the Netherlands) as well as companies of issuers in Eastern
Europe (such as Croatia, Czech Republic, all of Russia and Turkey). Many of the
countries in Eastern Europe are "developing" countries or "emerging markets."
The Fund may invest up to 65% of its total assets in securities of European
issuers located in "developing" countries or "emerging markets." For a
description of the risks associated with investment in emerging markets, see
"Risk Factors -- Emerging Markets." The Fund may invest up to 20% of its total
assets in securities of non-European companies.
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 a European equity investment portfolio than to a portfolio of domestic equity
securities.
AIM may invest a portion of the Fund's assets in (i) cash or high-grade
short-term securities, including repurchase agreements, commercial paper, time
deposits and master notes, denominated either in U.S. dollars or foreign
currencies, (ii) U.S. government obligations or investment grade corporate bonds
or other debt securities, and (iii) taxable municipal securities, when such
positions are deemed advisable in light of economic or market conditions or for
daily cash management purposes. In addition, AIM may invest, for temporary
defensive purposes, all or substantially all of the Fund's assets in the
securities described above. To the extent that the Fund is invested to a
significant degree in cash, high-grade short-term securities, U.S. government
obligations, investment grade corporate bonds or other debt securities, or
taxable municipal securities, its ability to achieve its investment objective of
growth of capital may be adversely affected. Under normal circumstances, the
Fund will invest no more than 20% of the value of its total assets in high-grade
short-term securities. 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."
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HEDGING STRATEGIES AND OTHER INVESTMENT POLICIES
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 and
may purchase 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. Any change to such policy must be
submitted by AIM to the Company's Board of Directors prior to the effectiveness
of such change.
OPTIONS. The Fund may purchase put or call options. 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.
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<PAGE> 45
The Fund may also 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's custodian
segregates cash or liquid securities with a value equal to the exercise price of
the put option. If a "covered" call or put option expires unexercised, the
writer realizes 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 "collar."
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.
Options purchased or written by the Fund may be traded on the national
securities exchanges or negotiated with a dealer. Options traded in the
over-the-counter market may not be as actively traded as those on an exchange,
so it may be more difficult to value such options. In addition, it may be
difficult to enter into closing transactions with respect to such options. Such
options and the securities used as "cover" for such options, unless otherwise
indicated, would be considered illiquid securities.
The Fund will not write options if, immediately after such sale, the aggregate
value of the securities or obligations underlying the outstanding options would
exceed 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 to be paid for such options would 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 hedge the value of its
portfolio against changes in market conditions or in exchange rates between
currencies (including the U.S. dollar). 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 and asset
coverage requirements 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 antici-
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<PAGE> 46
pated 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.
TEMPORARY DEFENSIVE MEASURES. 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.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
institutions believed by the Company's Board of Directors to present minimal
credit risk. 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 (such as the
sellers' failure to repurchase the obligation in accordance with the terms of
the agreement), a 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 (d) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Fund under the Investment Company
Act of 1940, as amended (the "1940 Act"). Repurchase agreements will be secured
by U.S. Treasury securities, U.S. Government agency securities (including, but
not limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper. For additional information on
the use of repurchase agreements, see the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the sale
by the Fund of a portfolio security with a simultaneous obligation to repurchase
the security at an agreed upon price, date and interest payment. The Fund will
enter into reverse repurchase agreements solely for temporary or defensive
purposes to facilitate the orderly sale of portfolio securities to accommodate
abnormally heavy redemption requests should they occur. The Fund will use
reverse repurchase agreements when the interest income to be earned from the
securities that would otherwise have to be liquidated to meet redemption
requests is greater than the interest expense of the reverse repurchase
transaction. The Fund may enter into reverse repurchase agreements in amounts
not exceeding 33-1/3% of the value of its total assets. Reverse repurchase
agreements involve the risk that the market value of securities retained by the
Fund in lieu of liquidation may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. This risk, if
encountered, could cause a reduction in the net asset value of the Fund's
shares. Reverse repurchase agreements are considered to be borrowings under the
1940 Act.
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.
BORROWING. The Fund may borrow money to a limited extent from banks (including
the Fund's custodian bank) for temporary or emergency purposes subject to the
limitations under the 1940 Act. The current provisions of the 1940 Act restrict
borrowings (Including reverse repurchase agreements) to an aggregate of
33-1/3% of the Fund's total assets at the time of the transaction. In addition,
the Fund does not intend to engage in leverage; therefore consistent with
current interpretations of the Securities and Exchange Commission, the Fund
will not purchase additional securities while borrowings from banks exceed 5%
of the Fund's total assets.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may
purchase securities on a "when-issued" basis, that is, delivery of and payment
of the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within forty-five days after the date of the
transaction). The Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. The Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. If the Fund purchases a when-issued
security or enters into a delayed delivery agreement, the Fund's custodian bank
will segregate cash or liquid securities in an amount at least equal to the
when-issued commitment or delayed delivery agreement commitment.
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<PAGE> 47
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 total assets at any given time.
ILLIQUID SECURITIES AND RULE 144A SECURITIES. The Fund will not invest more
than 15% of its total 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 total assets in illiquid securities. See the Statement of
Additional Information.
CLOSED-END INVESTMENT COMPANIES. The Fund may invest up to 10% of its total
assets in the securities of certain closed-end investment companies. Shares of
closed-end investment companies are often traded at market prices that are less
than the net asset values of their shares. Such investments will involve the
payment of duplicative fees through the indirect payment of a portion of the
expenses, including advisory fees, of such closed-end investment companies.
PORTFOLIO TURNOVER. Any particular security will be sold, and the proceeds
reinvested, whenever such action is deemed prudent from the viewpoint of the
Fund's investment objectives, regardless of the holding period of that security.
The estimated portfolio turnover rate for the Fund is less than 100%. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to the Fund, the portion
of the Fund's distributions constituting taxable capital gains may increase.
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RISK FACTORS
FOREIGN SECURITIES. 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,
deterioration of diplomatic relations, expropriation, nationalization or
confiscatory taxation, and limitations on the removal of funds or other assets
could also adversely affect the value of the Fund's investments. Individual
foreign economies may also differ favorably or unfavorably from the United
States economy in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency, and balance of
payments position, which may likewise affect the Fund's investments. Moreover,
foreign legal systems may be affected by the prevailing political climate and
the Fund may not be able to obtain legal remedies or enforce judgments in those
courts.
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.
EMERGING MARKETS. General. A developing country or emerging market country can
be considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the developed European countries (primarily in
Western Europe), the United States, Canada, Japan, Australia, New Zealand, Hong
Kong and Singapore. The characteristics of markets can change over time.
Currently, investing in many emerging markets may not be
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<PAGE> 48
desirable or feasible because of the lack of adequate custody arrangements for
the Fund's assets, overly burdensome repatriation and similar restrictions, the
lack of organized and liquid securities markets, unacceptable political risks or
other reasons. As desirable opportunities to invest in securities in emerging
markets develop, the Fund may expand and further broaden the group of emerging
markets in which it invests. In the past, markets of developing countries have
been more volatile than the markets of developed countries; however, such
markets often have provided higher rates of return to investors. AIM believes
that these characteristics can be expected to continue in the future.
Many of the risks described above relating to foreign securities generally
will be greater for emerging markets than for developed countries. Many emerging
markets have experienced substantial rates of inflation for many years.
Inflation and rapid fluctuations in inflation rates have had and may continue to
have very negative effects on the economies and securities markets of certain
developing markets. Economies in emerging markets generally are heavily
dependent upon international trade and accordingly, have been and may continue
to be affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be affected adversely by economic conditions in the
countries with which they trade.
Also, the securities markets of developing countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the United States and other more developed countries. Disclosure,
regulatory and accounting standards in many respects are less stringent than in
the United States and other developed markets. There also may be a lower level
of monitoring and regulation of developing markets and the activities of
investors in such markets, and enforcement of existing regulations has been
extremely limited.
In addition, brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive than in
the United States; this is particularly true with respect to emerging markets.
Such markets have different settlement and clearance procedures. In certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct such
transactions. Such settlement problems may cause emerging market securities to
be illiquid. The inability of the Fund to make intended securities purchases due
to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. Certain
emerging markets may lack clearing facilities equivalent to those in developed
countries. Accordingly, settlements can pose additional risks in such markets
and ultimately can expose the Fund to the risk of losses resulting from the
Fund's inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Fund's portfolio securities in such
markets may not be readily available. The Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Directors.
Investment in certain emerging market securities is restricted or controlled
to varying degrees. These restrictions or controls may at times limit or
preclude foreign investment in certain emerging market securities and increase
the costs and expenses of the Fund. Emerging markets may require governmental
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if a deterioration occurs
in an emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
Eastern European Markets. The Fund intends to invest in the securities of
issuers domiciled in Eastern European countries. Investment in the securities of
issuers in Eastern European markets involves certain additional risks not
involved in investment in securities of issuers in more developed capital
markets, such as (i) low or non-existent trading volume, resulting in a lack of
liquidity and increased volatility in prices for such securities, as compared to
securities of comparable issuers in more developed capital markets, (ii)
uncertain national policies and social, political and economic instability
(including the possibility that such countries could revert to a centralist
planned government), increasing the potential for expropriation of assets,
confiscatory taxation, high rates of inflation or unfavorable diplomatic
developments, (iii) possible fluctuations in exchange rates, differing legal
systems and the existence or possible imposition of exchange controls, custodial
restrictions or other foreign or U.S. governmental laws or restrictions
applicable to such investments, (iv) national policies which may limit the
Fund's investment opportunities such as restrictions on investment in issuers or
industries deemed sensitive to national interests, and (v) the lack of developed
legal structures governing private and foreign investments and private property.
Eastern European capital markets are emerging in a dynamic political and
economic environment brought about by the recent events there that have reshaped
political boundaries and traditional ideologies. In such a dynamic environment,
there can be no assurance that the Eastern European capital markets will
continue to present viable investment opportunities for the Fund. In the past,
Eastern European governments have expropriated substantial amounts of private
property, and most claims of the property owners have never been finally
settled. There is no assurance that such expropriations will not recur. In such
an event, it is possible that the Fund could lose the entire value of its
investments in the affected Eastern European markets.
The currencies of Eastern European countries are not, at present, freely
convertible into other currencies. Also, certain Eastern European authorities
presently require that securities of certain Eastern European issuers be held by
custodians in Eastern Europe. At
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<PAGE> 49
this time, it is possible that certain Eastern European countries may not have
available institutions qualified under the 1940 Act to hold Fund assets.
Therefore, the Fund may need to seek an exemptive order from the SEC prior to
investing in certain Eastern European countries. There is no assurance that the
SEC would issue such an order.
Reforms currently underway and anticipated throughout Eastern Europe are
directed at political and economic liberalization, with efforts to develop
increasingly market-oriented economies and to decentralize the economic and
political decision-making processes currently in the forefront. There can be no
assurance that these reforms will continue or, if continued, will achieve their
goals; in addition, there is the possibility that reforms may be reversed in the
future.
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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, except securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, and except that a Fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order.
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,
except that the Fund may purchase securities of other investment companies
to the extent permitted by applicable law or exemptive order.
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 SEC permits their exclusion.
4. Issue senior securities, except to the extent permitted by the 1940
Act, including permitted borrowings.
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 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.
Information concerning the Board of Directors may be found in the Statement of
Additional Information. 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. AIM Management is an indirect, wholly owned
subsidiary of AMVESCAP PLC, a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis.
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046, serves as the investment advisor to the Fund pursuant to
an investment advisory agreement dated as of February 28, 1997, as amended (the
"Advisory Agreement"). AIM was organized in 1976 and, together with its
subsidiaries, manages or advises 56 investment company portfolios (including
the Fund).
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.
SUB-ADVISOR AND SUB-SUB-ADVISOR. INVESCO Global Asset Management Limited,
Cedar House, 41 Cedar Avenue, Hamilton, HM12 Bermuda, serves as sub-advisor to
the Fund pursuant to a sub-advisory agreement between AIM and IGAM, dated as of
November 1, 1997 (the "Sub-Advisory Agreement"). INVESCO Asset Management
Limited, 11 Devonshire Square, London, England EC2M4YR, serves as
sub-sub-advisor to the Fund pursuant to a sub-sub-advisory agreement between
IGAM and IAML, dated as of November 1, 1997 (the "Sub-Sub-Advisory Agreement").
By the terms of the Sub-Advisory Agreement and Sub-Sub-Advisory Agreement, AIM
has appointed IGAM and IGAM has appointed IAML to provide AIM with
international economic and market research, securities analyses and investment
recommendations with respect to the Fund's investment portfolio. IGAM has
delegated certain of its responsibilities to IAML through the Sub-Sub-Advisory
Agreement. IAML provides international economic and market research,
11
<PAGE> 50
securities analyses and investment recommendations with respect to the Fund's
investment portfolio. The Sub-Advisory Agreement and Sub-Sub-Advisory Agreement
provide that neither IGAM nor IAML are responsible for the actual portfolio
investment decisions of the Fund or for the execution of portfolio transactions
on behalf of the Fund. The Fund's portfolio investment decisions and the
execution of securities transactions to carry out such decisions are solely the
responsibility of AIM as the Fund's investment advisor. The professional
investment staffs of IGAM and IAML include experienced portfolio managers and
research staffs. IGAM and IAML are indirect, wholly owned, investment advisory
subsidiaries of AMVESCAP PLC.
ADMINISTRATOR. AIM and the Company have entered into an Administrative
Services Agreement, dated as of February 28, 1997, pursuant to which AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Fund. 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.
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 approximately 125
individuals. 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
who are primarily responsible for the day-to-day management of the Fund are Paul
A. Rogge and Clas G.Olsson. Mr. Rogge is Vice President of A I M Capital
Management, Inc. ("AIM Capital"), a wholly owned subsidiary of AIM, and has been
responsible for the Fund since its inception. Mr. Rogge has been associated with
AIM since 1991 and has a total of six years of experience as an investment
professional. Mr. Olsson has been responsible for the Fund since its inception.
Mr. Olsson has been associated with AIM since 1994 and has a total of three
years of experience as an investment professional. Prior to joining AIM, he was
a broker assistant with Merrill Lynch, Pierce, Fenner & Smith Incorporated.
FEES AND EXPENSES. Pursuant to the Advisory Agreement, AIM is entitled to
receive a fee from the Fund calculated at the annual rate 0.95% of the first
$500 million of net assets and 0.90% of net assets over $500 million. AIM is
also entitled to receive reimbursement of administrative costs incurred on
behalf of the Fund. Pursuant to the Sub-Advisory Agreement between AIM and IGAM
with respect to the Fund, IGAM is entitled to receive 0.20% of the first $500
million and 0.175% of net assets over $500 million. Pursuant to the
Sub-Sub-Advisory Agreement between IGAM and IAML with respect to the Fund, IAML
is entitled to receive an annual fee equal to 100% of the fee received by IGAM
with respect to the Fund.
In addition, the Company and A I M Fund Services, Inc. P.O. Box 4739, Houston,
TX 77210-4739, a wholly owned subsidiary of AIM and registered transfer agent,
have entered into a Transfer Agency and Service Agreement, pursuant to which AFS
provides transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund.
FEE WAIVERS. AIM may from time to time voluntarily waive or reduce its fees,
while retaining its ability to be reimbursed for such fees prior to the end of
each fiscal year. Any fee waivers will be shared proportionately by AIM and
IGAM. 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.
DISTRIBUTOR. The Company has entered into Master Distribution Agreements on
behalf of the Fund (the "Distribution Agreements") with AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, to act as the
distributor of Class A, Class B and Class C 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. Class A and C Plan. The Company has adopted a Master
Distribution Plan applicable to Class A and Class C shares of the Fund (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of the Fund.
12
<PAGE> 51
Under the Class A and C Plan, the Company may compensate AIM Distributors an
aggregate amount of 0.35% of the average daily net assets of Class A shares of
the Fund on an annualized basis and an aggregate amount of 1.00% of the average
daily net assets of Class C shares of the Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of the Fund. Payments
can also be directed by AIM Distributors to selected institutions who have
entered into service agreements with respect to Class A and Class C shares of
the Fund and who provide continuing personal services to their customers who
own Class A and Class C shares of the Fund. The service fees payable to
selected institutions are calculated at the annual rate of 0.25% of the average
daily net asset value of those Fund shares that are held in such institution's
customers' accounts which were purchased on or after a prescribed date set
forth in the Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions, are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Company with respect to the
Fund. The Class A and C Plan does not obligate the Fund to reimburse AIM
Distributors for the actual expenses AIM Distributors may incur in fulfilling
its obligations under the Class A and C Plan on behalf of the Fund. Thus, under
the Class A and C Plan, 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.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc.
Class B Plan. 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 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 and C 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.
13
<PAGE> 52
- --------------------------------------------------------------------------------
ORGANIZATION OF THE COMPANY
The Company was organized in 1991 as a Maryland corporation, and is registered
with the SEC as an open-end series management investment company. The Company
currently consists of six investment portfolios: the Fund, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM
INTERNATIONAL EQUITY FUND and AIM ASIAN GROWTH 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 separate prospectuses. The
authorized capital stock of the Company consists of 4,000,000,000 shares of
common stock with a par value of $0.001 per share, of which 200,000,000 shares
are designated Class A shares, 200,000,000 shares are designated Class B shares
and 200,000,000 shares are designated Class C shares of each investment
portfolio of the Company, and the balance of which are unclassified.
Class A shares, Class B shares and Class C 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 (such as those associated with
the shareholder servicing of their shares) and is subject to differing sales
loads (which may affect performance), 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, Class B
shares and Class C 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.
14
<PAGE> 53
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR CASH MANAGEMENT FUND(2) AIM GLOBAL INCOME FUND
AIM ADVISOR FLEX FUND AIM GLOBAL UTILITIES FUND
AIM ADVISOR INCOME FUND(2) AIM GROWTH FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM INCOME FUND
AIM ADVISOR MULTIFLEX FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERNATIONAL EQUITY FUND
AIM AGGRESSIVE GROWTH FUND AIM LIMITED MATURITY TREASURY SHARES
AIM ASIAN GROWTH FUND AIM MONEY MARKET FUND(1)
AIM BALANCED FUND AIM MUNICIPAL BOND FUND
AIM BLUE CHIP FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CAPITAL DEVELOPMENT FUND AIM TAX-EXEMPT CASH FUND(1)
AIM CHARTER FUND AIM TAX-FREE INTERMEDIATE FUND
AIM CONSTELLATION FUND AIM VALUE FUND
AIM EUROPEAN DEVELOPMENT FUND AIM WEINGARTEN FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND
AIM GLOBAL GROWTH FUND
</TABLE>
(1) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve 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, Class B and Class C 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.
(2) Fund closed to investments on October 3, 1997. Please refer to
"Exchange Privilege" herein and the Fund's prospectus dated August 4, 1997.
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 ("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 A I M Distributors, Inc. ("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 an Individual Retirement Arrangement ("IRA") is $250. There are
no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 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. A Salary Reduction SEP ("SARSEP")
may not be established after December 31, 1996; however existing SARSEP accounts
can remain in effect.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
MCF-1 09/97
A-1
<PAGE> 54
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
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 (800) 347-4246.
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:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE
CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM
AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND,
AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE
FUND and AIM WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH
FUND), AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE INTERMEDIATE
FUND the "Multiple Class Funds," may be purchased at their respective net asset
value plus a sales charge as indicated below, except that Class A shares of AIM
TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are
sold without a sales charge and Class B shares (the "Class B shares") and Class
C shares ("Class C 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, Class B or Class C shares (or, if applicable, AIM Cash
Reserve 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 (800) 347-4246. 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-1 09/97
A-2
<PAGE> 55
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 include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- 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> <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. See "All Groups of AIM Funds." 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 DATE SUCH SHARES WERE PURCHASED,
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: the Class A shares of each of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM ADVISOR REAL ESTATE FUND, AIM BALANCED FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL
BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- 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> <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. See "All Groups of AIM Funds." 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 DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF-1 09/97
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<PAGE> 56
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 the Class A shares
of AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- 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 $ 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.
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 may 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 Class A shares of AIM
TAX-FREE INTERMEDIATE FUND 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. See "Contingent Deferred Sales Charge Program for
Large Purchases." 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), and which
are sold at net asset value and are not subject to a contingent deferred sales
charge, in an amount up to 0.10% of such purchases of shares of AIM LIMITED
MATURITY TREASURY SHARES, and in an amount up to 0.25% of such purchases of
Class A shares of AIM TAX-FREE INTERMEDIATE FUND.
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 4.00% 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 may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) (0.35% for AIM ADVISOR INCOME FUND) is intended
in part to permit AIM Distributors to recoup a portion of on-going sales
commissions to dealers plus financing costs, if any. After the first full year,
AIM Distributors will make such payments quarterly to dealers and institutions
based on the average net asset value of Class C shares which are attributable to
shareholders for whom the dealers and institutions are designated as dealers of
record.
MCF-1 09/97
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<PAGE> 57
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close 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 the Transfer Agent.
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 NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
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 business 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
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents 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 System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
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, subject to the terms
and conditions described under the caption "Exchange Privilege -- Terms and
Conditions of Exchanges."
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 Rule 12b-1 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 date such shares were purchased 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 date such shares were purchased.
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 Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND)
are subject, however, to Rule 12b-1 Plan payments of 1.00% per annum on the
average daily net assets of a Multiple Class Fund attributable to Class C
shares. See the discussion under the caption "Management -- Distribution
Plans." In addition, Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) redeemed within one year from the date such shares
were purchased are subject to a 1.00% contingent deferred sales charge. No
contingent deferred sales charge will be imposed if Class C shares are
redeemed after one year from the date such shares were purchased.
Redemptions of Class C shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without an
initial sales charge and are not subject to a contingent deferred sales
charge. (A contingent deferred sales charge may be imposed upon redemptions
of Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND when such
shares were purchased in an exchange. See "How to Redeem Shares -- Multiple
Distribution System -- Class C Shares" and "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases"). AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are, however, subject to the other
fees and expenses described in the prospectus for AIM MONEY MARKET FUND.
MCF-1 09/97
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<PAGE> 58
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM ADVISOR CASH MANAGEMENT FUND, AIM MONEY
MARKET FUND, AND AIM TAX-EXEMPT CASH FUND (THE "MONEY MARKET FUNDS"). 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 each 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. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, 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.
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. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
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 Class A shares of AIM
TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class
B and Class C 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.
The term "purchaser" means:
- an individual and his or her spouse and 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 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) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP or
SARSEP accounts should be linked;
MCF-1 09/97
A-6
<PAGE> 59
- 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. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
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) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and (ii) Class B and Class C 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 attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
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) Class A shares of
AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii)
Class B and Class C 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) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C
shares of AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C 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
MCF-1 09/97
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<PAGE> 60
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 AFS 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 Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
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 Class A 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 Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A 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) A I M Management
Group Inc. ("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, 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,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholders Services Group, Inc.); (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, 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,
similar specialized investment services or investment company transaction
services for 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 total amount invested in the
plan is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the AIM Funds in connection
with such accounts. Section 403(b) plans sponsored by public educational
institutions will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the 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 for share purchases of the Load Funds (as defined on page A-10
herein) sold at net asset value to an employee benefit plan in accordance with
this paragraph 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 and up to 0.10% of the net asset value of any AIM Limited
Maturity Treasury Shares sold at net asset value to an employee benefit plan in
accordance with this paragraph.
Class A 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 Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A 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 Class A 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 Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A 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 Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided:
MCF-1 09/97
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(a) that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND 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 Class A shares of 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 AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. 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 shares which are not subject to a contingent deferred sales charge, 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 shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first 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. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge 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
shares subject to a contingent deferred sales charge 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 account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
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.
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 or Class C Shares of the Multiple Class Funds and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND, 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 or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable 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
MCF-1 09/97
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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; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve 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 $5,000; (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 $5,000 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, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." 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 FUND, 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; IRA plans; SARSEP plans; and 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-1 09/97
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- --------------------------------------------------------------------------------
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, listed below
and 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; Class A shares (or shares which normally involve the
payment of initial sales charges) of certain of the AIM Funds, listed below and
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 Class A shares or shares of certain other funds, listed
below and referred to herein as the "No Load Funds," are sold at net asset
value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY SHARES
CLASS A FUND -- CLASS A AIM TAX-FREE INTERMEDIATE
AIM ADVISOR INCOME FUND -- AIM GLOBAL INCOME FUND -- CLASS A
CLASS A FUND -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A AIM ADVISOR CASH MANAGEMENT FUND
AIM ADVISOR LARGE CAP AIM GROWTH FUND -- CLASS A -- CLASS A
VALUE FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM MONEY MARKET FUND
AIM ADVISOR MULTIFLEX AIM INCOME FUND -- CLASS A -- AIM CASH RESERVE SHARES
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT AIM TAX-EXEMPT CASH FUND -- CLASS A
AIM ADVISOR REAL ESTATE FUND -- CLASS A
FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM AGGRESSIVE GROWTH FUND -- CLASS A
FUND -- CLASS A AIM MONEY MARKET
AIM ASIAN GROWTH FUND -- CLASS A
FUND -- CLASS A AIM MUNICIPAL BOND
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM CAPITAL DEVELOPMENT OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
AIM CONSTELLATION
FUND -- CLASS A
AIM EUROPEAN DEVELOPMENT
FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH
FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) no share of any Load
Fund, Class C of a Multiple Class Fund, Lower Load Fund or No Load Fund may be
exchanged for shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM ADVISOR INCOME
FUND; (ii) Load Fund share purchases of $1,000,000 or more which are subject to
a contingent deferred sales charge may not be exchanged for Lower Load Funds or
for AIM TAX-EXEMPT CASH FUND; (iii) LOWER LOAD FUND SHARE PURCHASES OF
$1,000,000 OR MORE AND AIM Cash Reserve Shares of AIM MONEY MARKET FUND and AIM
TAX-EXEMPT CASH FUND PURCHASES MAY BE EXCHANGED FOR LOAD FUND SHARES IN AMOUNTS
OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A CONTINGENT DEFERRED SALES
CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE CONTINGENT DEFERRED SALES
CHARGE ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH PERIOD SHALL BE COMPUTED
FROM THE DATE OF SUCH EXCHANGE; (iv) Class A shares and AIM LIMITED MATURITY
TREASURY SHARES may be exchanged for Class A shares or AIM LIMITED MATURITY
TREASURY SHARES, (v) Class B shares may be exchanged only for Class B shares;
(vi) Class C shares may only be exchanged for Class C shares; (vii) Class A
shares of AIM ADVISOR CASH MANAGEMENT
FUND may be exchanged for Class A shares of any Load Fund, Lower Load Fund or
No-Load Fund at net asset value; (viii) Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND may be exchanged for Class C shares of any Multiple Class Fund
at net asset value; and (ix) AIM Cash Reserve Shares of AIM MONEY MARKET FUND
may not be exchanged for Class A shares of AIM MONEY MARKET FUND or for Class B
or Class C shares.
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<PAGE> 64
Broker-dealers and institutions of record for Class A or Class C shares
purchased pursuant to an exchange from Class A or Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND will be compensated according to the sales commission or
concession that would apply if these Class A or Class C share purchases had been
purchased in a manner other than pursuant to an exchange.
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:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
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 Not Applicable
Lower Load
Funds.......... Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable 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 Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise, Of-
apply if No Load shares were fering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable 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, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve 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 Internal Revenue Service ("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 business 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. There is no fee for exchanges among the AIM Funds.
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.
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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.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. 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, 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 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 business 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 AFS. 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 AFS at (800) 959-4246. If a shareholder is unable to reach
AFS 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 Transfer Agent as long as such request is received
prior to NYSE Close. 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 if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures 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 AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares (except for Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) 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. 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 date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
MCF-1 09/97
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<PAGE> 66
utable 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 and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C 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 a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME FUND, AIM
ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, and AIM ADVISOR REAL ESTATE FUND, by shareholders of record on
April 30, 1995 of these funds (shareholders whose broker/dealers maintain a
single omnibus account with the Transfer Agent on behalf of those shareholders,
perform sub-accounting functions with respect to those shareholders, and are
unable to segregate shareholders of record prior to April 30, 1995 from
shareholders whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996); or (v) on Class C shares of AIM
ADVISOR CASH MANAGEMENT FUND except in certain cases when the shares were
purchased in an exchange. Redemptions of shares of AIM ADVISOR CASH MANAGEMENT
FUND are generally not subject to a contingent deferred sales charge; however, a
contingent deferred sales charge may be applicable to redemptions of shares of
AIM ADVISOR CASH MANAGEMENT FUND if the redeemed shares were exchanged from
another Class C share fund and the one year holding period in such fund has not
been completed.
Contingent deferred sales charges on Class B and Class C shares will be waived
on redemptions (1) following the death or post-purchase disability, as defined
in Section 72(m)(7) of the Code, of a shareholder or a settlor of a living trust
(provided AIM Distributors is notified of such death or post-purchase disability
at the time of the redemption request and is provided with satisfactory evidence
of such death or post-purchase 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 or Class C 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, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the fifth paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
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;
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(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C 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 and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower 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 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. 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 reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund, Class A shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM Cash Reserve
Shares of AIM MONEY MARKET FUND which were acquired through an exchange of
shares which previously were subject to the 1% contingent deferred sales charge
will be credited with the period of time such exchanged shares were held, and
(ii) shares of any Load Fund which are subject to the 1% contingent deferred
sales charge and which were acquired through an exchange of shares of a Lower
Load Fund or a No Load Fund which previously were not subject to the 1%
contingent deferred sales charge will not be credited with the period of time
such exchanged shares were held. 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 shares are being redeemed in connection
with employee terminations or withdrawals, and (a) the total amount invested in
a Plan 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 death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (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; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) 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 A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. 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 business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- 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.
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
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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 if they do not follow reasonable procedures for verification of
telephone transactions. Such reasonable procedures 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 NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT
FUND and AIM Cash Reserve 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, AIM ADVISOR CASH MANAGEMENT FUND and
the AIM Cash Reserve 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,
against shares held less than ten business 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
(other than AIM MONEY MARKET FUND) 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, except that shares that are subject to a contingent
deferred sales charge, 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 prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. 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 NYSE Close 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 "Terms and Conditions
of Purchase of the AIM Funds -- 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 NYSE 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 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.
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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 ("SEC"), 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 NYSE 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 AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES AND AIM LIMITED MATURITY TREASURY
SHARES ONLY). Within 90 days of a redemption, a shareholder may invest all or
part of the redemption proceeds in Class A shares of any AIM Fund (except Class
A shares of AIM ADVISOR CASH MANAGEMENT FUND) and AIM LIMITED MATURITY TREASURY
SHARES at the net asset value next computed after receipt by the Transfer Agent
of the funds to be reinvested; provided, however, if the redemption was made
from AIM LIMITED MATURITY TREASURY SHARES or Class A shares of AIM TAX-FREE
INTERMEDIATE FUND, the reinvested proceeds will be subject to the difference in
sales charge between the shares redeemed and the shares the proceeds are
reinvested in. The shareholder must ask the Transfer Agent for such privilege at
the time of reinvestment. A realized gain on the redemption is taxable, and
reinvestment may alter any capital gains payable. If there has been a loss on
the redemption and shares of the same fund are repurchased, 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 another AIM Fund at a reduced
sales charge 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; however, the shareholder's basis in the fund
shares purchased will include the sales charge. 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 and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any 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 the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE 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 as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE. The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and 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 FUND value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. 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 NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE 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 of the
applicable AIM Fund.
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- --------------------------------------------------------------------------------
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 ADVISOR CASH MANAGEMENT FUND.......... declared daily; paid monthly annually annually
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INCOME FUND................... declared and paid monthly monthly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT 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 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 INTERMEDIATE GOVERNMENT 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 annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM 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 FUND............ 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 a class 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 like 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 the Transfer Agent, 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 C shares may only
be reinvested in Class C shares (iii) dividends and distributions attributable
to Class A shares or AIM Limited Maturity Treasury Shares may not be reinvested
in Class B or Class C shares, and (iv) dividends and distributions attributable
to the AIM Cash Reserve Shares of AIM MONEY MARKET FUND may not be reinvested in
the Class A shares of that Fund or in any Class B or Class C shares. Investors
who have not previously selected such a reinvestment option on the account
application form may contact the Transfer Agent 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 and Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) are expected to be lower than those for Class A shares or
AIM Cash Reserve Shares because of higher distribution fees paid by Class B and
Class C shares
MCF-1 09/97
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<PAGE> 71
(except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND).
Dividends on all 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 the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent 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 gains 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 FUND (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 ADVISOR CASH
MANAGEMENT FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND,
AIM ADVISOR REAL ESTATE FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN DEVELOPMENT
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
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 FUND 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. Certain
dividends declared in October, November or December of a calendar year are
taxable to shareholders as though received on December 31 of that year if paid
to shareholders during January of the following calendar 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. With respect
to tax-exempt shareholders, distributions from the Funds will not be subject to
federal income taxation to the extent permitted under the applicable
tax-exemption.
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 ordinary income dividends and distributions (other
than exempt-interest dividends and capital gain dividends) and return of capital
distributions. 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 inter-
MCF-1 09/97
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<PAGE> 72
est 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.
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. 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 INTERMEDIATE GOVERNMENT 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 ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH
FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND AND AIM GLOBAL UTILITIES
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 MUNICIPAL BOND
FUND, AIM LIMITED MATURITY TREASURY SHARES AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND, for
which The Bank of New York, 90 Washington Street, 11th Floor, 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 passes upon
legal matters.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. 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. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF-1 09/97
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<PAGE> 73
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-1 09/97
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<PAGE> 74
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions 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. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions 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 transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
MCF-1 09/97
B-2
<PAGE> 75
[AIM LOGO APPEARS HERE]
THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Sub-Advisor
INVESCO Global Asset Management Limited
Cedar House, 41 Cedar Avenue
Hamilton, HM 12 Bermuda
Sub-Sub-Advisor
INVESCO Asset Management Limited
11 Devonshire Square
London, England EC2M4YR
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--Registered Trademark--, including charges and expenses, please call
(800) 347-4246 or write to A I M Distributors, Inc. and request a free
prospectus. Please read the prospectus carefully before you invest or send
money.
EDF-PRO-1
<PAGE> 76
AIM ASIAN GROWTH FUND
AIM EUROPEAN DEVELOPMENT FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND
AIM GLOBAL GROWTH FUND
AIM GLOBAL INCOME FUND
AIM INTERNATIONAL EQUITY FUND
(SERIES PORTFOLIOS OF AIM INTERNATIONAL FUNDS, INC.)
Supplement dated November 12, 1997 to
the Statement of Additional Information dated November 12, 1997
Currently, shares of AIM Asian Growth Fund and AIM European Development Fund
(the "Portfolios") are only available to employees of A I M Management Group
Inc., AMVESCAP PLC and their affiliates and to the directors/trustees of The
AIM Family of Funds--Registered Trademark-- ("eligible purchasers"). Eligible
purchasers do not include any member of the purchaser's family including
spouse, children, parents and parents of spouse. Also, shares of the Portfolios
are not available for exchange pursuant to the exchange privilege or for
automatic dividend reinvestment pursuant to the Automatic Dividend Investment
Plan from other portfolios in The AIM Family of Funds--Registered Trademark--,
except for the eligible purchasers as described above.
<PAGE> 77
STATEMENT OF
ADDITIONAL INFORMATION
AIM ASIAN GROWTH FUND
AIM EUROPEAN DEVELOPMENT FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND
AIM GLOBAL GROWTH FUND
AIM GLOBAL INCOME FUND
AIM INTERNATIONAL EQUITY FUND
(SERIES PORTFOLIOS OF AIM INTERNATIONAL FUNDS, INC.)
11 Greenway Plaza
Suite 100
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 FUNDS,
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 (800) 347-4246
------------------------
Statement of Additional Information dated: November 12, 1997
Relating to the AIM International Equity Fund Prospectus dated August 4, 1997,
the AIM Global Aggressive Growth Fund, AIM Global Growth Fund and AIM Global
Income Fund Prospectus dated August 4, 1997, the AIM Asian Growth Fund
Prospectus dated November 12, 1997, and the AIM European Development Fund
Prospectus dated November 12, 1997.
<PAGE> 78
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Yield Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Brokerage Commissions Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
HEDGING STRATEGIES AND OTHER INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Privatized Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Hedging Foreign Currency Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Writing Covered Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Writing Covered Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchasing Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchasing Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Combined Option Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Stock Index Options and Futures and Financial Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Restrictions on the Use of Futures Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Restrictions on OTC Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Asset Coverage for Futures and Options Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Risk Factors in Options, Futures, Forward and Currency Transactions . . . . . . . . . . . . . . . . . . . . 15
Repurchase Agreements and Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Exchange Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Countries in Which Asian Fund and European Fund May Invest . . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Aggressive Growth Fund, Growth Fund, and Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Asian Fund and European Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Remuneration of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
AIM Funds Retirement Plan for Eligible Directors/Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 30
Deferred Compensation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Investment Advisory, Sub-Advisory and Administrative Services Agreements . . . . . . . . . . . . . . . . . . 32
THE DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
i
<PAGE> 79
<TABLE>
<S> <C>
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
NET ASSET VALUE DETERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Reinvestment of Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 80
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 is included in the AIM Asian Growth Fund Prospectus dated November
12, 1997; the AIM European Development Fund Prospectus dated November 12, 1997;
the AIM Global Aggressive Growth Fund, AIM Global Growth Fund and AIM Global
Income Fund Prospectus, dated August 4, 1997 and the AIM International Equity
Fund Prospectus dated August 4, 1997, (individually, a "Prospectus" and
collectively, the "Prospectuses"). Copies of each Prospectus and additional
copies of this Statement of Additional Information may be obtained without
charge by writing the principal distributor of the Fund's shares, A I M
Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston, Texas
77210-4739, or by calling (800) 347-4246. Investors must receive a Prospectus
before they invest in the Funds.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds
(hereinafter defined). Some of the information required to be in this
Statement of Additional Information is also included in each Fund's current
Prospectus, and in order to avoid repetition, reference will be made herein to
sections of the applicable Prospectus. Additionally, each 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 each 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 an open-end, series, management investment company.
The Company currently consists of six separate portfolios: AIM Asian Growth
Fund (the "Asian Fund"), AIM European Development Fund ( the "European
Fund"), AIM Global Aggressive Growth Fund (the "Aggressive Growth Fund"), AIM
Global Growth Fund (the "Growth Fund") and AIM Global Income Fund ( the "Income
Fund") and AIM International Equity Fund (the "Equity Fund") (individually, a
"Fund" and collectively, the "Funds"). Each portfolio of the Company offers
Class A, Class B and Class C shares. This Statement of Additional Information
relates solely to the Funds.
As used in each Prospectus, the term "majority of the outstanding
shares" of the Company, of a particular Fund or of a class of a Fund means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Company, such Fund or such class present at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares of the Company, such Fund or
such class are present or represented by proxy or (ii) more than 50% of the
outstanding shares of the Company, such Fund or such class.
Each share of a Fund is entitled to one vote, to participate equally
in dividends and distributions declared by the Board of Directors with respect
to such 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 and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. Performance quotations reflect
historical information and should not be considered representative of a Fund's
performance for any period in the future. Performance is a function of a
number of factors and can be expected to fluctuate. The Funds may provide
performance information in reports, sales literature and
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<PAGE> 81
advertisements. The Funds may also, from time to time, quote information about
the Funds published or aired by publications or other media entities which
contain articles or segments relating to investment results or other data about
one or more of the Funds. The following is a list of such publications or
media entities:
<TABLE>
<S> <C> <C>
Advertising Age Financial World Nation's Business
Barron's Forbes New York Times
Best's Review Fortune Pension World
Broker World Hartford Courant Inc. Pensions & Investments
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
</TABLE>
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
<TABLE>
<S> <C>
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper Analytical Services
</TABLE>
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential
investments, investors should note that the methods of computing performance of
other potential investments are not necessarily comparable to the methods
employed by a Fund.
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share over the period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical investment in a
particular 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 a Fund's performance is not
constant over time, but changes from year to year, and that average annual
total returns do not represent the actual year-to-year performance of such
Fund.
In addition to average annual total returns, each 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. For
Asian Fund and European Fund total returns may be quoted with or without taking
the Class A shares' 5.50% maximum sales charge, the Class B shares' 5% maximum
contingent deferred sales charge ("CDSC") or the Class C shares' 1% maximum
CDSC into account. For Aggressive Growth Fund, Growth Fund and Income Fund
total returns may be quoted with or without taking the Class A shares' 4.75%
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<PAGE> 82
maximum sales charge, the Class B shares' 5% maximum CDSC or the Class C
shares' 1% maximum CDSC into account. For Equity Fund total returns may be
quoted with or without taking the Class A shares' 5.50% maximum sales charge,
the Class B shares' 5% maximum CDSC or the Class C shares' 1% maximum CDSC into
account. Excluding sales charges from a total return calculation produces a
higher total return figure.
YIELD QUOTATIONS
The standard formula for calculating yield for the Income Fund, as
described in the Prospectus, is as follows:
6
YIELD = 2[((a-b)/(c x d) + 1) -1]
Where a = dividends and interest earned during a stated 30-day
period. For purposes of this calculation, dividends
are accrued rather than recorded on the ex-dividend
date. Interest earned under this formula must
generally be calculated based on the yield to maturity
of each obligation (or, if more appropriate, based on
yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during
the period.
d = the maximum offering price per share on the last day of
the period.
The yields for the Class A and Class B shares of the Income Fund for
the 30-day period ended October 31, 1996 were as follows:
Class A . . . . . . . . . . . 6.09%
Class B . . . . . . . . . . . 5.90%
Yield is not available for the Class C shares of the Income Fund as
the effective date of the Class C shares of all Funds was August 4,1997.
HISTORICAL PORTFOLIO RESULTS
Total returns for Class A shares of Aggressive Growth Fund, Growth
Fund and Income Fund for the one-year period ended October 31, 1996 and the
period September 15, 1994 (inception date) through October 31, 1996 (which
include the maximum sales charge of 4.75% and reinvestment of all dividends and
distributions), and total returns for Class A shares of Equity Fund for the
one-year period ended October 31, 1996 and the period April 7, 1992 (date of
effectiveness of Equity Fund's registration statement) through October 31, 1996
(which include the maximum sales charge of 5.50% and reinvestment of all
dividends and distributions) were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
--------------------------- -----------------
Periods ended October 31, 1996 Periods ended October 31, 1996
------------------------------ --------------------------------
One Since One Since
Class A Shares: Year Inception Year Inception
- --------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Aggressive Growth Fund 15.09% 21.24% 15.09% 50.65%
Equity Fund 9.42% 13.51% 9.42% 78.36%
Growth Fund 11.69% 16.21% 11.69% 37.66%
Income Fund 4.99% 10.22% 4.99% 23.00%
</TABLE>
Total returns for Class B shares of the Aggressive Growth Fund, Equity
Fund, Growth Fund and Income Fund for the one-year period ended October 31,
1996 and the period September 15, 1994 (inception date) through October 31,
1996 (which include the maximum contingent deferred sales charge of 5% and
reinvestment of all dividends and distributions) were as follows:
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<PAGE> 83
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
--------------------------- -----------------
Periods ended October 31, 1996 Periods ended October 31, 1996
------------------------------ --------------------------------
One Since One Since
Class B Shares: Year Inception Year Inception
- --------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Aggressive Growth Fund 15.09% 22.26% 15.09% 53.36%
Equity Fund 9.88% 7.88% 9.88% 17.51%
Growth Fund 11.60% 17.12% 11.60% 39.95%
Income Fund 4.66% 10.93% 4.66% 24.72%
</TABLE>
Average annual total return is not available for Class A and B shares
of Asian Fund or European Fund as the effective date of the Class A and B
shares of such Funds was August 1, 1997.
Average annual total return is not available for Class C shares of
Aggressive Growth Fund, Asian Fund, Equity Fund, European Fund, Growth Fund or
Income Fund as the effective date of the Class C shares of all Funds was
August 4, 1997.
During the one-year period ended October 31, 1996, a hypothetical
$1,000 investment in the Class A shares of the Aggressive Growth Fund, Equity
Fund, Growth Fund and Income Fund at the beginning of such period would have
been worth $1,150.90, $1,094.20, $1,116.90 and $1,049.90, respectively,
assuming the maximum sales charge was paid and all distributions were
reinvested. For the period September 15, 1994 (inception date for Aggressive
Growth Fund, Growth Fund and Income Fund) through October 31, 1996, and the
period April 7, 1992 (date of effectiveness of Equity Fund's registration
statement) through October 31, 1996, a hypothetical $1,000 investment in the
Class A shares of the Aggressive Growth Fund, Equity Fund, Growth Fund and
Income Fund at the beginning of such period would have been worth $1,506.50,
$1,783.60, $1,376.60 and $1,230.00, respectively, assuming the maximum sales
charge was paid and all distributions were reinvested.
During the one-year period ended October 31, 1996, a hypothetical
$1,000 investment in the Class B shares of the Aggressive Growth Fund, Equity
Fund, Growth Fund and Income Fund at the beginning of such period would have
been worth $1,150.90, $1,098.80, $1,116.00 and $1,046.60, respectively,
assuming the maximum contingent deferred sales charge was paid and all
distributions were reinvested. For the period September 15, 1994 (inception
date) through October 31, 1996, a hypothetical $1,000 investment in the Class B
shares of the Aggressive Growth Fund, Equity Fund, Growth Fund and Income Fund
at the beginning of such period would have been worth $1,533.60, $1,175.10,
$1,399.50 and $1,247.20, respectively, assuming the maximum contingent deferred
sales charge was paid and all distributions were reinvested.
Each 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 Funds may also advertise
mutual fund performance rankings which have been assigned to each respective
Fund by such monitoring services. Each Fund's performance may also be compared
in advertising and other materials to the performance of comparative benchmarks
such as indices of stocks comparable to those in which the Funds invest, as
well as the following:
<TABLE>
<S> <C>
Standard & Poor's 500 Stock Index First Boston High Yield Index
Consumer Price Index The Financial Times - Actuaries World Indices (a
Bond Buyer Index wide range of comprehensive measures of
NASDAQ stock price performance for the world's
COFI major stock markets and regional areas)
</TABLE>
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<PAGE> 84
Dow Jones Industrial Average
Morgan Stanley Capital International Indices,
including:
EAFE Index
Pacific Basin Index
Pacific Ex Japan Index (a widely
recognized series of
indices in international
market
performance)
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasuries
30 year Treasuries
90 Day Treasury Bills
Advertising for the Income Fund may from time to time include
discussions of general economic conditions and interest rates.
From time to time, each 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). Each 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, each 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 Funds may disclose (i)
the largest holdings in the Funds' portfolios, (ii) certain selling group
members and/or (iii) certain institutional shareholders.
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 each Fund, for the selection of broker-dealers, for the
execution of the Funds' 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 Funds do not necessarily pay the
lowest commission or spread available.
A portion of the securities in which the Funds invest are traded in
over-the-counter ("OTC") markets, and in such transactions, a 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 a mark up or mark down.
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<PAGE> 85
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 certain Funds in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or
other securities representing underlying securities of 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 Funds) 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; (3) certain products and/or services provided to the Funds, the cost of
which will be included in Fund expenses reported to shareholders; and (4) the
broker's attitude toward and interest in mutual funds in general and in the
Funds 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 Funds, AIM may also consider sales of the Funds and
of the other AIM Funds as a factor in the selection of broker-dealers to
execute portfolio transactions for a Fund. In such cases, Fund trades may be
executed directly by selling dealers or by other broker-dealers with which
selling dealers have clearing arrangements.
AIM will seek, whenever possible, to recapture for the benefit of a
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 a Fund's portfolio securities in a
tender or exchange offer.
The Funds are 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 a 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 such 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, a Fund may pay a higher price for securities or higher commissions
in recognition of research services furnished by broker-dealers.
Provisions of the Investment Company Act of 1940, as amended (the
"1940 Act") and rules and regulations thereunder have been construed to
prohibit the Funds 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 Funds have obtained
an order of exemption from the SEC which permits a Fund to engage in certain
transactions with certain 5% holders, if a Fund complies with conditions and
procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
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<PAGE> 86
AIM and its affiliates manage several other investment accounts, some
of which may have investment objectives similar to those of the Funds. It is
possible that, at times, identical securities will be appropriate for
investment by one of the Funds and by another Fund or 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(s) 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 Fund(s) 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 a 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 a 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.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or A I M Capital Management, Inc.
("AIM Capital") and simultaneously purchased by another investment account
advised by AIM or AIM Capital, when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by AIM or AIM
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have
been adopted by the Boards of Directors/Trustees of the various AIM Funds,
including the Company. Although such transactions may result in custodian, tax
or other related expenses, no brokerage commissions or other direct transaction
costs are generated by transactions among the investment accounts advised by
AIM or AIM Capital.
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 a 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
Funds' investment programs. 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
7
<PAGE> 87
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 staff 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 Funds. Similarly, any 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 Funds. AIM is of the opinion that this
material is beneficial in supplementing AIM's research and analysis; and,
therefore, it may benefit the Funds by improving the quality of AIM's
investment advice. The advisory fee paid by the Funds 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 Funds.
With respect to the Income Fund, purchases and sales of portfolio
securities are generally transacted with the issuer or a primary market maker
for the securities on a net basis, without any brokerage commission being paid
by the Fund for such purchases. Purchases from dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases
and sales for the Aggressive Growth Fund and Growth Fund generally involve a
broker, and consequently involve the payment of commissions.
As of October 31, 1996, Aggressive Growth Fund had entered into
repurchase agreements with Dresdner Securities, Inc. and Daiwa Securities
America, Inc. having a market value of $54,000,000 and $631,659, respectively.
As of October 31, 1996, Equity Fund had entered into a repurchase agreement
with Daiwa Securities, Inc. having a market value of $121,642. Daiwa
Securities, Inc. is a regular broker of the Company, as defined in Rule 10b-1.
As of October 31, 1996, Growth Fund held an amount of common stock issued by
PaineWebber, Inc. and had entered into a repurchase agreement with Daiwa
Securities America, Inc. having a market value of $105,750 and $6,000,000,
respectively. As of October 31, 1996, Income Fund had entered into a
repurchase agreement with Daiwa Securities, Inc. having a market value of
$400,640. PaineWebber, Inc., Daiwa Securities America, Inc. and Dresdner
Securities, Inc. are regular brokers of the Company, as defined in Rule 10b-1.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1996 and 1995 and the period
September 15, 1994 (inception date) through October 31, 1994, Aggressive Growth
Fund paid brokerage commissions of $5,169,447, $1,409,761 and $59,076,
respectively. The increase in brokerage commissions from October 31, 1994
through October 31, 1996 was due to the increase in Aggressive Growth Fund's
net assets during such period. For the fiscal year ended October 31, 1996, AIM
allocated certain of Aggressive Growth Fund's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $56,670,088 and the related
brokerage commissions were $90,264.
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<PAGE> 88
For the years ended October 31, 1996, 1995 and 1994 Equity Fund paid
brokerage commissions of $5,666,504, $3,169,134 and $3,253,649, respectively.
The increase in brokerage commissions from October 31, 1994 through October 31,
1996 was due to the increase in Equity Fund's net assets during such period.
For the fiscal year ended October 31, 1996, AIM allocated certain of Equity
Fund's brokerage transactions to certain broker-dealers that provided AIM with
certain research, statistical and other information. Such transactions
amounted to $5,703,215 and the related brokerage commissions were $5,452.
For the fiscal years ended October 31, 1996 and 1995 and the period
September 15, 1994 (inception date) through October 31, 1994, Growth Fund paid
brokerage commissions of $826,284, $161,100 and $9,933, respectively. The
increase in brokerage commissions from October 31, 1994 through October 31,
1996 was due to the increase in Growth Fund's net assets during such period.
For the fiscal year ended October 31, 1996, AIM allocated certain of Growth
Fund's brokerage transactions to certain broker-dealers that provided AIM with
certain research, statistical and other information. Such transactions
amounted to $13,226,137 and the related brokerage commissions were $14,715.
For the fiscal years ended October 31, 1996 and 1995 and the period
September 15, 1994 (inception date) through October 31, 1994, Income Fund paid
brokerage commissions of $1,570, $6,939 and $0, respectively. For the fiscal
year ended October 31, 1996, none of Income Fund's brokerage transactions were
allocated to broker-dealers that provided AIM with certain research,
statistical and other information.
HEDGING STRATEGIES AND OTHER INVESTMENT POLICIES
The following discussion of certain investment strategies supplements
the discussion set forth in the Prospectus under the heading "Hedging
Strategies and Other Investment Techniques."
Each 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. Each 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 Funds
may also deal in certain forward contracts, including forward foreign exchange
transactions, foreign currency options and futures, and related options on such
futures. The Funds are 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 Funds will only engage in
these transactions for hedging purposes, the options and futures portfolio
strategies of the Funds will not subject the Funds to the risks frequently
associated with the speculative use of options and futures transactions. While
the Funds' use of hedging strategies is intended to reduce the volatility of
the respective net asset value of each Fund's shares, a Fund's net asset value
will nevertheless fluctuate. There can be no assurance that the hedging
transactions of any of the Funds will be effective.
PRIVATIZED ENTERPRISES
The governments of certain foreign countries have, to varying degrees,
embarked on privatization programs contemplating the sale of all or part of
their interests in state enterprises. European Fund's investments in the
securities of privatized enterprises include privately negotiated investments
in a government- or state-owned or controlled company or enterprise that has
not yet conducted an initial equity offering, investments in the initial
offering of equity securities of a state enterprise or former state enterprise
and investments in the securities of a state enterprise following its initial
equity offering.
In certain jurisdictions, the ability of foreign entities, such as
European Fund, to participate in privatizations may be limited by local law, or
the price or terms on which European Fund may be able to participate may be
less advantageous than for local investors. Moreover, there can be no
assurance that
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<PAGE> 89
governments that have embarked on privatization programs will continue to
divest their ownership of state enterprises, that proposed privatizations will
be successful or that governments will not re-nationalize enterprises that have
been privatized.
In the case of the enterprises in which European Fund may invest,
large blocks of the stock of those enterprises may be held by a small group of
stockholders, even after the initial equity offerings by those enterprises.
The sale of some portion or all of those blocks could have an adverse effect on
the price of the stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or
former state enterprises go through an internal reorganization or management.
Such reorganizations are made in an attempt to better enable these enterprises
to compete in the private sector. However, certain reorganizations could
result in a management team that does not function as well as the enterprise's
prior management and may have a negative effect on such enterprise. In
addition, the privatization of an enterprise by its government may occur over a
number of years, with the government continuing to hold a controlling position
in the enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which
European Fund may invest enjoy the protection of and receive preferential
treatment from the respective sovereigns that own or control them. After
making an initial equity offering these enterprises may no longer have such
protection or receive such preferential treatment and may become subject to
market competition from which they were previously protected. Some of these
enterprises may not be able to effectively operate in a competitive market and
may suffer losses or experience bankruptcy due to such competition.
HEDGING FOREIGN CURRENCY RISKS
Generally, the foreign exchange transactions of a 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
Funds have 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. A 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 Funds 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 any such Fund's portfolio
denominated or quoted in that particular foreign currency. The Funds will not
attempt to hedge all of their respective portfolio positions and will enter
into such transactions only to the extent, if any, deemed appropriate by AIM.
None of the Funds will enter into a position hedging commitment if, as a result
thereof, (1) the Aggressive Growth Fund, Asian Fund, Equity Fund, European Fund
or Growth Fund would have more than 10% of the value of their respective total
assets committed to such contracts, or (2) the Income Fund would have more than
40% of the value of its total assets committed to such contracts. None of the
Funds will enter into a forward contract with a term of more than one year.
In addition to the forward exchange contracts, the Funds 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 a 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."
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<PAGE> 90
WRITING COVERED CALL OPTIONS
Each 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 a
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, a 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, a Fund would seek to
mitigate the effects of a price decline. By writing covered call options,
however, a 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, a 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
Each 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 a 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,
a 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.
A 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 a 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.
Each Fund may write put options as an alternative to purchasing actual
securities. If security prices rise, a 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 a Fund will also profit, because it should be able to close out the
option at a lower price. If security prices fall, a Fund would expect to
suffer a loss. This loss should be less than the loss a 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.
PURCHASING PUT OPTIONS
Each 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 a 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 a 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 a 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. None of the Funds will 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 a
Fund would exceed 5% of the market value of the Fund's total assets.
PURCHASING CALL OPTIONS
Each 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
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<PAGE> 91
settled by purchasing the underlying futures contract). The Funds will
purchase call options only in connection with "closing purchase transactions."
COMBINED OPTION POSITIONS
Each 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, a 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 a
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, a 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
Each Fund is authorized to engage in transactions in stock index
options and futures and financial futures, and related options. A 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. A 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 Funds' 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 a Fund's investments in
foreign options, unless such options are specifically authorized for investment
by order of the CFTC or meet the definition of "trade option" as set forth in
CFTC Regulation 32.4, a Fund will not make such investments.
Each 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. A 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 a Fund in stock index futures and
financial futures are subject to limitations as described below under
"Restrictions on the Use of Futures Transactions."
A 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 a 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 Funds do 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
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<PAGE> 92
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 Funds are also authorized to purchase and write call and put
options on futures contracts and stock indices in connection with their 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 a Fund enters into futures transactions. A 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, a 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.
Each 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.
Each 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, a 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 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 Funds will not speculate in foreign security or
currency options, futures or related options. None of the Funds will hedge a
currency substantially in excess of the market value of securities which any
such Fund has committed or anticipates to purchase which are denominated in
such currency, and in the case of securities which have been sold by such Fund
but not yet delivered, the proceeds thereof in its denominated currency. None
of the Funds will 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
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<PAGE> 93
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 Funds require that all of
the Funds' futures and options on futures transactions constitute bona fide
hedging transactions and that the Funds not enter into such transactions if,
immediately thereafter, the sum of the amount of initial margin deposits on a
Fund's existing futures positions and premiums paid for related options would
exceed 5% of the market value of such 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 Funds 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 Funds will acquire only
those OTC options for which AIM believes a 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 Funds have each adopted an operating policy pursuant to which
each Fund 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 a Fund,
(ii) the market value of the underlying securities covered by OTC call options
currently outstanding which were sold by such 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 otherwise readily
marketable, would exceed 10% of the net assets of Aggressive Growth Fund,
Growth Fund and Income Fund, and 15% of the net assets of Equity Fund, European
Fund and Asian Fund, taken at market value. However, if an OTC option is sold
by a 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 such 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 Funds and may be amended by the Board of Directors of the Company without
approval of the Funds' respective shareholders. However, the Funds 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 Funds will not use leverage in their options and futures
strategies. Such investments will be made for hedging purposes only. The
Funds will hold securities or other options or futures positions whose values
are expected to offset their obligations under the hedge strategies. None of
the Funds will enter into an option or futures position that exposes a 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 Funds 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 segregated
securities will not be sold while the futures or option strategy is
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outstanding, unless they are replaced with similar securities. As a result,
there is a possibility that segregation of a large percentage of a 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 a 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 option or future 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 Funds 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 Funds 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 a 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 Funds intend 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 a 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 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 a Fund's ability to effectively
hedge its portfolio. There is also the risk of loss by a 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 accounts 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 Funds'
portfolios.
Because the Funds will engage in the options and futures transactions
described above solely in connection with their hedging activities, AIM does
not believe such options and futures transactions necessarily will have any
significant effect on the portfolio turnover rate of any of the Funds.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements and reverse repurchase
agreements. A repurchase agreement is an instrument under which a 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
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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
a 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 Aggressive Growth Fund, Asian Fund, Equity Fund, European Fund
and Growth Fund to enter into reverse repurchase agreements (which are
considered to be borrowings under the 1940 Act) only for temporary or emergency
purposes and not as a means to increase income. The Income Fund may enter into
such transactions as a means to enhance portfolio returns. The Funds will
enter into reverse repurchase agreements 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 applicable 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 a 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 Funds may make
secured loans of portfolio securities amounting to not more than 33-1/3% of
each Fund's respective total assets. Securities loans are made to banks,
brokers and other financial institutions pursuant to agreements requiring that
the loans be continuously 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 applicable
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 Funds have a right to call each of
their respective loans 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 Funds will
not have the right to vote securities while they are being lent, but each Fund
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
Each Fund may from time to time enter into short sales transactions.
A 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
Funds 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 a Fund's
total assets be deposited or pledged as collateral for such sales at any time.
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RULE 144A SECURITIES
Each 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 Funds, 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 each
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, a 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.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with
foreign currencies, and consequently the Funds may from time to time hold cash
balances in the form of foreign currencies and multinational currency units.
Such foreign currencies and multinational currency units will usually be
acquired on a spot (i.e. cash) basis at the spot rate prevailing in foreign
exchange markets and will result in currency conversion costs to the Funds.
The Funds attempt to purchase and sell foreign currencies on as favorable a
basis as practicable; however, some price spread on foreign exchange
transactions (to cover service charges) may be incurred, particularly when the
Funds change investments from one country to another, or when U.S. dollars are
used to purchase foreign securities. Certain countries could adopt policies
which would prevent the Funds from transferring cash out of such countries, and
the Funds may be affected either favorably or unfavorably by fluctuations in
relative exchange rates while the Funds hold foreign currencies.
COUNTRIES IN WHICH ASIAN FUND AND EUROPEAN FUND MAY INVEST
The Asian Fund considers issuers of securities located in the
following countries to be Asian issuers:
<TABLE>
<S> <C> <C> <C>
Bangladesh Indonesia Philippines Thailand
China Korea Singapore Vietnam
Hong Kong Malaysia Sri Lanka
India Pakistan Taiwan
</TABLE>
In addition to Asian issuers, the Asian Fund may invest up to 20% of
its total assets in securities of non-Asian issuers. The following is a list
of some of the non-Asian countries in which the Asian Fund may invest from time
to time:
<TABLE>
<S> <C>
Australia New Zealand
</TABLE>
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The European Fund considers issuers of securities located in the
following countries to be European issuers:
<TABLE>
<S> <C> <C> <C>
Austria Germany Netherlands Slovenia
Belgium Greece Norway Spain
Croatia Hungary Poland Sweden
Czech Republic Ireland Portugal Switzerland
Denmark Italy Romania Turkey
Finland Liechtenstein Russia Ukraine
France Luxembourg Slovakia United Kingdom
</TABLE>
In addition to European issuers, the European Fund may invest up to
20% of its total assets in securities of non-European issuers. The following
is a list of some of the non-European countries in which the European Fund may
invest from time to time:
<TABLE>
<S> <C> <C>
Bermuda Israel South Africa
Egypt
</TABLE>
The above lists may include foreign countries that have not yet been
approved by the Company's board. Asian Fund and European Fund will only invest
in foreign countries that have been approved by the board.
The word "Development" in the European Fund's name is designed to
address the general restructuring taking place in Europe as well as a more
dramatic political and economic restructuring taking place in regions such as
Eastern Europe. Also consistent with the name, the Fund has the ability to
invest a significant portion of its total assets in securities issued in
emerging markets.
INVESTMENT RESTRICTIONS
AGGRESSIVE GROWTH FUND, GROWTH FUND, AND INCOME FUND
The following fundamental policies and investment restrictions have
been adopted by Aggressive Growth Fund, Growth Fund and Income 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 applicable Fund, as
defined in the 1940 Act.
The Funds 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 Funds may purchase and sell stock
index and currency options, stock index futures,
interest rate futures, financial futures and currency
futures contracts and related options on such futures.
3. Purchase any security on margin, except that the Funds
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
18
<PAGE> 98
futures or related options transactions shall not be
considered the purchase of a security on margin.
4. Make loans, although the Funds 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. Issue senior securities, except to the extent
permitted by the 1940 Act, including permitted
borrowings.
6. Underwrite securities of other persons, except to the
extent that a 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. Purchase the securities of any issuer if, as a result,
more than 25% of the value of a 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 (unless and until SEC
changes its position) apply to foreign government
obligations unless the SEC permits their exclusion.
9. Purchase a security if, as a result, with respect to
75% of the value of a Fund's total assets, taken at
market value, more than 5% of a 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 and except that a
Fund may purchase securities of other investment
companies to the extent permitted by applicable law or
exemptive order. This restriction does not apply to
the Income Fund.
10. Purchase a security if, as a result, with respect to
50% 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, except securities
issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities and except that a
Fund may purchase securities of other investment
companies to the extent permitted by applicable law or
exemptive order. This restriction applies only to the
Income Fund.
11. Purchase a security if, as a result, more than 10% of
the outstanding voting securities of any issuer would
be held by a Fund, except that a Fund may purchase
securities of other investment companies to the extent
permitted by applicable law or exemptive order.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, the Funds will
not:
12. Make investments for the purpose of exercising control
or management.
19
<PAGE> 99
13. Lend portfolio securities in excess of 33-1/3% of
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."
14. Invest in securities which are illiquid if more than
15% of a Fund's total assets, taken at market value,
would be invested in such securities.
15. Effect short sales of securities, except that a 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.
EQUITY FUND
The following fundamental policies and investment restrictions have been
adopted by Equity 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
20
<PAGE> 100
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. 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.
9. 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, except that the
Fund may purchase securities of other investment
companies to the extent permitted by applicable law or
exemptive order.
10. Purchase a security if, as a result, more than 10% of
the outstanding voting securities of any issuer would
be held by the Fund, except that the Fund may purchase
securities of other investment companies to the extent
permitted by applicable law or exemptive order.
11. 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:
12. Make investments for the purpose of exercising control
or management.
13. 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."
14. 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.
15. 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.
21
<PAGE> 101
Percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total
assets.
ASIAN FUND AND EUROPEAN FUND
The following fundamental policies and investment restrictions have been
adopted by Asian Fund and European 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 applicable Fund, as defined in the 1940 Act.
The Funds 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 Funds may purchase and sell stock
index and currency options, stock index futures,
interest rate futures, financial futures and currency
futures contracts and related options on such futures.
3. Purchase any security on margin, except that the Funds
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 Funds 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. Issue senior securities, except to the extent
permitted by the 1940 Act, including permitted
borrowings.
6. Underwrite securities of other persons, except to the
extent that a 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 the securities of any issuer if, as a result,
more than 25% of the value of a 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 (unless and until SEC
changes its position) apply to foreign government
obligations unless the SEC permits their exclusion.
8. Purchase a security if, as a result, with respect to
75% of the value of a Fund's total assets, taken at
market value, more than 5% of a Fund's total assets,
taken at market value, would be invested in the
securities of any one issuer, except securities issued
or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and except that a Fund
may purchase securities of other investment companies
to the extent permitted by applicable law or exemptive
order.
22
<PAGE> 102
9. Purchase a security if, as a result, more than 10% of
the outstanding voting securities of any issuer
would be held by a Fund, except that a Fund may
purchase securities of other investment companies to
the extent permitted by applicable law or exemptive
order.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, each of the Funds
will not:
10. Make investments for the purpose of exercising control
or management.
11. 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."
12. Invest in securities which are illiquid if more than
15% of a Fund's total assets, taken at market value,
would be invested in such securities.
13. 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.
14. Purchase or sell interests in oil, gas or other
mineral exploration or development programs.
The following non-fundamental policies apply to all Funds. Subject to
the investment restriction on lending portfolio securities, number 13 for
Aggressive Growth Fund, Equity Fund, Growth Fund and Income Fund and number 11
for Asian Fund and European Fund, the Funds may from time to time lend
securities from their respective portfolios 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 applicable Fund. Such loans will
not be for more than 30 days and will be terminable at any time. The Funds
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 Funds may pay reasonable fees
to persons unaffiliated with the Funds 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.
The Funds may each 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 a Fund's net assets. Included in that amount, but
not to exceed 2% of the value of a Fund's net assets, may be warrants which are
not listed on national exchanges.
In order to permit the sale of the Funds, except Asian Fund and European
Fund, shares in certain states, the Funds 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,
Aggressive Growth Fund, Growth Fund and Income Fund have undertaken (1) not to
invest more than 10% of their respective total assets in restricted securities
(Arkansas), (2) to provide investors with written notification at least 30 days
prior to any change in the investment objective of any Fund (Missouri), (3) not
to invest in real estate limited partnerships (Texas), (4) not to 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
23
<PAGE> 103
than 5% of the securities of such issuer (Ohio), (5) not to invest any assets
of the Funds in the securities of other investment companies, except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from the purchase other than the customary broker's commission,
or except when the purchase is part of a plan of merger, consolidation,
reorganization, or acquisition (Ohio) and (6) not to engage in writing put and
call options on securities unless the options are issued by the Options
Clearing Corporation, and the aggregate value of the securities underlying the
calls or obligations underlying the puts determined as of the date the options
are sold shall not exceed 25% of the Funds' respective total net assets
(California). As of the date of this Statement of Additional Information,
Equity 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 a 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.
Each 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 a Fund are
redeemable on a daily basis in U.S. dollars, the Funds intend to manage their
portfolios so as to give reasonable assurance that they 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 the Funds' portfolio strategies.
24
<PAGE> 104
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during the last five years are set forth below.
<TABLE>
<CAPTION>
=============================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST 5 YEARS
NAME, ADDRESS AND AGE WITH REGISTRANT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (78) Director and Chairman of the Board of Directors,
11 Greenway Plaza, Suite 100 Chairman A I M Management Group Inc., A I M Advisors,
Houston, TX 77046 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 Chairman and Director, AMVESCAP PLC.
- -------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (53) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief
McLean, VA 22102 Executive Officer, COMSAT Corporation; and
Chairman, Board of Governors of INTELSAT
(international communications company).
- -------------------------------------------------------------------------------------------------------------
OWEN DALY II (73) Director Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company and
Monumental General Insurance Company; and
Chairman of the Board of Equitable
Bancorporation.
- -------------------------------------------------------------------------------------------------------------
JACK FIELDS (45) Director Formerly, Member of the U. S. House of
2607 Old Humble Road Representatives.
Humble, TX 77396
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------
* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
25
<PAGE> 105
<TABLE>
<CAPTION>
=============================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST 5 YEARS
NAME, ADDRESS AND AGE WITH REGISTRANT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
**CARL FRISCHLING (60) Director Partner, Kramer, Levin, Naftalis & Frankel
919 Third Avenue (law firm). Director, ERD Waste, Inc. (waste
New York, NY 10022 management company), Aegis Consumer Finance
(auto leasing company) and Lazard Funds, Inc.
(investment companies). Formerly, Partner,
Reid & Priest (law firm); and, prior thereto,
Partner, Spengler Carlson Gubar Brodsky &
Frischling (law firm).
- -------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (50) Director and Director, President and Chief Executive
11 Greenway Plaza, Suite 100 President Officer, A I M Management Group Inc.;
Houston, TX 77046 Director and President, A I M Advisors, Inc.;
Director and Senior Vice President,
A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund
Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company;
and Director, AMVESCAP PLC.
- -------------------------------------------------------------------------------------------------------------
JOHN F. KROEGER (73) Director Director, Flag Investors International Fund,
37 Pippins Way Inc., Flag Investors Emerging Growth Fund,
Morristown, NJ 07960 Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund,
Inc., 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., Flag Investors Real Estate
Securities 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).
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------
** 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.
26
<PAGE> 106
<TABLE>
<CAPTION>
=============================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST 5 YEARS
NAME, ADDRESS AND AGE WITH REGISTRANT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LEWIS F. PENNOCK (55) Director Attorney in private practice in Houston,
6363 Woodway, Suite 825 Texas.
Houston, TX 77057
- -------------------------------------------------------------------------------------------------------------
IAN W. ROBINSON (74) Director Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management
Tequesta, FL 33469 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 (58) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
- -------------------------------------------------------------------------------------------------------------
***JOHN J. ARTHUR (53) Senior Vice Director, Senior Vice President and Treasurer,
11 Greenway Plaza, Suite President and A I M Advisors, Inc.; and Vice President and
100 Treasurer Treasurer, A I M Management Group Inc.,
Houston, TX 77046 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.
- -------------------------------------------------------------------------------------------------------------
GARY T. CRUM (50) Senior Vice Director and President, A I M Capital
11 Greenway Plaza, Suite 100 President Management, Inc.; Director and Senior Vice
Houston, TX 77046 President, A I M Management Group Inc. and
A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP PLC.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
27
<PAGE> 107
<TABLE>
<CAPTION>
=============================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST 5 YEARS
NAME, ADDRESS AND AGE WITH REGISTRANT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
***CAROL F. RELIHAN (43) Senior Vice Director, Senior Vice President, General
11 Greenway Plaza, Suite President and Counsel and Secretary, A I M Advisors, Inc.;
100 Secretary Vice President, General Counsel and Secretary,
Houston, TX 77046 A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management
Company; Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.;
and General Counsel and Vice President A I M
Fund Services, Inc. and A I M Institutional
Fund Services, Inc.
- -------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (38) Vice President and Vice President and Fund Controller,
11 Greenway Plaza, Suite 100 Assistant Treasurer A I M Advisors, Inc.; and Assistant Vice
Houston, TX 77046 President and Assistant Treasurer, Fund
Management Company.
- -------------------------------------------------------------------------------------------------------------
ROBERT G. ALLEY (49) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc.; and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance Officer,
11 Greenway Plaza, Suite 100 A I M Advisors, Inc., A I M Capital
Houston, TX 77046 Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc.,
A I M Institutional Fund Services, Inc. and
Fund Management Company.
- -------------------------------------------------------------------------------------------------------------
JONATHAN C. SCHOOLAR (36) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc.; and Vice President, A I M
Houston, TX 77046 Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. 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
- ----------------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
28
<PAGE> 108
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), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. 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, Fields, Kroeger, Pennock (Chairman), Robinson 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 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 services
according to a fee schedule which recognizes the fact that such director also
serves as a director or trustee of other AIM Funds. Each such director
receives a fee, allocated among the AIM Funds for which he serves as a director
or trustee, which consists of an annual retainer component and a meeting fee
component.
29
<PAGE> 109
Set forth below is information regarding compensation paid or accrued
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 5,036 38,621 68,000
- ----------------------------------------------------------------------------------------------------------
Owen Daly II 4,967 82,607 68,000
- ----------------------------------------------------------------------------------------------------------
Jack Fields(4) 0 0 0
- ----------------------------------------------------------------------------------------------------------
Carl Frischling(5) 5,002 56,683 68,000
- ----------------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ----------------------------------------------------------------------------------------------------------
John F. Kroeger 4,825 83,654 66,000
- ----------------------------------------------------------------------------------------------------------
Lewis F. Pennock 4,896 33,702 67,000
- ----------------------------------------------------------------------------------------------------------
Ian W. Robinson 5,002 64,973 68,000
- ----------------------------------------------------------------------------------------------------------
Louis S. Sklar 4,998 47,593 66,500
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) The total amount of compensation deferred by all directors of the
Company during the fiscal year ended October 31, 1996, including interest
earned thereon, was $19,045.
(2) During the fiscal year ended October 31, 1996, the total amount of
expenses allocated to the Company in respect of such retirement benefits was
$16,282. Data reflect compensation earned for the calendar year ended December
31, 1996.
(3) Each Director serves as director or trustee of a total of eleven
registered investment companies advised by AIM (comprised of 55 portfolios).
Data reflect total compensation earned during the calendar year ended December
31, 1996.
(4) Mr. Fields was not serving as a Director during the fiscal year ended
December 31, 1996.
(5) See page 31 regarding fees earned by Mr. Frischling's law firm.
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 "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day
30
<PAGE> 110
of the calendar quarter coincident with or following his date of retirement
equal to 75% of the retainer paid or accrued by the Applicable AIM Funds for
such director during the twelve-month period immediately preceding the
director's retirement (including amounts deferred under a separate agreement
between the Applicable AIM Funds and the director) for the number of such
director's years of service (not in excess of 10 years of service) completed
with respect to any of the Applicable AIM Funds. Such benefit is payable to
each eligible director in quarterly installments. 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 ten 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 the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar are 10,10, 0, 20, 19, 15, 10 and 7 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
=========================================================
Number of Years Annual Retainer
of Service with Paid By All AIM Funds
the AIM Funds ================================
<S> <C>
$80,000
=========================================================
10 $60,000
---------------------------------------------------------
9 $54,000
---------------------------------------------------------
8 $48,000
---------------------------------------------------------
7 $42,000
---------------------------------------------------------
6 $36,000
---------------------------------------------------------
5 $30,000
=========================================================
</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 their deferral accounts 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
(5) or ten (10) years (depending on the Agreement) 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
death. The Agreements are not funded and, with respect to the payments of
amounts
31
<PAGE> 111
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.
The Company paid the law firm of Kramer, Levin, Naftalis & Frankel ,
counsel to the Board of Directors, $4,726, $5,247, $3,146 and $3,047 in legal
fees for services provided to the Aggressive Growth Fund, Equity Fund, Growth
Fund and Income Fund, respectively, during the fiscal year ended October 31,
1996. Mr. Frischling, a Director of the Company, is a partner in such firm.
INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), a holding company that has been engaged in the financial services
business since 1976. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, United Kingdom.
AIM and the Company have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions, (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 and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Directors reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Sanctions for violations
of the Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
The Company, on behalf of the Funds, has entered into a Master
Investment Advisory Agreement ("Investment Advisory Agreement") and a Master
Administrative Services Agreement ("Administrative Services Agreement"), both
dated February 28, 1997, as amended, with AIM. In addition, AIM has entered
into a Master Sub-Advisory Agreement (the "Sub-Advisory Agreement") with
INVESCO Global Asset Management Limited ("IGAM") with respect to the Asian Fund
and the European Fund. In addition, IGAM has entered into a Sub-Sub-Advisory
Agreement with INVESCO Asia Limited ("IAL") with respect to the Asian Fund and
a Sub-Sub-Advisory Agreement with INVESCO Asset Management Limited ("IAML")
with respect to European Fund. See "Management" in the Prospectus.
The Investment Advisory Agreement and, with respect to the Asian Fund
and the European Fund, the Sub-Advisory Agreement and Sub-Sub-Advisory
Agreements provide that each Fund will pay or cause to be paid all expenses of
the Fund not assumed by AIM (or IGAM, IAL and IAML), 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 a Fund in
connection with membership in investment company organizations; the cost of
printing copies of prospectuses and statements of additional information
distributed to each Fund's shareholders; and all other charges and costs of a
Fund's operations unless otherwise expressly provided.
The Investment Advisory Agreement, Sub-Advisory Agreement and
Sub-Sub-Advisory Agreements (as applicable) provide that if, for any fiscal
year, the total of all ordinary business expenses of each 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
32
<PAGE> 112
aised 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 and/or IGAM, IAL and IAML
will reimburse each 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 Funds and the Sub-Advisory
Agreement and Sub-Sub-Advisory Agreements for the Asian Fund and the European
Fund, each provide that such agreement will continue in effect for two years,
and from year to year thereafter only if such continuance is specifically
approved 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 Funds' shareholders on
February 7, 1997 and was continued by the Company's Board of Directors
(including the affirmative vote of all of the Non-Interested Directors) on May
13, 1997. The Investment Advisory Agreement became effective as of February 28,
1997. The Sub-Advisory Agreement and Sub-Sub-Advisory Agreements were approved
by the Company's Board of Directors on September 19, 1997. The Investment
Advisory Agreement and the Sub-Advisory Agreement each provides that the Funds
or AIM and, with respect to the Sub-Sub-Advisory Agreements each provides that
the applicable Fund, Sub-Sub-Advisor or the Sub-Advisor, may terminate such
agreement on sixty (60) days' written notice without penalty. The Investment
Advisory Agreement, Sub-Advisory Agreement and Sub-Sub-Advisory Agreements each
terminates automatically in the event of its assignment. Under the Investment
Advisory Agreement, AIM is entitled to receive from each Fund a fee calculated
at the following annual rates based on the average daily net assets of the
Fund:
AIM ASIAN GROWTH FUND
AIM EUROPEAN DEVELOPMENT FUND
<TABLE>
<S> <C>
Net Assets Annual Rate
---------- -----------
First $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.95%
Over $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.90%
AIM GLOBAL AGGRESSIVE GROWTH FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.90%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.85%
AIM GLOBAL GROWTH FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.85%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
</TABLE>
33
<PAGE> 113
<TABLE>
<S> <C>
AIM GLOBAL INCOME FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.70%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.65%
AIM INTERNATIONAL EQUITY FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.95%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.90%
</TABLE>
AIM has voluntarily agreed to waive advisory fees under the Investment
Advisory Agreement in order to achieve the following annual fee structure for
Equity Fund: 0.95% of the first $500 million of Equity Fund's average daily net
assets; 0.90% of the next $500 million of Equity Fund's average daily net
assets; and 0.85% of Equity Fund's average daily net assets exceeding $1
billion. AIM may terminate such fee waiver at any time without notice to
Shareholders.
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. Any fee waivers will be shared proportionately by the sub-advisor.
Fee waivers or reductions other than those contained in the Advisory Agreement,
Sub-Advisory Agreement or Sub-Sub-Advisory Agreements, may be modified or
terminated at any time and without notice to investors.
For the fiscal years ended October 31, 1996, 1995 and 1994, AIM
received advisory fees from each Fund as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 8,571,918 $ 1,106,108 $ -0- *
Equity Fund $ 10,384,642 $ 6,225,765 $5,526,858
Growth Fund $ 1,163,814 $ 125,323 $ -0- *
Income Fund $ -0- $ -0- $ -0- *
</TABLE>
* For the period September 15, 1994 (inception date) through October 31,
1994.
Under the Sub-Advisory Agreement, IGAM is entitled to receive from AIM
with respect to each of the Asian Fund and the European Fund, a fee calculated
at the following annual rates based on the average daily net assets of the
Fund:
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C>
First $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.20%
Over $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.175%
</TABLE>
Under the Sub-Sub-Advisory Agreements IAL, with respect to Asian Fund,
and IAML, with respect to European Fund, are each entitled to receive from IGAM
an annual fee equal to 100% of the fee received by the Sub-Advisor with respect
to the applicable Fund.
Pursuant to a sub-advisory agreement which has since been terminated,
AIM paid to Nationale-Nederlanden International Investment Advisors B.V.
sub-advisory fees for the Equity Fund during the year ended October 31, 1994 of
$429,520.
34
<PAGE> 114
For the fiscal years ended October 31, 1996, 1995 and 1994, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ -0- $ -0- $ 13,551*
Equity Fund $ 299,147 $ 77,672 $ 43,159
Growth Fund $ -0- $ 19,558 $ 2,816*
Income Fund $ 182,596 $ 55,087 $ 2,099*
</TABLE>
* For the period September 15, 1994 (inception date) through October
31, 1994.
The Administrative Services Agreement for the Funds provides that AIM
may perform, or arrange for the performance of, certain accounting and other
administrative services to each Fund which are not required to be performed by
AIM under the Investment Advisory Agreement. For such services, AIM is entitled
to receive from each 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, 1997, 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 December 11, 1996. The agreement became
effective as of February 28, 1997.
For the fiscal years ended October 31, 1996, 1995 and 1994, AIM
received reimbursement of administrative services costs from each Fund as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 86,330 $ 25,218 $ 3,939*
Equity Fund $ 94,250 $ 29,858 $ 381,864
Growth Fund $ 78,151 $ 21,984 $ 2,686*
Income Fund $ 74,433 $ 29,858 $ 2,508*
</TABLE>
* For the period September 15, 1994 (inception date) through October
31, 1994.
In addition, the Transfer Agency and Service Agreement for the Funds
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 Funds 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 Funds, maintain shareholder accounts and provide
shareholders with information regarding the Funds and their accounts. The
Transfer Agency and Service Agreement became effective on November 1, 1994.
For the fiscal years ended October 31, 1996 and 1995, AFS received
transfer agency and shareholder services fees with respect to each fund as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Aggressive Growth Fund $ 1,474,675 $ 258,683
Equity Fund $ 1,170,699 $ 757,067
Growth Fund $ 216,804 $ 33,579
Income Fund $ 40,282 $ 9,321
</TABLE>
35
<PAGE> 115
AIM reimbursed AFS pursuant to a services agreement which was
terminated during the fourth quarter of 1994 for providing shareholder
servicing for Aggressive Growth Fund, Growth Fund and Income Fund for the
period September 15, 1994 (inception date) through October 31, 1994 in the
amounts of $1,439, $186 and $24, respectively, and for Equity Fund for the
fiscal year ended October 31, 1994 the amount of $351,680.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN. The Company has adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to the Class A and
Class C shares of the Funds (the "Class A and C Plan"). The Class A and C Plan
provides that for Aggressive Growth Fund, Growth Fund and Income Fund the Class
A shares pay 0.50% per annum of their average daily net assets, for Equity Fund
the Class A shares pay 0.30% per annum of their average daily net assets and
for Asian Fund and European Fund the Class A shares pay 0.35% 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. Under the Class A and C Plan, Class C shares of each
Fund pay compensation to AIM Distributors at an annual rate of 1.00% of the
average daily net assets attributable to Class C shares. Of such amount, each
Fund pays a service fee of 0.25% of the average daily net assets attributable
to Class A and Class C shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who
purchase and own Class A and Class C shares. Activities appropriate for
financing under the Class A and C 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 and C 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 Funds (the "Class B Plan", and collectively with the Class A and C Plan,
the "Plans"). Under the Class B Plan, each 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, each 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 Funds' 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 Funds. 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 Funds; 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 Funds' 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
36
<PAGE> 116
distributions automatically in the Funds' shares; and providing such other
information and services as the Funds 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 following: answering shareholder inquiries regarding a 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 a
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, a 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 Funds during such period at the annual rate
of 0.25% of the average daily net asset value of the Funds' 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
Funds to no more than 0.25% per annum of the average daily net assets of the
funds attributable to the customers of such dealers or financial institutions,
and by imposing a cap on the total sales charges, including asset based sales
charges, that may be paid by the Funds and their respective 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.
37
<PAGE> 117
For the fiscal year ended October 31, 1996, the Funds paid the
following amounts under the Class A and C Plan and the Class B Plan:
<TABLE>
<CAPTION>
% of Class'
average daily
net assets*
Class A and C Plan* Class B Plan Class A Class B
------------------- ------------ ------- -------
<S> <C> <C> <C> <C>
Aggressive Growth Fund $2,653,374 $4,217,606 0.50% 1.00%
Equity Fund 2,684,486 2,034,652 0.30% 1.00%
Growth Fund 352,082 663,802 0.50% 1.00%
Income Fund 78,792 103,129 0.50% 1.00%
</TABLE>
An estimate by category of actual fees paid by the Funds under the Class A Plan
during the year ended October 31, 1996 follows:
<TABLE>
<CAPTION>
Aggressive Equity Growth Income
Growth Fund Fund Fund Fund
----------- ------- ------- -----
<S> <C> <C> <C>
CLASS A
Advertising . . . . . . . . . . . . $ 73,660 $ 201,447 $ 13,817 $ 4,712
Printing and mailing prospectuses
semi-annual reports and annual reports
(other than to current shareholders) $ 10,949 $ 31,069 $ 1,974 $ 943
Seminars . . . . . . . . . . . . . . $ 25,880 $ 69,154 $ 4,935 $ 943
Compensation to Underwriters to partially
offset other marketing expenses . . $ -0- $ -0- $ -0- $ -0-
Compensation to Dealers including
finder's fees . . . . . . . . . . . $ 2,542,885 $ 2,382,816 $ 331,356 $ 72,194
Compensation to Sales Personnel . . $ -0- $ -0- $ -0- $ -0-
</TABLE>
- -----------------------------------
* The effective date of Class C shares of all Funds was August 4, 1997.
38
<PAGE> 118
An estimate by category of actual fees paid by the Funds under the Class B
Plan during the year ended October 31, 1996 as follows:
<TABLE>
<CAPTION>
Aggressive Equity Growth Income
Growth Fund Fund Fund Fund
----------- ------- ------- ------
<S> <C> <C> <C> <C>
CLASS B
Advertising . . . . . . . . . . . . $ 597,500 $ 288,966 $ 93,804 $ 13,528
Printing and mailing prospectuses
semi-annual reports and annual reports
(other than to current shareholders) $ 89,775 $ 43,995 $ 13,971 $ 1,933
Seminars . . . . . . . . . . . . . . $ 209,474 $ 100,988 $ 33,929 $ 4,832
Compensation to Underwriters to partially
offset upfront dealer commissions and
other marketing costs . . . . . . . $ 3,167,402 $ 1,527,909 $ 498,480 $ 77,423
Compensation to Dealers . . . . . . $ 153,455 $ 72,794 $ 23,618 $ 5,412
Compensation to Sales Personnel . . $ -0- $ -0- $ -0- $ -0-
</TABLE>
No fees were paid by the Funds for Class C shares during the fiscal
year ended October 31, 1996, as the effective date of Class C shares was August
4, 1997.
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 Funds and their respective shareholders.
The Plans do not obligate the Funds 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 Funds 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, 1998 and each year 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.
39
<PAGE> 119
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 and C Plan is
amended in a manner which the Board of Directors determines would materially
increase the charges paid under the Class A and C Plan, the Class B shares of
the Funds will no longer convert into Class A shares of the same Funds 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 Funds 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 Funds
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 and C Plan, on the one
hand, and the Class B Plan, on the other hand, are: (i) the Class A and C Plan
allows payment to AIM Distributors or to dealers or financial institutions of
up to 0.50% of average daily net assets of the Class A shares of Aggressive
Growth Fund, Income Fund, and Growth Fund, of up to 0.35% of average daily net
assets of the Class A shares of Asian Fund and European Fund, and of up to
0.30% of average daily net assets of the Class A shares of Equity Fund, as
compared to 1.00% of such assets of each Fund's Class B shares; (ii) the Class
B Plan obligates the Class B shares to continue to make payments to AIM
Distributors following 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 Funds' 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 and
Class C shares of the Funds was approved by the Board of Directors on June 11,
1997. A Master Distribution Agreement with AIM Distributors relating to the
Class B shares of the Funds was also approved by the Board of Directors on
December 11, 1996. 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 Funds'
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 Funds), 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 Funds' 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 Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of
the 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. AIM
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<PAGE> 120
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 a 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.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to
AIM Distributors under the Class C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such on-going sales commission plus
financing costs, if any. After the first full year, AIM Distributors will make
such payments quarterly to dealers and institutions based on the average net
asset value of Class C shares which are attributable to shareholders for whom
the dealers and institutions are designated as dealers of record.
The Company (on behalf of any class of the Funds) 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
Funds and their Class B shareholders to pay Contingent Deferred Sales Charges.
The following chart reflects the total sales charges paid in
connection with the sale of Class A shares of each Fund and the amount retained
by AIM Distributors for the fiscal years ended October 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- -----
Sales Amount Sales Amount Sales Amount
Charges Retained Charges Retained Charges Retained
---------- ---------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund $ 17,453,757 $ 3,270,278 $4,770,524 $ 779,090 $ 436,203 $ 43,586*
Equity Fund 8,663,571 1,489,975 3,662,531 565,101 8,535,232 1,177,691
Growth Fund 2,044,462 388,799 473,172 82,337 46,883 5,382*
Income Fund 325,210 57,096 156,910 27,115 13,085 2,102*
</TABLE>
* For the period September 15, 1994 (inception date) through October 31, 1994.
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<PAGE> 121
The following chart reflects the contingent deferred sales charges
paid by Class A and Class B shareholders for the fiscal years ended October 31,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 84,130 $ 68,427 $ 79*
Equity Fund 39,753 106,168 336*
Growth Fund 14,106 25,155 80*
Income Fund 4,924 3,877 -0-*
</TABLE>
* For the period September 15, 1994 (inception date) through October 31, 1994.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of each 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 of
each Fund 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 Funds or with AIM and its affiliates, are familiar with
the Funds, 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 Funds' 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 of the Funds through AIM Distributors without payment of a sales charge.
The persons who may purchase Class A shares of the Funds without a sales charge
are set forth in the Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under
the heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the heading "How to Redeem Shares." AIM intends to redeem
all shares of Aggressive Growth Fund and Growth Fund in cash. In addition to
the Funds' 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: (800) 959-4246) and
guarantee delivery of all required documents in good order. A repurchase is
effected at the net asset value per share of a 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 Funds' 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
Funds 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 ("NYSE ") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE 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 a Fund not reasonably practicable.
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<PAGE> 122
NET ASSET VALUE DETERMINATION
In accordance with current SEC rules and regulations, the net asset
value per share of a Fund is determined once daily as of the close of trading
of the NYSE (generally 4:00 p.m. Eastern Time) on each business day of the
Fund. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time)
on a particular day, the net asset value of a Fund share is determined as of
the close of the NYSE on such day. For purposes of determining net asset value
per share, futures and options contract closing prices which are available
fifteen (15) minutes after the close of trading of the NYSE will generally be
used. Each Class' net asset value per share is determined by subtracting the
Class' liabilities (e.g., the expenses) from the Class' assets, and dividing
the result by the total number of Class shares outstanding. Determination of
the Class' net asset value per share is made in accordance with generally
accepted accounting principles.
Equity 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 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 a 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 a 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 each 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 each Fund and its shareholders that are not
described in the Funds' Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Funds' Prospectus is not intended as a substitute
for careful tax planning. Investors are urged to consult their tax advisers
with specific reference to their own tax situation.
Qualification as a Regulated Investment Company. As stated in the
Funds' Prospectus, each 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, each Fund is required, among other
things, to derive at least 90% of
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<PAGE> 123
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 Requirement"). Foreign currency gains
(including gains from options, futures or forward contracts on foreign
currencies) that are not "directly related" to a 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 each 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, a 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 a 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, each 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.
Each 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 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.
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<PAGE> 124
For purposes of the excise tax, a regulated investment company shall
(1) offset a net ordinary loss (but not below the net capital gain) 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). Each 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.
Investment in Foreign Financial Instruments. 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 a
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.
Hedging Transactions. Some of the forward foreign currency exchange
contracts, options and futures contracts that the Funds 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) generally treated as ordinary
income or loss.
Generally, the hedging transactions in which the Funds 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 Funds. In addition, losses realized by the Funds on positions that are part
of a 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 the conversion transaction rules have been promulgated, the
tax consequences to the Funds of hedging transactions are not entirely clear.
The hedging transactions may increase the amount of short-term capital gain
realized by the Funds (and, if they are conversion transactions, the amount of
ordinary income) which is taxed as ordinary income when distributed to
shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a 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 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
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<PAGE> 125
ordinary income or long-term capital gain may be increased or decreased as
compared to a fund that did not engage in such transactions.
Requirements relating to each Fund's tax status as a regulated
investment company, including (in particular) the Short-Short Gain Test, may
limit the extent to which a Fund will be able to engage in transactions in
options and futures contracts.
PFIC Investments. Each 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.
Each Fund may be able to elect alternative tax treatment with respect
to PFIC stock. Under one such election, a 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 Funds' intentions to qualify annually as regulated investment
companies may limit their 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
Funds themselves 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 Shares. 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. Unless the shares are disposed of as part of a
conversion transaction, 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 that disposed Class A shares, Class B
shares or Class C shares are replaced within the 61-day period beginning 30
days before and ending 30 days after the disposition of such shares. 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 each Fund from
sources within foreign countries may be subject to foreign income taxes
withheld at the source. The United States has entered into
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<PAGE> 126
tax treaties with many foreign countries which entitle the Funds 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 a
Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a 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 a Fund for this purpose, shareholders will be required to
allocate Fund distributions according to the source of the income realized by
the Fund. Each 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 a
Fund.
Backup Withholding. Under certain provisions of the Code, the Funds
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 a Fund's investment company
taxable income and distributions constituting returns of capital 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 a 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 or
redemption of shares of a Fund and capital gain dividends ordinarily will be
subject to U.S. income tax at a rate of 30% (or lower 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 Funds
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.
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<PAGE> 127
Notwithstanding the foregoing, if distributions by the Funds are
effectively connected with a U.S. trade or business of a foreign shareholder,
then dividends from such 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 a 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 any of
the Funds.
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 July 1, 1997. 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 Funds.
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Board of Directors will issue to shareholders at least
semi-annually the Funds' financial statements. Financial statements, audited
by independent auditors, will be issued annually. The firm of KPMG Peat Marwick
LLP, 700 Louisiana, NationsBank Building, Houston, Texas 77002, currently
serves as the auditors of each 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 Funds. Under its contract with the Company relating to each Fund, the
Custodian is authorized to establish separate accounts in foreign currencies
and to cause foreign securities owned by each 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 of principal and income,
pays and collects all monies for securities bought and sold by each 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 a transfer and dividend disbursing agent
for the Class A, Class B and Class C shares of each of the Funds. Each Fund
pays the Custodian and the Transfer Agent such compensation as may be agreed
upon from time to time.
48
<PAGE> 128
Texas Commerce Bank National Association, 712 Main, Houston, Texas
77002, 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 October 1, 1997, and the amount of outstanding
shares held by such holders are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only(*) Beneficially
- ---- --------------- -------------- ------------
<S> <C> <C>
AIM International Merrill Lynch, Pierce, 32.82%**
Equity Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 36.97%**
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
</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.
49
<PAGE> 129
<TABLE>
<CAPTION> Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only(*) Beneficially
- ---- --------------- -------------- ------------
<S> <C> <C> <C>
Class C shares Merrill Lynch, Pierce, 55.57%**
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Prudential Securities Inc. 5.57%
FBO Sherwin B. Kite
IRA DTD 02/22/89
30 S. Wacker Drive #900
Chicago, IL 60606-7403
AIM Global Aggressive Merrill Lynch, Pierce, 16.54%
Growth Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 26.68%**
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 65.94%**
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
</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.
50
<PAGE> 130
<TABLE>
<CAPTION> Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only(*) Beneficially
- ---- --------------- -------------- ------------
<S> <C> <C> <C>
AIM Global Growth Merrill Lynch, Pierce, 13.30%
Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 23.39%
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce 53.49%**
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
PaineWebber For The 7.41%
Benefit of
Joseph J. Ottaviano &
Eleanor F. Ottaviano JTWROS
97 Humbert Street
North Providence, RI 02911-2519
AIM Global Income Fund - Merrill Lynch, Pierce 10.78%
Class B shares Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
</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.
51
<PAGE> 131
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only(*) Beneficially
- ---- --------------- -------------- ------------
<S> <C> <C> <C>
Class C shares Karl Walker & 39.98%**
Peggy Walker C/PROP
RT 2, Box 186
Hockley, TX 77447
Joyce N. Wilson 22.73%
TRST. Wilson Family Trust
2524 E. Ames Ave.
Anaheim, CA 92806-4701
Wexford Clearing Services 9.34%
FBO James O. Harris
14125 SW Bonnie Brae St.
Beaverton, OR 97005-4332
Mary Elizabeth Weir Jones 8.56%
37 Coventry Ct.
Prairie Village, KS 66208-5227
Smith Barney, Inc. 8.35%
388 Greenwich Street
New York, NY 10013
</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.
As of October 1, 1997, the directors and officers of the Company as a
group owned less than 1% of the outstanding shares of the Funds.
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.
52
<PAGE> 132
APPENDIX A
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all
Money Market Obligations, and the Funds reserve the right to invest in Money
Market Obligations other than those listed below:
1. GOVERNMENT OBLIGATIONS.
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes, and bonds issued
by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such
as the Government National Mortgage Association have been established as
instrumentalities of the U. S. Government to supervise and finance certain
types of activities. Issues of these agencies, while not direct obligations of
the U. S. Government, are either backed by the full faith and credit of the
United States or are guaranteed by the Treasury or supported by the issuing
agencies' right to borrow from the Treasury.
FOREIGN GOVERNMENT OBLIGATIONS -- These are U.S. dollar denominated
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Fund's investment advisor to be of comparable quality to the other
obligations in which the Fund may invest. Such securities also include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank. The percentage of the Fund's assets invested in
securities issued by foreign governments will vary depending on the relative
yields of such securities, the economic and financial markets of the countries
in which the investments are made and the interest rate climate of such
countries.
2. BANK INSTRUMENTS.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and
accepted by a commercial bank. It is used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument
with a specific maturity. Certificates of deposit are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange
for the deposit of funds. Like a certificate of deposit, it earns a specified
rate of interest over a definite period of time; however, it cannot be traded
in the secondary market.
EURODOLLAR OBLIGATIONS -- A Eurodollar obligation is a U.S.
dollar-denominated obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS -- A Yankee dollar obligation is a U.S.
dollar-denominated obligation issued by a domestic branch of a foreign bank.
53
<PAGE> 133
3. COMMERCIAL INSTRUMENTS.
COMMERCIAL PAPER -- The term used to designate unsecured short-term
promissory notes issued by corporations and other entities. Maturities on these
issues vary from a few days to nine months.
VARIABLE RATE MASTER DEMAND NOTES -- Variable rate master demand notes
are unsecured demand notes that permit investment of fluctuating amounts of
money at variable rates of interest pursuant to arrangements with the issuers.
The interest rate on a variable amount master demand note is periodically
redetermined according to a prescribed formula. Although there is no secondary
market in master demand notes, the payee may demand payment of the principal
amount of the note on relatively short notice.
4. REPURCHASE AGREEMENTS -- A repurchase agreement is a contractual
undertaking whereby the seller of securities (limited to U.S. Government
securities, including securities issued or guaranteed by the U.S. Treasury or
the various agencies and instrumentalities of the U.S. Government) agrees to
repurchase the securities at a specified price on a future date determined by
negotiations.
54
<PAGE> 134
APPENDIX B
DESCRIPTION OF CORPORATE BOND RATINGS
Investment grade debt securities are those rating categories indicated
by an asterisk ( * ).
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS ARE AS FOLLOWS:
*Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
*Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
*A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium- grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
*Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
55
<PAGE> 135
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in the Aa and A
groups when assigning ratings to industrial development bonds and bonds secured
by either a letter of credit or bond insurance. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
STANDARD AND POOR'S RATINGS SERVICES CLASSIFICATIONS ARE AS FOLLOWS:
*AAA
Debt rated 'AAA' has the highest rating assigned by Standard & Poor's
("S&P"). Capacity to pay interest and repay principal is extremely strong.
*AA
Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
*A
Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
*BBB
Debt rated 'BBB' regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher categories.
BB, B, CCC, CC, C
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. 'BB' indicates the
lowest degree of speculation and 'C' the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
56
<PAGE> 136
BB
Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B
Debt rated 'B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'BB' or 'BB-' rating.
CCC
Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The 'CCC'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'B' or 'B-' rating.
CC
The rating 'CC' is typically applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C
The rating 'C' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
C1
The rating 'C1' is reserved for income bonds on which no interest is
being paid.
D
Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal or principal payments are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
PLUS (+) OR MINUS (-)
The rating from 'AA' to 'CCC' may be modified by the addition of a
plus or minus sign to show relative standing within the major categories.
57
<PAGE> 137
DUFF & PHELPS FIXED-INCOME RATINGS ARE AS FOLLOWS:
*AAA
Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
*AA+, AA AND AA-
High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions.
*A+, A AND A-
Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
*BBB+, BBB AND BBB-
Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
BB+, BB AND BB-
Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B AND B-
Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according
to economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in quality rating within this category or into a
higher or lower quality rating grade.
CCC
Well below investment grade securities. May be in default or have
considerable uncertainty as to timely payment of interest, preferred dividends
and/or principal. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable company
developments.
DD
Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP
Preferred stock with dividend arrearages.
58
<PAGE> 138
FITCH INVESTORS SERVICE, INC.'S BOND RATINGS ARE AS FOLLOWS:
*AAA
Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
*AA
Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated 'AAA.' Because bonds rated
in the 'AAA' and 'AA' categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated 'F-1+.'
*A
Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
*BBB
Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC
Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C
Bonds are in imminent default in payment of interest or principal.
59
<PAGE> 139
DDD, DD, AND D
Bonds are in default on interest and/or principal payments. Such bonds
are extremely speculative and should be valued on the basis of their ultimate
recovery value in liquidation or reorganization of the obligor. 'DDD'
represents the highest potential for recovery on these bonds, and 'D'
represents the lowest potential for recovery.
PLUS (+) MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the 'AAA', 'DDD', 'DD', or 'D' categories.
60
<PAGE> 140
FINANCIAL STATEMENTS
FS
<PAGE> 141
AIM GLOBAL AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-35.06%
ADVERTISING/BROADCASTING-0.90%
CKS Group, Inc.(a) 100,000 $ 2,112,500
- -------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 124,600 6,043,100
- -------------------------------------------------------------------
Heftel Broadcasting Corp.(a) 133,800 6,690,000
- -------------------------------------------------------------------
Jacor Communications, Inc.(a) 65,500 1,842,188
- -------------------------------------------------------------------
Telemundo Group, Inc.-Class A(a) 100,000 2,625,000
- -------------------------------------------------------------------
19,312,788
- -------------------------------------------------------------------
AEROSPACE/DEFENSE-0.21%
BE Aerospace, Inc.(a) 137,500 3,385,938
- -------------------------------------------------------------------
REMEC, Inc.(a) 50,000 1,150,000
- -------------------------------------------------------------------
4,535,938
- -------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.03%
Borg-Warner Automotive, Inc. 8,000 336,000
- -------------------------------------------------------------------
Mark IV Industries, Inc. 16,538 384,497
- -------------------------------------------------------------------
720,497
- -------------------------------------------------------------------
BANKING-0.42%
Bank of Boston Corp. 45,000 3,273,750
- -------------------------------------------------------------------
Bank United Corp.-Class A(a) 150,000 4,575,000
- -------------------------------------------------------------------
First Savings Bank of Washington
Bancorp, Inc. 50,000 1,050,000
- -------------------------------------------------------------------
8,898,750
- -------------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.15%
Cerner Corp.(a) 202,000 3,257,250
- -------------------------------------------------------------------
BIOTECHNOLOGY-0.10%
Biogen, Inc.(a) 63,900 2,044,800
- -------------------------------------------------------------------
BUSINESS SERVICES-0.90%
AccuStaff, Inc.(a) 120,000 2,190,000
- -------------------------------------------------------------------
Caribiner International, Inc.(a) 50,000 2,650,000
- -------------------------------------------------------------------
Claremont Technology Group, Inc.(a) 38,400 518,400
- -------------------------------------------------------------------
CUC International, Inc.(a) 56,550 1,194,618
- -------------------------------------------------------------------
Data Processing Resources Corp.(a) 13,500 248,063
- -------------------------------------------------------------------
Equifax, Inc. 5,200 149,500
- -------------------------------------------------------------------
IntelliQuest Information Group,
Inc.(a) 70,000 1,137,500
- -------------------------------------------------------------------
NOVA Corp.(a) 150,000 2,700,000
- -------------------------------------------------------------------
Pharmaceutical Product Development,
Inc.(a) 100,000 1,675,000
- -------------------------------------------------------------------
RemedyTemp, Inc.-Class A(a) 38,000 579,500
- -------------------------------------------------------------------
Robert Half International, Inc.(a) 65,000 2,551,250
- -------------------------------------------------------------------
Romac International, Inc.(a) 50,000 975,000
- -------------------------------------------------------------------
Superior Consultant Holdings Corp.(a) 32,300 742,900
- -------------------------------------------------------------------
Vincam Group, Inc. (The)(a) 49,500 1,608,750
- -------------------------------------------------------------------
Whittman-Hart, Inc.(a) 21,600 410,400
- -------------------------------------------------------------------
19,330,881
- -------------------------------------------------------------------
COMPUTER MINI/PCS-0.82%
Dell Computer Corp.(a) 100,000 8,368,750
- -------------------------------------------------------------------
Stratus Computer, Inc.(a) 100,000 3,887,500
- -------------------------------------------------------------------
Sun Microsystems, Inc.(a) 183,300 5,281,331
- -------------------------------------------------------------------
17,537,581
- -------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-0.31%
ACT Networks, Inc.(a) 83,400 $ 1,125,900
- -------------------------------------------------------------------
Coherent Communications Systems
Corp.(a) 150,000 2,456,250
- -------------------------------------------------------------------
Network Appliance, Inc.(a) 50,000 1,456,250
- -------------------------------------------------------------------
VideoServer, Inc.(a) 100,000 1,687,500
- -------------------------------------------------------------------
6,725,900
- -------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-3.59%
Affiliated Computer Services, Inc.(a) 128,400 3,338,400
- -------------------------------------------------------------------
BDM International Inc.(a) 140,000 3,255,000
- -------------------------------------------------------------------
BISYS Group, Inc. (The)(a) 81,900 2,620,800
- -------------------------------------------------------------------
Computer Data Systems, Inc. 110,400 2,401,200
- -------------------------------------------------------------------
Computer Task Group, Inc. 53,700 2,315,813
- -------------------------------------------------------------------
CSG Systems International, Inc.(a) 85,000 1,508,750
- -------------------------------------------------------------------
Documentum, Inc.(a) 40,000 740,000
- -------------------------------------------------------------------
DST Systems, Inc.(a) 34,200 970,425
- -------------------------------------------------------------------
Electronic Arts, Inc.(a) 77,200 1,862,450
- -------------------------------------------------------------------
Engineering Animation, Inc.(a) 126,800 2,916,400
- -------------------------------------------------------------------
HBO & Co. 36,500 1,952,750
- -------------------------------------------------------------------
HPR, Inc.(a) 150,000 2,118,750
- -------------------------------------------------------------------
Imnet Systems, Inc.(a) 125,000 2,296,875
- -------------------------------------------------------------------
Indus Group, Inc.(a) 137,500 2,079,688
- -------------------------------------------------------------------
Integrated Measurement Systems,
Inc.(a) 100,000 1,325,000
- -------------------------------------------------------------------
JDA Software Group, Inc.(a) 50,000 1,262,500
- -------------------------------------------------------------------
Keane, Inc.(a) 35,600 1,650,950
- -------------------------------------------------------------------
McAfee Associates, Inc.(a) 100,000 5,575,000
- -------------------------------------------------------------------
National Data Corp. 75,000 2,812,500
- -------------------------------------------------------------------
Network General Corp.(a) 50,000 687,500
- -------------------------------------------------------------------
Parametric Technology Co.(a) 30,200 1,366,550
- -------------------------------------------------------------------
Physician Computer Network, Inc.(a) 170,500 905,781
- -------------------------------------------------------------------
Raptor Systems, Inc.(a) 75,000 862,500
- -------------------------------------------------------------------
Renaissance Solutions, Inc.(a) 65,000 1,413,750
- -------------------------------------------------------------------
Rogue Wave Software(a) 41,500 399,437
- -------------------------------------------------------------------
Scopus Technology, Inc.(a) 21,500 575,125
- -------------------------------------------------------------------
Security Dynamics Technologies,
Inc.(a) 125,000 3,156,250
- -------------------------------------------------------------------
Simulation Sciences, Inc.(a) 272,500 2,776,094
- -------------------------------------------------------------------
SPSS, Inc.(a) 65,000 1,722,500
- -------------------------------------------------------------------
Sterling Commerce, Inc.(a) 104,200 2,696,175
- -------------------------------------------------------------------
SunGard Data Systems Inc.(a) 40,100 1,779,437
- -------------------------------------------------------------------
Sykes Enterprises, Inc.(a) 10,200 290,700
- -------------------------------------------------------------------
Synopsys, Inc.(a) 174,043 5,547,621
- -------------------------------------------------------------------
Transition Systems, Inc.(a) 14,700 176,400
- -------------------------------------------------------------------
Vantive Corp.(a) 50,000 993,750
- -------------------------------------------------------------------
Veritas Software Corp.(a) 75,000 2,521,875
- -------------------------------------------------------------------
Viasoft, Inc.(a) 75,000 3,187,500
- -------------------------------------------------------------------
Wind River Systems(a) 114,750 2,639,250
- -------------------------------------------------------------------
76,701,446
- -------------------------------------------------------------------
CONSUMER NON-DURABLES-0.14%
Central Garden and Pet Co.(a) 75,000 1,495,313
- -------------------------------------------------------------------
</TABLE>
FS-1
<PAGE> 142
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER NON-DURABLES-(CONTINUED)
Herbalife International, Inc. 91,700 $ 1,478,662
- -------------------------------------------------------------------
2,973,975
- -------------------------------------------------------------------
COSMETICS & TOILETRIES-0.73%
General Nutrition Companies, Inc.(a) 150,000 3,225,000
- -------------------------------------------------------------------
Helen of Troy Ltd.(a) 250,000 5,812,500
- -------------------------------------------------------------------
NBTY, Inc.(a) 175,000 3,325,000
- -------------------------------------------------------------------
Rexall Sundown, Inc.(a) 160,500 3,189,938
- -------------------------------------------------------------------
15,552,438
- -------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.73%
ANADIGICS, Inc.(a) 133,600 3,774,200
- -------------------------------------------------------------------
ASE Test Ltd.(a) 49,100 1,822,838
- -------------------------------------------------------------------
Benchmarq Microelectronics, Inc.(a) 250,000 4,375,000
- -------------------------------------------------------------------
Berg Electronics Corp.(a) 76,400 2,292,000
- -------------------------------------------------------------------
BMC Industries, Inc. 110,000 3,190,000
- -------------------------------------------------------------------
Micron Electronics, Inc.(a) 300,000 6,112,500
- -------------------------------------------------------------------
Sawtek Inc.(a) 150,000 4,443,750
- -------------------------------------------------------------------
Sipex Corp.(a) 150,000 3,600,000
- -------------------------------------------------------------------
Teradyne, Inc.(a) 189,500 6,206,125
- -------------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 20,000 627,500
- -------------------------------------------------------------------
ThermoQuest Corp.(a) 45,000 585,000
- -------------------------------------------------------------------
37,028,913
- -------------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.09%
Halter Marine Group, Inc.(a) 100,000 1,962,500
- -------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.07%
Imperial Credit Industries, Inc.(a) 100,000 1,456,250
- -------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.46%
AmeriCredit Corp.(a) 132,200 1,900,375
- -------------------------------------------------------------------
Amresco, Inc.(a) 120,000 1,747,500
- -------------------------------------------------------------------
Cityscape Financial Corp.(a) 100,000 1,337,500
- -------------------------------------------------------------------
CMAC Investment Corp. 24,400 927,200
- -------------------------------------------------------------------
Concord EFS, Inc.(a) 199,737 3,944,806
- -------------------------------------------------------------------
Delta Financial Corp.(a) 183,700 2,479,950
- -------------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 200,100 4,427,212
- -------------------------------------------------------------------
Green Tree Financial Corp. 38,500 1,140,563
- -------------------------------------------------------------------
IMC Mortgage Co.(a) 200,000 2,250,000
- -------------------------------------------------------------------
Money Store, Inc. (The) 128,900 2,787,462
- -------------------------------------------------------------------
PMT Services, Inc.(a) 100,000 1,187,500
- -------------------------------------------------------------------
Student Loan Marketing Association 25,000 2,956,250
- -------------------------------------------------------------------
SunAmerica, Inc. 70,000 3,220,000
- -------------------------------------------------------------------
Union Acceptance Corp.(a) 75,000 787,500
- -------------------------------------------------------------------
31,093,818
- -------------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.16%
Washington Mutual, Inc. 70,800 3,495,750
- -------------------------------------------------------------------
FUNERAL SERVICES-0.26%
Equity Corp. International(a) 255,000 5,482,500
- -------------------------------------------------------------------
FURNITURE-0.32%
Ethan Allen Interiors, Inc. 80,000 3,540,000
- -------------------------------------------------------------------
Herman Miller, Inc. 100,000 3,237,500
- -------------------------------------------------------------------
6,777,500
- -------------------------------------------------------------------
GAMING-0.18%
GTECH Holdings Corp.(a) 47,600 1,463,700
- -------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GAMING-(CONTINUED)
Primadonna Resorts, Inc.(a) 125,000 $ 2,343,750
- -------------------------------------------------------------------
3,807,450
- -------------------------------------------------------------------
HOME BUILDING-0.10%
Southern Energy Homes, Inc.(a) 202,500 2,100,938
- -------------------------------------------------------------------
HOTELS/MOTELS-0.06%
Prime Hospitality Corp.(a) 30,000 498,750
- -------------------------------------------------------------------
Suburban Lodges of America, Inc.(a) 20,000 322,500
- -------------------------------------------------------------------
Wyndham Hotel Corp.(a) 16,700 461,338
- -------------------------------------------------------------------
1,282,588
- -------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.08%
CRA Managed Care, Inc.(a) 30,300 1,068,075
- -------------------------------------------------------------------
First Commonwealth, Inc.(a) 45,000 551,250
- -------------------------------------------------------------------
1,619,325
- -------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.20%
CapMAC Holdings, Inc. 70,000 1,820,000
- -------------------------------------------------------------------
HCC Insurance Holdings, Inc.(a) 77,250 1,940,906
- -------------------------------------------------------------------
Vesta Insurance Group, Inc. 12,000 501,000
- -------------------------------------------------------------------
4,261,906
- -------------------------------------------------------------------
LEISURE & RECREATION-0.64%
Callaway Golf Co. 60,000 1,792,500
- -------------------------------------------------------------------
Cannondale Corp.(a) 75,000 1,462,500
- -------------------------------------------------------------------
Harley-Davidson, Inc. 60,000 2,370,000
- -------------------------------------------------------------------
Regal Cinemas, Inc.(a) 50,000 1,362,500
- -------------------------------------------------------------------
Royal Caribbean Cruises Ltd.(a) 150,000 4,781,250
- -------------------------------------------------------------------
West Marine, Inc.(a) 70,600 1,835,600
- -------------------------------------------------------------------
13,604,350
- -------------------------------------------------------------------
MACHINE TOOLS-0.13%%
Precision Castparts Corp. 50,000 2,675,000
- -------------------------------------------------------------------
MACHINERY (HEAVY)-0.04%
Rental Service Corp. 41,400 765,900
- -------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.27%
Kulicke & Soffa Industries, Inc.(a) 125,000 3,492,188
- -------------------------------------------------------------------
Prime Service, Inc.(a) 100,000 2,237,500
- -------------------------------------------------------------------
5,729,688
- -------------------------------------------------------------------
MEDICAL (DRUGS)-0.76%
Arbor Drugs, Inc. 166,350 3,056,681
- -------------------------------------------------------------------
Cardinal Health, Inc. 55,500 2,955,375
- -------------------------------------------------------------------
Curative Technologies, Inc.(a) 75,000 1,771,875
- -------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 57,900 1,679,100
- -------------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 40,000 1,470,000
- -------------------------------------------------------------------
Forest Laboratories, Inc.(a) 45,300 1,545,863
- -------------------------------------------------------------------
Medicis Pharmaceutical Corp.(a) 150,000 3,675,000
- -------------------------------------------------------------------
16,153,894
- -------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.31%
ABR Information Services, Inc.(a) 70,000 1,408,750
- -------------------------------------------------------------------
American HomePatient, Inc.(a) 100,000 1,925,000
- -------------------------------------------------------------------
American Medserve Corp.(a) 136,300 1,482,263
- -------------------------------------------------------------------
Arbor Health Care Co.(a) 60,100 1,472,450
- -------------------------------------------------------------------
EmCare Holdings, Inc.(a) 61,500 1,729,687
- -------------------------------------------------------------------
Envoy Corp.(a) 100,000 2,087,500
- -------------------------------------------------------------------
FPA Medical Management, Inc.(a) 111,507 1,811,988
- -------------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 143
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Health Management Associates,
Inc.-Class A(a) 223,800 $ 5,986,650
- -------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 150,000 2,962,500
- -------------------------------------------------------------------
Hologic, Inc.(a) 100,000 2,075,000
- -------------------------------------------------------------------
Humana, Inc.(a) 100,000 2,175,000
- -------------------------------------------------------------------
Integrated Health Services, Inc.(a) 100,000 3,212,500
- -------------------------------------------------------------------
MedPartners, Inc.(a) 38,500 702,625
- -------------------------------------------------------------------
Multicare Companies, Inc.(a) 82,950 1,544,944
- -------------------------------------------------------------------
NCS HealthCare, Inc.-Class A(a) 110,000 2,502,500
- -------------------------------------------------------------------
NovaCare, Inc.(a) 125,000 1,421,875
- -------------------------------------------------------------------
OccuSystems, Inc.(a) 45,000 928,125
- -------------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 123,000 1,476,000
- -------------------------------------------------------------------
Oxford Health Plans, Inc.(a) 90,000 5,928,750
- -------------------------------------------------------------------
PacifiCare Health Systems, Inc.-Class
B(a) 25,000 2,006,250
- -------------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 15,200 501,600
- -------------------------------------------------------------------
PhyCor, Inc.(a) 49,950 1,329,919
- -------------------------------------------------------------------
Renal Care Group, Inc.(a) 90,400 2,712,000
- -------------------------------------------------------------------
Renal Treatment Centers, Inc.(a) 50,000 1,081,250
- -------------------------------------------------------------------
RoTech Medical Corp.(a) 77,200 1,215,900
- -------------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 63,200 1,524,700
- -------------------------------------------------------------------
Tenet Healthcare Corp.(a) 80,000 2,080,000
- -------------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 37,600 1,207,900
- -------------------------------------------------------------------
United Healthcare Corp.(a) 100,000 4,862,500
- -------------------------------------------------------------------
Universal Health Services, Inc.-Class
B(a) 89,800 3,401,175
- -------------------------------------------------------------------
Vencor, Inc.(a) 66,000 2,747,250
- -------------------------------------------------------------------
Wellpoint Health Networks, Inc.(a) 75,000 3,168,750
- -------------------------------------------------------------------
70,673,301
- -------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.02%
Acuson Corp.(a) 100,000 2,425,000
- -------------------------------------------------------------------
Capstone Pharmacy Services, Inc.(a) 45,000 379,688
- -------------------------------------------------------------------
Dentsply International, Inc. 37,400 1,851,300
- -------------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 83,100 1,184,175
- -------------------------------------------------------------------
Omnicare, Inc. 173,300 4,224,187
- -------------------------------------------------------------------
Patterson Dental Co.(a) 120,000 4,020,000
- -------------------------------------------------------------------
Physician Sales & Service, Inc.(a) 50,000 725,000
- -------------------------------------------------------------------
Quintiles Transnational Corp.(a) 85,000 4,324,375
- -------------------------------------------------------------------
ResMed, Inc.(a) 40,000 700,000
- -------------------------------------------------------------------
Suburban Ostomy Supply Co., Inc.(a) 92,800 835,200
- -------------------------------------------------------------------
Sybron International Corp.(a) 32,800 1,090,600
- -------------------------------------------------------------------
21,759,525
- -------------------------------------------------------------------
METALS-0.01%
Shaw Group, Inc.(a) 23,300 314,550
- -------------------------------------------------------------------
OFFICE PRODUCTS-0.29%
Daisytek International Corp.(a) 100,000 2,725,000
- -------------------------------------------------------------------
Reynolds & Reynolds Co.-Class A 163,600 3,394,700
- -------------------------------------------------------------------
6,119,700
- -------------------------------------------------------------------
OIL & GAS (DRILLING)-0.20%
Cliffs Drilling Co.(a) 70,000 4,270,000
- -------------------------------------------------------------------
OIL & GAS (SERVICES)-1.07%
Camco International, Inc. 100,000 4,437,500
- -------------------------------------------------------------------
Energy Ventures, Inc.(a) 100,000 6,687,500
- -------------------------------------------------------------------
Global Industries Ltd.(a) 125,000 2,625,000
- -------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (SERVICES)-(CONTINUED)
Global Marine, Inc.(a) 150,000 $ 3,018,750
- -------------------------------------------------------------------
Newpark Resources, Inc.(a) 50,000 2,243,750
- -------------------------------------------------------------------
Veritas DGC, Inc.(a) 200,000 3,850,000
- -------------------------------------------------------------------
22,862,500
- -------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.39%
Cooper Cameron Corp.(a) 50,000 3,562,500
- -------------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 77,400 4,982,625
- -------------------------------------------------------------------
ENSCO International, Inc.(a) 75,900 3,605,250
- -------------------------------------------------------------------
Falcon Drilling Co., Inc.(a) 75,000 2,868,750
- -------------------------------------------------------------------
Marine Drilling Companies, Inc.(a) 146,500 2,307,375
- -------------------------------------------------------------------
National-Oilwell, Inc.(a) 150,000 5,831,250
- -------------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 133,800 2,308,050
- -------------------------------------------------------------------
Rowan Companies, Inc.(a) 100,000 1,800,000
- -------------------------------------------------------------------
Varco International, Inc.(a) 107,500 2,472,500
- -------------------------------------------------------------------
29,738,300
- -------------------------------------------------------------------
POLLUTION CONTROL-0.59%
Tetra Technologies, Inc.(a) 100,000 2,325,000
- -------------------------------------------------------------------
US Filter Corp.(a) 120,150 3,649,556
- -------------------------------------------------------------------
USA Waste Services, Inc.(a) 200,000 6,550,000
- -------------------------------------------------------------------
12,524,556
- -------------------------------------------------------------------
RESTAURANTS-0.45%
Apple South, Inc. 50,800 660,400
- -------------------------------------------------------------------
Foodmaker, Inc.(a) 335,000 3,643,125
- -------------------------------------------------------------------
Landry's Seafood Restaurants, Inc.(a) 72,100 1,012,780
- -------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 13,400 262,975
- -------------------------------------------------------------------
Papa John's International, Inc.(a) 22,500 579,375
- -------------------------------------------------------------------
Showbiz Pizza Time, Inc.(a) 96,600 1,859,550
- -------------------------------------------------------------------
Starbucks Corp.(a) 50,000 1,493,750
- -------------------------------------------------------------------
9,511,955
- -------------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.14%
Kroger Co.(a) 36,000 990,000
- -------------------------------------------------------------------
Quality Food Centers, Inc.(a) 50,000 2,006,250
- -------------------------------------------------------------------
2,996,250
- -------------------------------------------------------------------
RETAIL (STORES)-4.51%
Bed Bath & Beyond, Inc.(a) 40,400 1,105,950
- -------------------------------------------------------------------
Blyth Industries, Inc.(a) 150,000 5,925,000
- -------------------------------------------------------------------
CDW Computer Centers, Inc.(a) 78,700 3,777,600
- -------------------------------------------------------------------
CompUSA, Inc.(a) 172,000 3,311,000
- -------------------------------------------------------------------
Dayton Hudson Corp. 75,000 3,375,000
- -------------------------------------------------------------------
Dollar General Corp. 56,562 1,788,773
- -------------------------------------------------------------------
Duty Free International, Inc. 19,900 281,088
- -------------------------------------------------------------------
Eagle Hardware & Garden, Inc.(a) 130,200 2,441,250
- -------------------------------------------------------------------
Footstar, Inc.(a) 100,000 2,075,000
- -------------------------------------------------------------------
Gadzooks, Inc.(a) 50,000 1,393,750
- -------------------------------------------------------------------
Gap, Inc. 58,400 1,861,500
- -------------------------------------------------------------------
Global DirectMail Corp.(a) 21,800 384,225
- -------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 200,000 4,275,000
- -------------------------------------------------------------------
Inacom Corp.(a) 50,000 1,106,250
- -------------------------------------------------------------------
Insight Enterprises, Inc.(a) 100,000 2,375,000
- -------------------------------------------------------------------
Jones Apparel Group, Inc.(a) 100,000 4,175,000
- -------------------------------------------------------------------
Just for Feet, Inc.(a) 225,000 3,571,875
- -------------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 144
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Loehmann's Holdings, Inc.(a) 159,500 $ 1,096,562
- -------------------------------------------------------------------
Marks Bros. Jewelers, Inc.(a) 152,400 1,695,450
- -------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 87,400 2,174,075
- -------------------------------------------------------------------
Michaels Stores, Inc.(a) 100,000 1,925,000
- -------------------------------------------------------------------
Micro Warehouse, Inc.(a) 97,100 1,674,975
- -------------------------------------------------------------------
MicroAge, Inc.(a) 250,000 3,156,250
- -------------------------------------------------------------------
MSC Industrial Direct Co., Inc.-Class
A(a) 40,000 1,230,000
- -------------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 150,000 5,250,000
- -------------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 67,000 1,432,125
- -------------------------------------------------------------------
PETsMART, Inc.(a) 92,200 1,550,113
- -------------------------------------------------------------------
Pier 1 Imports, Inc. 265,000 5,233,750
- -------------------------------------------------------------------
Ross Stores, Inc. 80,000 2,250,000
- -------------------------------------------------------------------
Sports Authority, Inc. (The)(a) 110,400 1,959,600
- -------------------------------------------------------------------
Staples, Inc.(a) 235,800 4,244,400
- -------------------------------------------------------------------
Tech Data Corp.(a) 85,700 2,099,650
- -------------------------------------------------------------------
Tiffany & Co. 82,500 3,269,062
- -------------------------------------------------------------------
TJX Companies, Inc. 64,600 3,052,350
- -------------------------------------------------------------------
Toys "R" Us, Inc.(a) 100,000 2,850,000
- -------------------------------------------------------------------
Viking Office Products, Inc.(a) 106,100 1,445,613
- -------------------------------------------------------------------
Wet Seal, Inc.-Class A(a) 55,000 1,361,250
- -------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 75,000 2,325,000
- -------------------------------------------------------------------
Zale Corp.(a) 100,000 1,850,000
- -------------------------------------------------------------------
96,348,486
- -------------------------------------------------------------------
SCHOOLS-0.10%
Children's Comprehensive Services,
Inc.(a) 186,200 2,187,850
- -------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.34%
Datum, Inc.(a) 66,700 1,550,775
- -------------------------------------------------------------------
Dynatech Corp.(a) 50,000 1,737,500
- -------------------------------------------------------------------
Perkin-Elmer Corp. 55,500 4,030,688
- -------------------------------------------------------------------
7,318,963
- -------------------------------------------------------------------
SECURITY & SAFETY SERVICES-0.03%
Rural/Metro Corp.(a) 25,000 718,750
- -------------------------------------------------------------------
SEMICONDUCTORS-3.83%
Actel Corp.(a) 50,000 893,750
- -------------------------------------------------------------------
Advanced Micro Devices, Inc.(a) 100,000 4,250,000
- -------------------------------------------------------------------
Altera Corp.(a) 152,800 7,573,150
- -------------------------------------------------------------------
Burr-Brown Corp.(a) 50,000 1,475,000
- -------------------------------------------------------------------
Computer Products, Inc.(a) 200,000 3,425,000
- -------------------------------------------------------------------
Cymer, Inc.(a) 100,000 4,112,500
- -------------------------------------------------------------------
Dallas Semiconductor Corp.(a) 100,000 3,650,000
- -------------------------------------------------------------------
DuPont Photomasks, Inc.(a) 100,000 4,787,500
- -------------------------------------------------------------------
GaSonics International Corp.(a) 105,600 897,600
- -------------------------------------------------------------------
HADCO Corp.(a) 76,700 3,278,925
- -------------------------------------------------------------------
Integrated Device Technology, Inc.(a) 200,000 2,350,000
- -------------------------------------------------------------------
Kemet Corp.(a) 100,000 1,950,000
- -------------------------------------------------------------------
Lattice Semiconductor Corp.(a) 112,900 6,308,288
- -------------------------------------------------------------------
Linear Technology Corp.(a) 126,000 6,331,500
- -------------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 94,300 2,581,462
- -------------------------------------------------------------------
Micron Technology, Inc. 61,300 2,160,825
- -------------------------------------------------------------------
National Semiconductor Corp.(a) 157,700 3,942,500
- -------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS-(CONTINUED)
Photronics, Inc.(a) 125,000 $ 4,328,125
- -------------------------------------------------------------------
Sanmina Corp.(a) 111,000 5,550,000
- -------------------------------------------------------------------
Sierra Semiconductor Corp.(a) 175,000 2,953,125
- -------------------------------------------------------------------
Silicon Valley Group, Inc.(a) 175,000 3,598,438
- -------------------------------------------------------------------
Solectron Corp.(a) 25,500 1,463,062
- -------------------------------------------------------------------
Triquint Semiconductor, Inc.(a) 92,200 2,742,950
- -------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 37,500 1,181,250
- -------------------------------------------------------------------
81,784,950
- -------------------------------------------------------------------
SHOES & RELATED APPAREL-0.40%
Converse, Inc.(a) 100,000 1,500,000
- -------------------------------------------------------------------
Genesco Inc.(a) 150,000 1,743,750
- -------------------------------------------------------------------
Nine West Group, Inc.(a) 14,200 562,675
- -------------------------------------------------------------------
Pacific Sunwear of California(a) 100,000 3,125,000
- -------------------------------------------------------------------
Wolverine World Wide, Inc. 39,950 1,607,988
- -------------------------------------------------------------------
8,539,413
- -------------------------------------------------------------------
STEEL-0.04%
Maverick Tube Corp.(a) 38,600 844,375
- -------------------------------------------------------------------
TELECOMMUNICATIONS-1.46%
ACC Corp. 13,500 214,313
- -------------------------------------------------------------------
ADC Telecommunications, Inc.(a) 130,000 3,396,250
- -------------------------------------------------------------------
Advanced Fibre Communications,
Inc.(a) 100,000 3,987,500
- -------------------------------------------------------------------
Andrew Corp.(a) 95,325 2,359,294
- -------------------------------------------------------------------
Billing Information Concepts(a) 79,600 1,900,450
- -------------------------------------------------------------------
Brightpoint, Inc.(a) 218,750 4,785,156
- -------------------------------------------------------------------
CellStar Corp.(a) 150,000 3,600,000
- -------------------------------------------------------------------
P-COM, Inc.(a) 50,000 1,431,250
- -------------------------------------------------------------------
PairGain Technologies, Inc.(a) 52,800 1,372,800
- -------------------------------------------------------------------
Premiere Technologies, Inc.(a) 100,000 2,387,500
- -------------------------------------------------------------------
Proxim, Inc.(a) 70,000 1,408,750
- -------------------------------------------------------------------
Tellabs, Inc.(a) 89,800 3,580,775
- -------------------------------------------------------------------
U.S. Long Distance Corp.(a) 64,200 778,425
- -------------------------------------------------------------------
31,202,463
- -------------------------------------------------------------------
TEXTILES-0.78%
Liz Claiborne, Inc. 69,000 3,122,250
- -------------------------------------------------------------------
Mohawk Industries, Inc.(a) 75,000 1,678,125
- -------------------------------------------------------------------
Nautica Enterprises, Inc.(a) 125,000 2,765,625
- -------------------------------------------------------------------
Quicksilver, Inc.(a) 50,000 1,087,500
- -------------------------------------------------------------------
St. John Knits, Inc. 50,000 1,918,750
- -------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 103,800 4,126,050
- -------------------------------------------------------------------
WestPoint Stevens, Inc.(a) 50,000 1,956,250
- -------------------------------------------------------------------
16,654,550
- -------------------------------------------------------------------
TRANSPORTATION-0.12%
Hub Group, Inc.(a) 100,000 2,650,000
- -------------------------------------------------------------------
TRUCKING-0.13%
Swift Transportation Co., Inc.(a) 50,000 1,425,000
- -------------------------------------------------------------------
USFreightways Corp. 50,000 1,350,000
- -------------------------------------------------------------------
2,775,000
- -------------------------------------------------------------------
Total Domestic Common Stocks 748,685,951
- -------------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 145
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-62.41%
ARGENTINA-1.83%
Banco de Galicia y Buenos Aires S.A. de
C.V.-ADR (Banking)(a) 500,439 $ 12,174,743
- ----------------------------------------------------------------------
Perez Companc S.A.-Class B
(Oil & Gas-Services) 1,679,000 13,618,052
- ----------------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Oil & Gas-Services) 479,600 13,248,950
- ----------------------------------------------------------------------
39,041,745
- ----------------------------------------------------------------------
AUSTRALIA-0.55%
QBE Insurance Group Ltd.
(Insurance-Multi-Line Property) 2,055,929 11,752,289
- ----------------------------------------------------------------------
AUSTRIA-0.39%
VA Technologie A.G.
(Engineering & Construction) 53,200 8,267,016
- ----------------------------------------------------------------------
BELGIUM-0.71%
Barco Industries (Electronic
Components/Miscellaneous) 41,000 6,984,336
- ----------------------------------------------------------------------
COLRUYT S.A. (Retail-Food & Drug) 8,800 3,643,077
- ----------------------------------------------------------------------
UCB S.A. (Medical-Drugs) 1,650 4,527,692
- ----------------------------------------------------------------------
15,155,105
- ----------------------------------------------------------------------
BRAZIL-2.70%
Banco Bradesco S.A. (Banking) 1,316,000 10,889,328
- ----------------------------------------------------------------------
CESP-Companhia Energetica de Sao Paulo
(Electric Power)(a) 65,000 3,453,221
- ----------------------------------------------------------------------
Cia. Riograndense de Telecomunicacoes
(Telecommunications)(a) 40,000 5,263,752
- ----------------------------------------------------------------------
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar (Retail-Food &
Drug) 326,500 6,450,179
- ----------------------------------------------------------------------
Companhia Paranaense de Energia-Copel
(Electric Power)(a) 240,000 3,734,838
- ----------------------------------------------------------------------
Eletricidade de Sao Paulo S.A.
(Electric Power)(a) 24,000 4,818,054
- ----------------------------------------------------------------------
Multicanal Participacoes S.A.-ADR
(Cable Television)(a) 415,000 6,017,500
- ----------------------------------------------------------------------
Saneamiento Basico de Sao Paulo
(Water Supply)(a) 7,000 1,382,228
- ----------------------------------------------------------------------
Telecomunicacoes Brasileiras
S.A.-Telebras-ADR (Telecommunications) 136,700 15,686,325
- ----------------------------------------------------------------------
57,695,425
- ----------------------------------------------------------------------
CANADA-3.15%
Biovail Corporation International
(Medical-Drugs)(a) 110,000 2,750,000
- ----------------------------------------------------------------------
Canadian Natural Resources Ltd.
(Oil & Gas-Exploration & Production)(a) 345,000 8,223,694
- ----------------------------------------------------------------------
CanWest Global Communications Corp.
(Electronic Components/Miscellaneous) 355,998 4,778,069
- ----------------------------------------------------------------------
Cognos, Inc. (Computer
Software/Services)(a) 300,000 7,612,500
- ----------------------------------------------------------------------
Ensign Resource Service Group, Inc.
(Oil & Gas-Drilling) 100,000 1,753,758
- ----------------------------------------------------------------------
Extendicare, Inc.-Class A
(Insurance-Life & Health)(a) 350,000 4,346,815
- ----------------------------------------------------------------------
Four Seasons Hotels, Inc. (Hotels/Motels) 85,000 1,886,185
- ----------------------------------------------------------------------
Gulf Canada Resources, Ltd. (Oil & Gas-
Exploration & Production)(a) 250,000 2,031,250
- ----------------------------------------------------------------------
Imax Corp. (Leisure & Recreation)(a) 75,000 2,681,250
- ----------------------------------------------------------------------
JDS Fitel Inc. (Telecommunications)(a) 95,000 2,023,085
- ----------------------------------------------------------------------
MDS Inc.-Class B
(Medical Instruments/Products) 218,000 4,260,129
- ----------------------------------------------------------------------
Newbridge Networks Corp. (Computer
Networking)(a) 67,600 2,146,300
- ----------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Newcourt Credit Group, Inc.
(Finance-Consumer Credit) 120,000 $ 2,216,178
- ----------------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 50,000 3,631,250
- ----------------------------------------------------------------------
Philip Environmental, Inc.
(Pollution Control)(a) 375,000 5,906,250
- ----------------------------------------------------------------------
Precision Drilling Corp. (Oil &
Gas-Drilling)(a) 125,000 4,343,750
- ----------------------------------------------------------------------
Sears Canada, Inc. (Retail-Stores) 166,500 1,757,963
- ----------------------------------------------------------------------
Suncor, Inc.
(Oil & Gas-Exploration & Production) 105,000 4,810,308
- ----------------------------------------------------------------------
67,158,734
- ----------------------------------------------------------------------
CHILE-0.44%
Cia. de Telecomunicaciones de Chile
S.A.-ADR (Telephone) 287,300 9,301,338
- ----------------------------------------------------------------------
DENMARK-0.73%
Bang & Olufsen Holding A/S-Class B
(Electronic Components/Miscellaneous)(a) 90,000 5,189,130
- ----------------------------------------------------------------------
Coloplast A/S-Class B
(Medical Instruments/Products) 25,000 1,813,161
- ----------------------------------------------------------------------
Falck A/S (Security & Safety Services) 20,000 5,082,920
- ----------------------------------------------------------------------
Kobenhavns Lufthavne A/S (Transportation) 35,000 3,542,112
- ----------------------------------------------------------------------
15,627,323
- ----------------------------------------------------------------------
FINLAND-1.35%
Cultor Oy (Food/Processing)(a) 30,000 1,661,411
- ----------------------------------------------------------------------
Hartwall OY A.B. (Beverages-Alcoholic)(a) 80,000 3,615,107
- ----------------------------------------------------------------------
Huhtamaki Group (Conglomerates)(a) 100,000 4,365,049
- ----------------------------------------------------------------------
KCI Konecranes (Machinery-Heavy)(a) 76,750 2,951,696
- ----------------------------------------------------------------------
Orion-yhtyma OY (Medical-Drugs)(a) 120,000 4,499,654
- ----------------------------------------------------------------------
Raision Tehtaat Oy (Food/Processing)(a) 44,500 3,688,082
- ----------------------------------------------------------------------
Tamro OY A.B. (Medical-Drugs)(a) 400,000 2,461,349
- ----------------------------------------------------------------------
TT Tieto OY-Class B
(Computer Software/Services)(a) 74,000 5,620,721
- ----------------------------------------------------------------------
28,863,069
- ----------------------------------------------------------------------
FRANCE-2.89%
Altran Technologies, S.A.
(Telecommunications) 15,000 5,217,168
- ----------------------------------------------------------------------
BERTRAND FAURE
(Automobile/Truck Parts & Tires) 110,000 5,267,712
- ----------------------------------------------------------------------
Christian Dalloz (Textiles)(a) 3,800 1,445,387
- ----------------------------------------------------------------------
CIPE (Security & Safety Services) 16,000 2,247,923
- ----------------------------------------------------------------------
Coflexip S.A. (Oil & Gas-Specialty)(a) 35,000 1,901,568
- ----------------------------------------------------------------------
Compagnie Generale de Geophysique S.A.
(Oil & Gas-Drilling)(a) 26,000 2,200,634
- ----------------------------------------------------------------------
Dassault Electronique
(Electronic/Defense) 30,000 3,274,223
- ----------------------------------------------------------------------
Dassault Systemes S.A.-ADR
(Computer Software/Services)(a) 100,000 6,162,500
- ----------------------------------------------------------------------
Galeries Lafayette (Retail-Stores)(a) 5,600 2,245,181
- ----------------------------------------------------------------------
Grand Optical Photoservice
(Retail-Stores) 26,400 3,930,712
- ----------------------------------------------------------------------
Labinal S.A. (Aerospace/Defense) 8,300 2,118,907
- ----------------------------------------------------------------------
LDC S.A. (Food/Processing) 7,500 1,323,567
- ----------------------------------------------------------------------
Le Carbone-Lorraine
(Electronic Components/Miscellaneous) 9,100 2,159,428
- ----------------------------------------------------------------------
Mecatherm S.A.
(Machinery-Miscellaneous)(a) 3,000 818,298
- ----------------------------------------------------------------------
Penauille Polyservices
(Security & Safety Services)(a) 5,300 1,363,934
- ----------------------------------------------------------------------
Scor S.A.(Insurance-Multi-line Property) 130,000 5,078,386
- ----------------------------------------------------------------------
Sidel, S.A. (Machinery-Miscellaneous) 70,000 5,027,671
- ----------------------------------------------------------------------
Sommer Allibert
(Automobile/Truck Parts & Tires) 70,000 2,518,633
- ----------------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 146
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Strafor Facom S.A. (Office Products) 40,000 $ 3,022,359
- ----------------------------------------------------------------------
Vallourec S.A. (Metals) 73,000 4,277,564
- ----------------------------------------------------------------------
61,601,755
- ----------------------------------------------------------------------
GERMANY-1.71%
Continental A.G.
(Automobile/Truck Parts & Tires) 185,000 4,070,043
- ----------------------------------------------------------------------
Fresenius A.G.-Preferred
(Medical Instruments/Products) 26,000 5,847,673
- ----------------------------------------------------------------------
Fresenius A.G.-Rts., expiring 05/13/97
(Medical Instruments/Products) 26,000 115,936
- ----------------------------------------------------------------------
Hugo Boss A.G.-Preferred (Textiles) 1,750 2,233,226
- ----------------------------------------------------------------------
IWKA A.G. (Machine Tools) 8,100 2,135,148
- ----------------------------------------------------------------------
Plettac A.G. (Machinery-Miscellaneous) 10,000 2,205,797
- ----------------------------------------------------------------------
Porsche A.G.
(Automobile/Truck Parts & Tires) 6,300 8,185,125
- ----------------------------------------------------------------------
Puma A.G. (Shoes & Related Apparel)(a) 35,000 1,182,296
- ----------------------------------------------------------------------
Puma A.G. Rudolph Dassler Sport (Shoes &
Related Apparel) (Acquired 06/10/96;
cost $2,280,576)(a)(b) 70,000 2,364,592
- ----------------------------------------------------------------------
SCHMALBACH LUBECA A.G. (Containers)(a) 20,000 4,388,498
- ----------------------------------------------------------------------
SGL Carbon A.G. (Metals-Miscellaneous) 27,500 3,834,883
- ----------------------------------------------------------------------
36,563,217
- ----------------------------------------------------------------------
GREECE-0.11%
Titan Cement Co. S.A. (Building
Materials) 30,000 2,404,580
- ----------------------------------------------------------------------
HONG KONG-7.07%
Asia Satellite Telecommunications
Holdings Ltd. (Telecommunications) 1,530,000 3,881,043
- ----------------------------------------------------------------------
Asia Satellite Telecommunications
Holdings Ltd.-ADR (Telecommunications) 177,300 4,565,475
- ----------------------------------------------------------------------
China Resources Enterprise Ltd. (Real
Estate) 5,414,000 14,956,380
- ----------------------------------------------------------------------
Cosco Pacific Ltd. (Transportation) 11,318,000 15,852,359
- ----------------------------------------------------------------------
Dao Heng Bank Group Ltd. (Banking) 2,479,200 11,777,520
- ----------------------------------------------------------------------
Esprit Asia Holdings Ltd. (Retail-Stores) 10,520,000 4,821,016
- ----------------------------------------------------------------------
First Pacific Company Ltd.
(Conglomerates) 13,326,033 15,912,451
- ----------------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 888,400 10,006,183
- ----------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
(Electric Power) 4,443,840 7,055,991
- ----------------------------------------------------------------------
Hutchison Whampoa Ltd. (Conglomerates)(a) 1,800,000 13,360,873
- ----------------------------------------------------------------------
Johnson Electric Holdings Ltd.
(Electronic Components/Miscellaneous) 4,140,000 11,223,133
- ----------------------------------------------------------------------
New World Infrastructure Ltd.
(Building Materials)(a) 3,446,400 9,743,260
- ----------------------------------------------------------------------
Shanghai Industrial Holdings Ltd.
(Conglomerates)(a) 2,532,000 14,250,978
- ----------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real
Estate) 1,250,000 13,554,508
- ----------------------------------------------------------------------
150,961,170
- ----------------------------------------------------------------------
HUNGARY-0.18%
Richter Gedeon Rt.-GDR (Medical-Drugs) 50,000 3,775,000
- ----------------------------------------------------------------------
INDONESIA-1.19%
PT Bank Dagang Nasional (Banking) 1,083,500 1,081,271
- ----------------------------------------------------------------------
PT Bank Internasional Indonesia
(Banking) 19,605,682 14,119,318
- ----------------------------------------------------------------------
PT Indosat (Telecommunications) 808,000 2,227,819
- ----------------------------------------------------------------------
PT Indosat-ADR (Telecommunications) 87,500 2,406,250
- ----------------------------------------------------------------------
PT Ramayana Lestari Sentosa
(Retail-Stores)(a) 2,324,000 5,642,634
- ----------------------------------------------------------------------
25,477,292
- ----------------------------------------------------------------------
IRELAND-0.69%
CBT Group PLC-ADR
(Computer Software/Services)(a) 7,600 369,550
- ----------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
IRELAND-(CONTINUED)
Elan Corp. PLC-ADR (Medical-Drugs)(a) 200,000 $ 6,800,000
- ----------------------------------------------------------------------
Greencore Group PLC (Food/Processing) 462,000 2,357,851
- ----------------------------------------------------------------------
Saville Systems Ireland PLC-ADR(a) 125,000 5,140,625
- ----------------------------------------------------------------------
14,668,026
- ----------------------------------------------------------------------
ISRAEL-1.57%
Blue Square-Israel Ltd.-ADR
(Retail-Stores)(a) 550,000 10,243,750
- ----------------------------------------------------------------------
ESC Medical Systems Ltd.
(Medical Instruments/Products)(a) 300,000 8,062,500
- ----------------------------------------------------------------------
Tecnomatix Technologies Ltd.
(Computer Software/Services)(a) 27,500 704,688
- ----------------------------------------------------------------------
Teledata Communication Ltd.
(Telecommunications)(a) 150,000 3,300,000
- ----------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Medical-Drugs) 198,500 10,073,875
- ----------------------------------------------------------------------
Tower Semiconductor Ltd.
(Semiconductors)(a) 100,000 1,250,000
- ----------------------------------------------------------------------
33,634,813
- ----------------------------------------------------------------------
ITALY-0.41%
Azienda Mediterranea Gas e Acqua S.p.A.
(Gas Distribution)(a) 2,500,000 1,981,398
- ----------------------------------------------------------------------
Bulgari S.p.A. (Retail-Stores)(a) 263,000 4,754,560
- ----------------------------------------------------------------------
Gewiss S.p.A. (Electronic
Components/Miscellaneous)(a) 150,000 2,014,981
- ----------------------------------------------------------------------
8,750,939
- ----------------------------------------------------------------------
JAPAN-4.15%
Aderans Co. Ltd. (Retail-Stores) 394,000 8,877,299
- ----------------------------------------------------------------------
Bellsystem 24, Inc. (Telephone) 48,000 5,899,082
- ----------------------------------------------------------------------
Capcom Co., Ltd. (Computer
Software/Services) 201,000 3,531,177
- ----------------------------------------------------------------------
Circle K Japan Co. Ltd.
(Retail-Food & Drug)(a) 222,000 10,196,242
- ----------------------------------------------------------------------
FCC Co. Ltd.
(Automobile/Truck Parts & Tires) 143,110 3,923,447
- ----------------------------------------------------------------------
Fujitsu Denso Ltd. (Electric Power) 340,000 10,285,579
- ----------------------------------------------------------------------
Hokuto Corp. (Advertising/Broadcasting) 185,250 6,421,397
- ----------------------------------------------------------------------
Laox (Electronic
Components/Miscellaneous) 460,000 5,472,092
- ----------------------------------------------------------------------
Nippon Thompson Co. (Machine Tools) 710,000 4,782,369
- ----------------------------------------------------------------------
Noritsu Koki Co. Ltd.
(Electronic Components/Miscellaneous) 315,600 13,450,947
- ----------------------------------------------------------------------
77 Bank (Banking) 770,000 6,308,741
- ----------------------------------------------------------------------
Shohkoh Fund & Co.
(Finance-Consumer Credit) 20,600 4,836,176
- ----------------------------------------------------------------------
Yamato Kogyo Co. (Building Materials) 537,000 4,653,563
- ----------------------------------------------------------------------
88,638,111
- ----------------------------------------------------------------------
MALAYSIA-3.10%
Arab Malaysian Finance Berhad
(Finance-Asset Management) 1,310,000 2,869,603
- ----------------------------------------------------------------------
Commerce Asset Holding Berhad
(Finance-Asset Management) 574,000 3,429,186
- ----------------------------------------------------------------------
Gamuda Berhad (Engineering &
Construction) 2,286,699 8,242,244
- ----------------------------------------------------------------------
Gamuda Berhad-Wts., expiring 12/28/01
(Engineering & Construction) 66 81
- ----------------------------------------------------------------------
Malayan Banking Berhad (Banking) 1,112,000 11,072,168
- ----------------------------------------------------------------------
Sungei Way Holdings Berhad
(Building Materials) 4,991,800 11,431,755
- ----------------------------------------------------------------------
Sunway City Berhad Group (Real Estate) 4,000,000 8,682,492
- ----------------------------------------------------------------------
Tan Chong Motor Holdings Berhad
(Automobile-Manufacturers) 5,040,000 9,354,150
- ----------------------------------------------------------------------
UMW Holdings Berhad
(Finance-Asset Management) 2,125,000 11,171,738
- ----------------------------------------------------------------------
66,253,417
- ----------------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 147
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO-2.59%
Coca-Cola Femsa S.A.-ADR
(Beverages-Non-Alcoholic) 170,400 $ 5,942,700
- ----------------------------------------------------------------------
Fomento Economico Mexicano, S.A. de C.V.
(Beverages-Alcoholic)(a) 1,804,900 8,472,003
- ----------------------------------------------------------------------
Grupo Financiero Banamex Accival, S.A. de
C.V. (Banacci) (Banking)(a) 4,350,000 9,316,932
- ----------------------------------------------------------------------
Grupo Industrial Maseca S.A. de
C.V.-Class B (Food/Processing) 5,844,600 5,722,140
- ----------------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Advertising/Broadcasting)(a) 310,800 7,187,250
- ----------------------------------------------------------------------
Panamerican Beverages, Inc.-Class A
(Beverages-Soft Drinks) 502,000 14,558,000
- ----------------------------------------------------------------------
Tubos de Acero de Mexico S.A. (Steel)(a) 250,000 4,093,750
- ----------------------------------------------------------------------
55,292,775
- ----------------------------------------------------------------------
NETHERLANDS-3.74%
Aalberts Industries N.V. (Metals) 115,000 2,638,454
- ----------------------------------------------------------------------
Ahrend Groep N.V. (Furniture) 105,000 6,359,390
- ----------------------------------------------------------------------
Baan Co. N.V.-ADR
(Computer Software/Services)(a) 75,000 4,031,250
- ----------------------------------------------------------------------
Beter Bed Holding N.V. (Furniture)(a) 115,000 2,012,780
- ----------------------------------------------------------------------
Cap Gemini N.V.
(Computer Software/Services)(a) 160,000 5,223,015
- ----------------------------------------------------------------------
CMG PLC (Computer Software/Services) 340,000 6,352,204
- ----------------------------------------------------------------------
Content Beheer N.V. (Business Services) 70,000 2,529,385
- ----------------------------------------------------------------------
De Boer Winkelbedrijven N.V.
(Retail-Food & Drug) 25,000 1,924,755
- ----------------------------------------------------------------------
Getronics N.V. (Computer
Software/Services) 300,000 9,084,843
- ----------------------------------------------------------------------
IHC Caland N.V. (Trucking) 114,000 5,628,907
- ----------------------------------------------------------------------
Internatio-Muller N.V. (Conglomerates) 288,000 8,351,897
- ----------------------------------------------------------------------
Koninklijke Van Ommeren N.V.
(Transportation)(a) 122,000 4,752,759
- ----------------------------------------------------------------------
NORIT N.V. (Cosmetics & Toiletries) 200,000 3,449,161
- ----------------------------------------------------------------------
Oce-Van Der Grinten N.V.
(Office Automation) 67,000 8,105,477
- ----------------------------------------------------------------------
Ordina Beheer N.V. (Computer
Software/Services)(a) 80,000 5,358,518
- ----------------------------------------------------------------------
Randstad Holdings N.V. (Business
Services) 46,400 4,167,736
- ----------------------------------------------------------------------
79,970,531
- ----------------------------------------------------------------------
NORWAY-1.23%
Ekornes A.S.A. (Furniture) 300,000 2,211,706
- ----------------------------------------------------------------------
Merkantildata A.S.A.
(Computer Software/Services) 50,000 912,768
- ----------------------------------------------------------------------
Saevik Supply A.S.A. (Oil &
Gas-Services)(a) 160,000 1,864,854
- ----------------------------------------------------------------------
Smedvig A.S.A.-Class A (Oil &
Gas-Services) 160,000 3,819,581
- ----------------------------------------------------------------------
Smedvig A.S.A.-Class B (Oil &
Gas-Services) 140,000 3,292,984
- ----------------------------------------------------------------------
Tandberg A.S.A. (Telecommunications)(a) 110,000 1,228,023
- ----------------------------------------------------------------------
Tandberg Television A.S.A.
(Telecommunications)(a) 440,000 3,521,878
- ----------------------------------------------------------------------
Tomra Systems A.S.A.
(Machinery-Miscellaneous) 486,000 9,418,076
- ----------------------------------------------------------------------
26,269,870
- ----------------------------------------------------------------------
PERU-0.66%
Telefonica del Peru S.A.-Class B
(Telecommunications) 1,026,000 2,471,640
- ----------------------------------------------------------------------
Telefonica del Peru S.A.-ADR
(Telecommunications)(a) 486,500 11,676,000
- ----------------------------------------------------------------------
14,147,640
- ----------------------------------------------------------------------
PHILIPPINES-2.88%
C & P Homes, Inc. (Home Building) 14,800,000 5,612,438
- ----------------------------------------------------------------------
DMCI Holdings Inc.
(Engineering & Construction)(a) 11,700,000 5,989,761
- ----------------------------------------------------------------------
Equitable Banking Corp. (Banking)(a) 150,000 585,893
- ----------------------------------------------------------------------
Filinvest Land Inc. (Real Estate)(a) 27,213,175 6,398,244
- ----------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PHILIPPINES-(CONTINUED)
International Container Terminal
Services, Inc. (Containers)(a) 8,150,000 $ 4,790,482
- ----------------------------------------------------------------------
Ionics Circuit Inc.
(Electronic
Components/Miscellaneous)(a) 4,832,000 2,931,816
- ----------------------------------------------------------------------
Marsman & Co., Inc.-Class B
(Medical-Drugs)(a) 6,330,000 1,440,273
- ----------------------------------------------------------------------
Metro Pacific Corp. (Conglomerates) 27,254,000 6,304,490
- ----------------------------------------------------------------------
Metropolitan Bank & Trust Co. (Banking) 424,072 8,684,068
- ----------------------------------------------------------------------
Philippine Long Distance Telephone Co.
(Telecommunications) 97,460 5,562,279
- ----------------------------------------------------------------------
Philippine Long Distance Telephone
Co.-ADR (Telecommunications) 79,700 4,443,275
- ----------------------------------------------------------------------
SM Prime Holdings Inc. (Real Estate)(a) 32,000,000 8,373,151
- ----------------------------------------------------------------------
Southeast Asia Cement Holdings, Inc.
(Building Materials)(a) 8,771,000 405,788
- ----------------------------------------------------------------------
61,521,958
- ----------------------------------------------------------------------
PORTUGAL-1.36%
Cimpor-Cimentos de Portugal S.A.
(Building Materials)(a) 250,000 5,378,200
- ----------------------------------------------------------------------
Jeronimo Martins & Filho, S.A.
(Retail-Stores)(a) 56,000 3,350,014
- ----------------------------------------------------------------------
Portugal Telecom S.A.
(Telecommunications)(a) 265,000 9,763,158
- ----------------------------------------------------------------------
Semapa (Building Materials)(a) 110,000 2,353,753
- ----------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications)(a) 60,000 5,166,523
- ----------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.-ADR
(Telecommunications)(a) 34,900 3,010,125
- ----------------------------------------------------------------------
29,021,773
- ----------------------------------------------------------------------
SINGAPORE-1.51%
City Developments Ltd. (Real Estate) 789,000 6,377,409
- ----------------------------------------------------------------------
DBS Land Ltd. (Real Estate) 3,030,000 9,796,477
- ----------------------------------------------------------------------
Overseas Union Bank Ltd. (Banking) 1,030,000 6,759,931
- ----------------------------------------------------------------------
Wing Tai Holdings Ltd. (Real Estate) 3,600,000 9,301,554
- ----------------------------------------------------------------------
32,235,371
- ----------------------------------------------------------------------
SOUTH AFRICA-0.42%
Dimension Data Holdings Ltd.
(Computer Peripherals)(a) 1,008,000 3,400,427
- ----------------------------------------------------------------------
Sasol Ltd.
(Oil & Gas-Exploration & Production) 438,850 5,625,649
- ----------------------------------------------------------------------
9,026,076
- ----------------------------------------------------------------------
SPAIN-0.83%
Azkoyen S.A. (Machinery-Miscellaneous) 17,000 2,546,425
- ----------------------------------------------------------------------
Mapfre Vida (Insurance-Life & Health)(a) 54,000 3,475,531
- ----------------------------------------------------------------------
Prosegur, CIA de Seguridad S.A.
(Business Services) 400,000 4,336,377
- ----------------------------------------------------------------------
Tele Pizza, S.A. (Restaurants)(a) 100,000 4,582,607
- ----------------------------------------------------------------------
Vidrala S.A. (Containers) 40,000 2,886,358
- ----------------------------------------------------------------------
17,827,298
- ----------------------------------------------------------------------
SWEDEN-1.77%
AB Lindex (Retail-Stores)(a) 130,000 2,792,331
- ----------------------------------------------------------------------
Allgon A.B.-Class B (Electronic
Components/Miscellaneous) 270,000 7,399,901
- ----------------------------------------------------------------------
Assa Abloy A.B.-Class B
(Machinery-Miscellaneous)(a) 230,000 4,500,491
- ----------------------------------------------------------------------
Esselte A.B.-Class B (Office Products)(a) 200,000 4,563,591
- ----------------------------------------------------------------------
Scandic Hotels A.B. (Hotels/Motels)(a) 230,000 3,840,810
- ----------------------------------------------------------------------
Securitas A.B.-Class B
(Security & Safety Services) 126,300 3,042,908
- ----------------------------------------------------------------------
Spectra-Physics A.B. (Electronic
Components/Miscellaneous) 120,000 2,080,385
- ----------------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 148
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWEDEN-(CONTINUED)
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 152,160 $ 5,116,380
- ----------------------------------------------------------------------
WM-Data A.B.-Class B
(Computer Software/Services)(a) 60,000 4,359,631
- ----------------------------------------------------------------------
37,696,428
- ----------------------------------------------------------------------
SWITZERLAND-2.07%
Ares-Serono Group-Class B (Medical-Drugs) 2,000 2,683,671
- ----------------------------------------------------------------------
Disetronic Holding A.G.
(Medical-Drugs)(a) 2,000 4,389,119
- ----------------------------------------------------------------------
Gurit-Heberlein A.G. (Textiles)(a) 900 2,304,796
- ----------------------------------------------------------------------
Kuoni Reisen A.G. (Leisure &
Recreation)(a) 1,600 4,602,130
- ----------------------------------------------------------------------
Logitech International S.A.
(Computer Peripherals) 30,000 5,494,878
- ----------------------------------------------------------------------
Logitech International S.A.-ADR
(Computer Peripherals)(a) 100,000 1,837,500
- ----------------------------------------------------------------------
Mikron Holding A.G. (Machinery-Heavy)(a) 17,000 2,537,141
- ----------------------------------------------------------------------
Rieter Holdings Ltd.
(Machinery-Miscellaneous)(a) 18,500 5,873,414
- ----------------------------------------------------------------------
Saurer A.G. (Machinery-Miscellaneous)(a) 9,500 4,975,239
- ----------------------------------------------------------------------
Stratec Holding A.G.
(Medical Instruments/Products)(a) 2,600 3,950,885
- ----------------------------------------------------------------------
TAG Heuer International S.A.
(Consumer Non-Durables)(a) 40,000 5,616,987
- ----------------------------------------------------------------------
44,265,760
- ----------------------------------------------------------------------
THAILAND-0.36%
Bank of Ayudhya Public Co., Ltd.
(Banking) 87,475 224,359
- ----------------------------------------------------------------------
Hana Microelectronics Public Co., Ltd.
(Electronic Components/Miscellaneous) 452,400 2,441,895
- ----------------------------------------------------------------------
Krung Thai Bank Public Co. Ltd. (Banking) 1,687,670 2,115,846
- ----------------------------------------------------------------------
Siam Commercial Bank PLC (Banking) 377,100 2,208,682
- ----------------------------------------------------------------------
Thai Theparos Food Product Public Co.
Ltd. (Food/Processing)(a) 215,500 676,467
- ----------------------------------------------------------------------
7,667,249
- ----------------------------------------------------------------------
UNITED KINGDOM-8.07%
Aegis Group PLC
(Advertising/Broadcasting) 6,000,000 5,980,550
- ----------------------------------------------------------------------
Airtours PLC (Leisure & Recreation) 815,000 12,112,723
- ----------------------------------------------------------------------
Alexon Group PLC (Retail-Stores)(a) 555,000 1,781,036
- ----------------------------------------------------------------------
Astec (BSR) PLC (Electronic
Components/Miscellaneous) 1,300,000 3,170,989
- ----------------------------------------------------------------------
Avis Europe PLC (Transportation)
(Acquired 03/26/97; cost
$2,977,263)(a)(b) 1,484,550 3,248,205
- ----------------------------------------------------------------------
Blacks Leisure Group PLC (Retail-Stores) 200,000 1,552,674
- ----------------------------------------------------------------------
British-Borneo Petroleum Syndicate PLC
(Oil & Gas-Exploration & Production) 360,000 7,410,049
- ----------------------------------------------------------------------
Capita Group PLC
(Computer Software/Services) 570,000 2,203,322
- ----------------------------------------------------------------------
Capital Radio PLC
(Advertising/Broadcasting) 250,000 2,196,110
- ----------------------------------------------------------------------
Caradon PLC (Building Materials) 1,000,000 4,027,552
- ----------------------------------------------------------------------
Carpetright PLC (Retail-Stores) 142,000 1,088,590
- ----------------------------------------------------------------------
Compass Group PLC (Restaurants) 335,000 3,676,801
- ----------------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 114,700 3,505,519
- ----------------------------------------------------------------------
Dewhirst Group PLC (Textiles) 404,000 1,289,918
- ----------------------------------------------------------------------
D.F.S. Furniture Co. PLC (Retail-Stores) 660,000 5,947,488
- ----------------------------------------------------------------------
Dr. Solomon's Group PLC-ADR
(Computer Software/Services)(a) 109,600 2,534,500
- ----------------------------------------------------------------------
FKI PLC (Conglomerates) 1,125,000 3,318,476
- ----------------------------------------------------------------------
Games Workshop Group PLC
(Leisure & Recreation) 165,000 1,743,598
- ----------------------------------------------------------------------
Go-Ahead Group PLC (The) (Transportation) 230,000 1,763,209
- ----------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Goode Durrant PLC (Business Services) 214,000 $ 1,607,601
- ----------------------------------------------------------------------
Graseby PLC (Medical
Instruments/Products) 425,000 985,008
- ----------------------------------------------------------------------
Harvey Nichols PLC (Retail-Stores)(a) 330,000 1,658,023
- ----------------------------------------------------------------------
Holliday Chemical Holdings PLC
(Chemicals) 675,000 1,651,945
- ----------------------------------------------------------------------
J.D. Wetherspoon PLC (Restaurants) 105,000 1,991,086
- ----------------------------------------------------------------------
Jarvis Hotels PLC (Hotels/Motels)(a) 675,000 1,695,705
- ----------------------------------------------------------------------
JBA Holdings PLC
(Computer Software/Services) 150,000 1,993,517
- ----------------------------------------------------------------------
JJB Sports PLC (Retail-Stores) 215,000 1,573,298
- ----------------------------------------------------------------------
Logica PLC (Computer Software/Services) 300,000 4,190,032
- ----------------------------------------------------------------------
London Forfaiting Co. PLC
(Finance-Asset Management) 340,000 2,220,746
- ----------------------------------------------------------------------
London International Group PLC
(Cosmetics & Toiletries)(a) 2,000,000 5,850,890
- ----------------------------------------------------------------------
Manchester United PLC (Leisure &
Recreation) 500,000 5,324,148
- ----------------------------------------------------------------------
Mayflower Corp. PLC (The)
(Automobile/Trucks Parts & Tires) 890,000 2,149,271
- ----------------------------------------------------------------------
Medeva PLC (Medical-Drugs) 325,000 1,580,227
- ----------------------------------------------------------------------
Millennium & Copthorne Hotels PLC
(Hotels/Motels) 350,000 2,138,574
- ----------------------------------------------------------------------
Misys PLC (Computer Software/Services) 500,000 10,028,363
- ----------------------------------------------------------------------
P&P PLC (Computer Mini/PCs) 471,000 1,687,050
- ----------------------------------------------------------------------
Parity PLC (Computer Software/Services) 350,000 2,779,578
- ----------------------------------------------------------------------
PizzaExpress PLC (Restaurants) 387,000 4,334,149
- ----------------------------------------------------------------------
Powerscreen International PLC
(Machinery-Heavy) 515,000 5,070,705
- ----------------------------------------------------------------------
Provident Financial PLC
(Finance-Consumer Credit) 1,000,000 9,254,456
- ----------------------------------------------------------------------
Sage Group PLC (The)
(Computer Software/Services) 300,000 3,119,125
- ----------------------------------------------------------------------
Scholl PLC (Cosmetics & Toiletries) 200,000 975,688
- ----------------------------------------------------------------------
SEMA Group PLC (Computer
Software/Services) 500,000 9,704,214
- ----------------------------------------------------------------------
SIG PLC (Building Materials) 420,000 2,232,739
- ----------------------------------------------------------------------
Spirax-Sarco Engineering PLC
(Machinery-Miscellaneous) 130,000 1,493,840
- ----------------------------------------------------------------------
St. Ives PLC (Containers) 201,000 1,723,323
- ----------------------------------------------------------------------
Stagecoach Holdings PLC (Transportation) 790,000 7,611,912
- ----------------------------------------------------------------------
Stanley Leisure PLC (Gaming) 425,000 1,901,135
- ----------------------------------------------------------------------
Taylor Woodrow PLC (Engineering &
Construction) 1,450,000 4,512,155
- ----------------------------------------------------------------------
TBI PLC (Real Estate) 500,000 652,350
- ----------------------------------------------------------------------
172,242,162
- ----------------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 1,332,775,255
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE BONDS-0.09%
ADVERTISING/BROADCASTING-0.05%
Jacor Communications Inc.,
Conv. Sr. LYON 5.50%; 06/12/11 $2,350,000 1,086,875
- ------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.02%
Cityscape Financial Corp.,
Conv. Sub. Deb., 6.00%; 05/01/06
(Acquired 08/06/96; cost
$718,588)(b) 520,000 344,911
- ------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.02%
Multicare Companies Inc.,
Conv. Sub. Deb., 7.00%; 03/15/03
(Acquired 01/13/97; cost
$480,000)(b) 400,000 458,000
- ------------------------------------------------------------------
Total Domestic Convertible
Corporate Bonds 1,889,786
- ------------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 149
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FOREIGN CONVERTIBLE CORPORATE BONDS-0.36%
HONG KONG-0.11%
New World Infrastructure Ltd.
(Banking), Conv. Bonds,
5.00%, 07/15/01
(Acquired 04/10/97-04/11/97; cost
$2,172,563)(b) $1,850,000 $ 2,104,375
- ------------------------------------------------------------------
New World Infrastructure Ltd.
(Banking), Conv. Bonds,
5.00%, 07/15/01 250,000 284,375
- ------------------------------------------------------------------
2,388,750
- ------------------------------------------------------------------
NETHERLANDS-0.14%
Baan Co., N.V. (Computer
Software/Services), Conv. Sub.
Notes, 4.50%, 12/15/01
(Acquired 01/13/97-01/24/97; cost
$2,585,688)(b) 2,245,000 3,048,283
- ------------------------------------------------------------------
- ------------------------------------------------------------------
PHILIPPINES-0.11%
Metropolitan Bank & Trust
International Finance Ltd.
(Banking),
Conv. Deb., 2.75%, 09/10/00 $1,815,000 $ 2,323,200
- ------------------------------------------------------------------
Total Foreign Convertible
Corporate Bonds 7,760,233
- ------------------------------------------------------------------
REPURCHASE AGREEMENT(d)-0.38%
HSBC Securities, Inc.,
5.05%, 05/01/97(e) 8,219,390 8,219,390
- ------------------------------------------------------------------
TOTAL INVESTMENTS-98.30% 2,099,330,615
- ------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.70% 36,300,665
- ------------------------------------------------------------------
NET ASSETS-100.00% $2,135,631,280
==================================================================
</TABLE>
Abbreviations:
ADR -- American Depository Receipt
Conv. -- Convertible
Deb. -- Debentures
GDR -- Global Depository Receipt
LYON -- Liquid Yield Option Notes
Rts. -- Rights
Sr. -- Senior
Sub. -- Subordinated
Wts. -- Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 04/30/97 were $11,568,366,
which represented 0.54% of the Fund's net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of original
issue discount.
(d) 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% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts, private accounts and certain
non-registered investment companies managed by the investment advisor or its
affiliates.
(e) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$100,014,028. Collateralized by $96,950,000 U.S. Government obligations,
7.50% to 7.875% due 10/31/99 to 12/31/99 with an aggregate market value at
04/30/97 of $102,002,050.
See Notes to Financial Statements.
FS-9
<PAGE> 150
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,871,399,840) $2,099,330,615
- ------------------------------------------------------------
Foreign currencies, at market value (cost
$27,777,977) 27,678,737
- ------------------------------------------------------------
Receivables for:
Investments sold 26,417,685
- ------------------------------------------------------------
Capital stock sold 7,157,174
- ------------------------------------------------------------
Dividends and interest 3,055,831
- ------------------------------------------------------------
Investment for deferred compensation plan 10,249
- ------------------------------------------------------------
Other assets 277,050
- ------------------------------------------------------------
Total assets 2,163,927,341
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 19,547,514
- ------------------------------------------------------------
Capital stock reacquired 4,748,214
- ------------------------------------------------------------
Deferred compensation 10,249
- ------------------------------------------------------------
Accrued advisory fees 1,513,497
- ------------------------------------------------------------
Accrued administrative services fees 8,967
- ------------------------------------------------------------
Accrued directors' fees 4,061
- ------------------------------------------------------------
Accrued distribution fees 1,549,165
- ------------------------------------------------------------
Accrued transfer agent fees 458,679
- ------------------------------------------------------------
Accrued operating expenses 455,715
- ------------------------------------------------------------
Total liabilities 28,296,061
- ------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,135,631,280
============================================================
NET ASSETS:
Class A $1,098,005,480
============================================================
Class B $1,037,625,800
============================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
CLASS A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 70,728,784
============================================================
CLASS B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 67,771,687
============================================================
CLASS A:
Net asset value and redemption price per
share $ 15.52
============================================================
Offering price per share:
(Net asset value $15.52 divided by 95.25%)$ 16.29
============================================================
CLASS B:
Net asset value and offering price per
share $ 15.31
============================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $833,354 foreign withholding
tax) $ 7,676,217
- -------------------------------------------------------------
Interest 903,931
- -------------------------------------------------------------
Total investment income 8,580,148
- -------------------------------------------------------------
EXPENSES:
Advisory fees 8,808,576
- -------------------------------------------------------------
Administrative services fees 54,405
- -------------------------------------------------------------
Directors' fees 6,626
- -------------------------------------------------------------
Distribution fees-Class A 2,631,007
- -------------------------------------------------------------
Distribution fees-Class B 4,809,316
- -------------------------------------------------------------
Custodian fees 680,546
- -------------------------------------------------------------
Transfer agent fees-Class A 1,237,431
- -------------------------------------------------------------
Transfer agent fees-Class B 1,365,858
- -------------------------------------------------------------
Other 526,876
- -------------------------------------------------------------
Total expenses 20,120,641
- -------------------------------------------------------------
Less: Expenses paid indirectly (16,745)
- -------------------------------------------------------------
Net expenses 20,103,896
- -------------------------------------------------------------
Net investment income (loss) (11,523,748)
- -------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) on sales of:
Investment securities (64,423,236)
- -------------------------------------------------------------
Foreign currencies (618,506)
- -------------------------------------------------------------
(65,041,742)
- -------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 26,301,048
- -------------------------------------------------------------
Foreign currencies (188,075)
- -------------------------------------------------------------
26,112,973
- -------------------------------------------------------------
Net gain (loss) on investment securities
and foreign
currencies (38,928,769)
- -------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $(50,452,517)
==============================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE> 151
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the year ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (11,523,748) $ (8,221,031)
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities
and foreign currencies (65,041,742) (32,408,407)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 26,112,973 171,434,202
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (50,452,517) 130,804,764
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized capital gains:
Class A -- (766,625)
- -----------------------------------------------------------------------------------------------
Class B -- (520,242)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 202,334,036 657,118,189
- -----------------------------------------------------------------------------------------------
Class B 257,215,785 635,669,948
- -----------------------------------------------------------------------------------------------
Net increase in net assets 409,097,304 1,422,306,034
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,726,533,976 304,227,942
- -----------------------------------------------------------------------------------------------
End of period $2,135,631,280 $1,726,533,976
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,016,588,400 $1,557,038,579
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (11,537,802) (14,054)
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and
foreign currencies (97,223,213) (32,181,471)
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 227,803,895 201,690,922
- -----------------------------------------------------------------------------------------------
$2,135,631,280 $1,726,533,976
===============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Aggressive Growth 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 Global Aggressive Growth Fund, AIM Global Growth Fund,
AIM Global Income Fund and AIM International Equity Fund. The Fund currently
offers two different classes of shares: Class A shares and 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 Fund's investment objective is to provide above-average long-term growth of
capital appreciation. The Fund seeks to achieve its objective by investing in a
portfolio of global equity securities including securities of selected companies
with relatively small market capitalization.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at the last sales price on the exchange where
the security is principally traded or, lacking any sales, at the mean between
the closing bid and asked prices on the day of valuation. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Securities traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) are valued at the mean
FS-11
<PAGE> 152
between the closing bid and asked prices on valuation date. Securities
reported on the NASDAQ National Market System are valued at the last sales
price on the valuation date or, absent a last sales price, at the mean of the
closing bid and asked prices. Debt obligations (including convertible bonds)
are valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as yield,
type of issue, coupon rate and maturity date. Securities for which market
quotations are either not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's 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 would not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at 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 currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses 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. The Fund has a capital loss
carryforward of $32,147,412 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2004.
F. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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 advisory agreement, the
Fund pays an advisory fee to AIM at the annual rate of 0.90% of the first $1
billion of the Fund's average daily net assets, plus 0.85% of the Fund's average
daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $54,405 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the six months ended April 30, 1997, AFS was paid
$1,554,464 for such services.
The Fund received reductions in transfer agency fees of $15,802 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $943 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $16,745 during the six months ended
April 30, 1997.
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
distribution 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, pays AIM Distributors an annual rate of 0.50% 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. Of the total compensation payable, the Fund pays a service fee of
0.25% 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 Fund, pursuant to the Class B Plan, will pay AIM
Distributors an annual rate of 1.00% of the average daily net assets
attributable to the Class B
FS-12
<PAGE> 153
shares. Of this amount, the Fund pays 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. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more designees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the six months ended April 30, 1997, the Class A shares
and the Class B shares paid AIM Distributors $2,631,007 and $4,809,316,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,429,678 from the sales of the
Class A shares of the Fund during the six months ended April 30, 1997. 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 six months
ended April 30, 1997, AIM Distributors received commissions of $82,914 in
contingent deferred sales charges imposed on redemptions of Fund shares. Certain
officers and directors of the Company are officers and directors of AIM, AFS and
AIM Distributors.
During the six months ended April 30, 1997, the Fund incurred legal fees of
$8,781 for services rendered by the law firm of Kramer, Levin, Naftalis &
Frankel as counsel to the Company's directors. A member of that firm is a
director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 1997, the Fund did not borrow under the
line of credit agreement. The funds which are party to the line of credit are
charged a commitment fee of 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1997, on a
tax basis, was $981,957,969 and $527,989,778, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1997, on a tax basis, is as follows.
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 346,645,643
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (118,714,868)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 227,930,775
=========================================================
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the six months ended
April 30, 1997 and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 21,617,741 $ 351,813,876 50,205,954 $ 748,519,743
- --------------------- ---------- -------------- ---------- --------------
Class B 20,324,555 326,605,732 45,280,451 673,914,740
- --------------------- ---------- -------------- ---------- --------------
Issued as
reinvestment of
dividends:
Class A -- -- 56,549 727,221
- --------------------- ---------- -------------- ---------- --------------
Class B -- -- 38,442 491,285
- --------------------- ---------- -------------- ---------- --------------
Reacquired:
Class A (9,236,278) (149,479,840) (6,124,044) (92,128,775)
- --------------------- ---------- -------------- ---------- --------------
Class B (4,362,967) (69,389,947) (2,588,161) (38,736,077)
- --------------------- ---------- -------------- ---------- --------------
28,343,051 $ 459,549,821 86,869,191 $1,292,788,137
===================== ========== ============== ========== ==============
</TABLE>
FS-13
<PAGE> 154
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share and Class B share
outstanding during the six months ended April 30, 1997, each of the years in the
two-year period ended October 31, 1996 and the period September 15, 1994 (date
operations commenced) through October 31, 1994.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, ------------------------------------------
1997 1996 1995 1994
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 15.76 $ 13.09 $ 10.22 $ 10.00
- ------------------------------------------------------------ ---------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.07) (0.09)(a) (0.09)(a) --
- ------------------------------------------------------------ ---------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.17) 2.81 2.96 0.22
- ------------------------------------------------------------ ---------- -------- -------- --------
Total from investment operations (0.24) 2.72 2.87 0.22
- ------------------------------------------------------------ ---------- -------- -------- --------
Less distributions:
Distributions from capital gains -- (0.05) -- --
- ------------------------------------------------------------ ---------- -------- -------- --------
Net asset value, end of period $ 15.52 $ 15.76 $ 13.09 $ 10.22
============================================================ ========== ======== ======== ========
Total return(b) (1.52)% 20.83% 28.08% 2.20%
============================================================ ========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,098,005 $919,319 $186,029 $ 18,410
============================================================ ========== ======== ======== ========
Ratio of expenses to average net assets 1.74%(c)(d) 1.83% 2.11% 2.02%(e)(f)
============================================================ ========== ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.89)%(c) (0.62)% (0.68)% 0.27%(f)(g)
============================================================ ========== ======== ======== ========
Portfolio turnover rate 27% 44% 64% 2%
============================================================ ========== ======== ======== ========
Average brokerage commission rate paid(h) $ 0.0285 $ 0.0155 N/A N/A
============================================================ ========== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are annualized and based on average net assets of $1,061,124,353.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) After fee waivers and expense reimbursements. Ratio of expenses to average
net assets prior to fee waivers and expense reimbursements is 4.03%
(annualized) for 1994.
(f) Annualized.
(g) After fee waivers and expense reimbursements. Ratio of net investment income
(loss) to average net assets prior to fee waivers and expense reimbursements
is (1.74)% (annualized) for 1994.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, ------------------------------------------
1997 1996 1995 1994
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 15.58 $ 13.02 $ 10.21 $ 10.00
- ------------------------------------------------------------ ---------- -------- -------- -------
Income from investment operations:
Net investment income (loss) (0.10) (0.17)(a) (0.14)(a) --
- ------------------------------------------------------------ ---------- -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.17) 2.78 2.95 0.21
- ------------------------------------------------------------ ---------- -------- -------- -------
Total from investment operations (0.27) 2.61 2.81 0.21
- ------------------------------------------------------------ ---------- -------- -------- -------
Less distributions:
Distributions from capital gains -- (0.05) -- --
- ------------------------------------------------------------ ---------- -------- -------- -------
Net asset value, end of period $ 15.31 $ 15.58 $ 13.02 $ 10.21
============================================================ ========== ======== ======== ========
Total return(b) (1.73)% 20.09% 27.52% 2.10%
============================================================ ========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,037,626 $807,215 $118,199 $ 6,201
============================================================ ========== ======== ======== ========
Ratio of expenses to average net assets 2.28%(c)(d) 2.37% 2.62% 2.54%(e)(f)
============================================================ ========== ======== ======== ========
Ratio of net investment income (loss) to average net assets (1.42)%(c) (1.16)% (1.19)% (0.25)%(f)(g)
============================================================ ========== ======== ======== ========
Portfolio turnover rate 27% 44% 64% 2%
============================================================ ========== ======== ======== ========
Average brokerage commission rate paid(h) $ 0.0285 $ 0.0155 N/A N/A
============================================================ ========== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are annualized and based on average net assets of $969,834,513.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average assets would have been 2.27% (annualized)
for 1997.
(e) After fee waivers and expense reimbursements. Ratio of expenses to average
net assets prior to fee waivers and expense reimbursements is 4.43%
(annualized) for 1994.
(f) Annualized.
(g) After fee waivers and expense reimbursements. Ratio of net investment income
(loss) to average net assets prior to fee waivers and expense reimbursements
is (2.14)% (annualized) for 1994.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
FS-14
<PAGE> 155
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
An annual meeting of shareholders of the Company was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other companies and/or the amendment of
certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ended October 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes For Against Abstentions
--------------- --------- --------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 130,433,380 0 3,798,959
Bruce L. Crockett........................................... 130,563,964 0 3,668,375
Owen Daly II................................................ 130,421,284 0 3,811,055
Carl Frischling............................................. 130,515,713 0 3,716,626
Robert H. Graham............................................ 130,587,498 0 3,644,841
John F. Kroeger............................................. 130,446,846 0 3,785,493
Lewis F. Pennock............................................ 130,506,142 0 3,726,197
Ian W. Robinson............................................. 130,446,093 0 3,786,246
Louis S. Sklar.............................................. 130,573,480 0 3,658,859
(2) Approval of the new Investment Advisory Agreement........... 59,560,291 868,768 2,843,639
(3) Elimination of Policy prohibiting investments in other
investment companies........................................ 44,936,713 2,141,368 2,956,734
(4) KPMG Peat Marwick LLP....................................... 128,509,801 995,829 4,726,709
</TABLE>
FS-15
<PAGE> 156
AIM GLOBAL GROWTH FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-28.46%
ADVERTISING/BROADCASTING-0.38%
Interpublic Group of Companies,
Inc. 22,000 $ 1,245,750
- ---------------------------------------------------------------
BANKING-0.37%
NationsBank Corp. 20,000 1,207,500
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.07%
PepsiCo, Inc. 6,600 230,175
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.42%
Amgen, Inc.(a) 7,000 412,125
- ---------------------------------------------------------------
Biogen, Inc.(a) 23,000 736,000
- ---------------------------------------------------------------
Guidant Corp. 3,200 218,400
- ---------------------------------------------------------------
1,366,525
- ---------------------------------------------------------------
BUSINESS SERVICES-0.65%
AccuStaff, Inc.(a) 25,000 456,250
- ---------------------------------------------------------------
Cognizant Corp. 25,900 844,988
- ---------------------------------------------------------------
Equifax, Inc. 28,000 805,000
- ---------------------------------------------------------------
2,106,238
- ---------------------------------------------------------------
CHEMICALS-0.23%
Monsanto Co. 17,100 731,025
- ---------------------------------------------------------------
COMPUTER MAINFRAMES-0.22%
International Business Machines
Corp. 4,500 723,375
- ---------------------------------------------------------------
COMPUTER MINI/PCS-1.55%
Compaq Computer Corp.(a) 14,000 1,195,250
- ---------------------------------------------------------------
Dell Computer Corp.(a) 15,800 1,322,263
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 15,000 823,125
- ---------------------------------------------------------------
Hewlett-Packard Co. 17,000 892,500
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 27,400 789,463
- ---------------------------------------------------------------
5,022,601
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.21%
Ascend Communications, Inc.(a) 15,000 686,250
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.25%
EMC Corp.(a) 18,000 654,750
- ---------------------------------------------------------------
Storage Technology Corp.(a) 4,400 154,550
- ---------------------------------------------------------------
809,300
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-1.58%
BMC Software, Inc.(a) 13,400 579,550
- ---------------------------------------------------------------
Computer Associates
International, Inc. 1,700 88,400
- ---------------------------------------------------------------
Compuware Corp.(a) 31,800 1,200,450
- ---------------------------------------------------------------
Fiserv, Inc.(a) 17,100 645,525
- ---------------------------------------------------------------
Microsoft Corp.(a) 11,000 1,336,500
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Parametric Technology Co.(a) 9,300 $ 420,825
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 32,500 840,938
- ---------------------------------------------------------------
5,112,188
- ---------------------------------------------------------------
CONGLOMERATES-0.61%
Johnson Controls, Inc. 24,000 921,000
- ---------------------------------------------------------------
Tyco International Ltd. 10,000 610,000
- ---------------------------------------------------------------
U.S. Industries, Inc.(a) 12,700 458,788
- ---------------------------------------------------------------
1,989,788
- ---------------------------------------------------------------
COSMETICS & TOILETRIES-0.95%
Dial Corp. 62,000 961,000
- ---------------------------------------------------------------
McKesson Corp. 3,200 231,600
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 10,000 1,257,500
- ---------------------------------------------------------------
Warner-Lambert Co. 6,500 637,000
- ---------------------------------------------------------------
3,087,100
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.72%
Symbol Technologies, Inc. 18,000 582,750
- ---------------------------------------------------------------
Teradyne, Inc.(a) 26,000 851,500
- ---------------------------------------------------------------
Waters Corp.(a) 30,000 888,750
- ---------------------------------------------------------------
2,323,000
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.49%
Franklin Resources, Inc. 7,500 443,437
- ---------------------------------------------------------------
T. Rowe Price Associates 24,500 1,133,125
- ---------------------------------------------------------------
1,576,562
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.47%
Federal Home Loan Mortgage Corp. 38,800 1,236,750
- ---------------------------------------------------------------
Finova Group, Inc. 5,400 370,575
- ---------------------------------------------------------------
Green Tree Financial Corp. 30,000 888,750
- ---------------------------------------------------------------
Money Store, Inc. (The) 31,000 670,375
- ---------------------------------------------------------------
Student Loan Marketing
Association 13,500 1,596,375
- ---------------------------------------------------------------
SunAmerica, Inc. 300 13,800
- ---------------------------------------------------------------
4,776,625
- ---------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.88%
ContiFinancial Corp.(a) 14,100 405,375
- ---------------------------------------------------------------
Great Western Financial Corp. 31,000 1,302,000
- ---------------------------------------------------------------
H.F. Ahmanson & Co. 30,000 1,143,750
- ---------------------------------------------------------------
2,851,125
- ---------------------------------------------------------------
FOOD/PROCESSING-0.12%
ConAgra, Inc. 6,900 397,613
- ---------------------------------------------------------------
FUNERAL SERVICES-0.37%
Service Corp. International 35,000 1,198,750
- ---------------------------------------------------------------
</TABLE>
FS-16
<PAGE> 157
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOTELS/MOTELS-0.29%
HFS, Inc.(a) 16,000 $ 948,000
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.84%
Conseco Inc. 24,000 993,000
- ---------------------------------------------------------------
Equitable of Iowa Cos. 21,300 1,041,038
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A(a) 26,400 699,600
- ---------------------------------------------------------------
2,733,638
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.77%
American International Group,
Inc. 3,900 501,150
- ---------------------------------------------------------------
ITT Hartford Group, Inc. 11,000 819,500
- ---------------------------------------------------------------
Travelers Group, Inc. 21,066 1,166,530
- ---------------------------------------------------------------
2,487,180
- ---------------------------------------------------------------
LEISURE & RECREATION-0.15%
Walt Disney Co. (The) 6,000 492,000
- ---------------------------------------------------------------
MACHINERY (HEAVY)-0.27%
Caterpillar Inc. 10,000 890,000
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.34%
Thermo Electron Corp.(a) 32,000 1,104,000
- ---------------------------------------------------------------
MEDICAL (DRUGS)-2.38%
Abbott Laboratories 8,000 488,000
- ---------------------------------------------------------------
American Home Products Corp. 18,000 1,192,500
- ---------------------------------------------------------------
AmeriSource Health Corp.-Class
A(a) 22,000 981,750
- ---------------------------------------------------------------
Cardinal Health, Inc. 12,650 673,612
- ---------------------------------------------------------------
Johnson & Johnson 14,100 863,625
- ---------------------------------------------------------------
Merck & Co., Inc. 8,000 724,000
- ---------------------------------------------------------------
Pfizer, Inc. 12,000 1,152,000
- ---------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 6,000 432,750
- ---------------------------------------------------------------
Schering-Plough Corp. 5,400 432,000
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 21,900 782,925
- ---------------------------------------------------------------
7,723,162
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.15%
Columbia/HCA Healthcare Corp. 15,000 525,000
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(a) 50,000 987,500
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 33,500 1,042,688
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 16,900 439,400
- ---------------------------------------------------------------
United Healthcare Corp. 15,500 753,688
- ---------------------------------------------------------------
3,748,276
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.41%
Baxter International Inc. 25,000 1,196,875
- ---------------------------------------------------------------
Becton, Dickinson & Co. 22,000 1,012,000
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 7,500 361,875
- ---------------------------------------------------------------
DePuy, Inc.(a) 8,700 182,700
- ---------------------------------------------------------------
Stryker Corp. 22,000 723,250
- ---------------------------------------------------------------
Sybron International Corp.(a) 12,700 422,275
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL INSTRUMENTS/PRODUCTS-(CONTINUED)
US Surgical Corp. 20,000 $ 685,000
- ---------------------------------------------------------------
4,583,975
- ---------------------------------------------------------------
OFFICE AUTOMATION-0.30%
Xerox Corp. 16,000 984,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING)-0.12%
Reading & Bates Corp.(a) 17,000 380,375
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-0.94%
Exxon Corp. 22,000 1,245,750
- ---------------------------------------------------------------
Halliburton Co. 14,000 988,750
- ---------------------------------------------------------------
Louisiana Land & Exploration Co. 12,200 610,000
- ---------------------------------------------------------------
Unocal Corp. 5,200 198,250
- ---------------------------------------------------------------
3,042,750
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.98%
Baker Hughes, Inc. 19,000 655,500
- ---------------------------------------------------------------
Coastal Corp. 16,500 783,750
- ---------------------------------------------------------------
Rowan Companies, Inc.(a) 25,000 450,000
- ---------------------------------------------------------------
Schlumberger Ltd. 4,300 476,225
- ---------------------------------------------------------------
Tidewater, Inc. 20,000 802,500
- ---------------------------------------------------------------
3,167,975
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.10%
Kimberly-Clark Corp. 6,200 317,750
- ---------------------------------------------------------------
POLLUTION CONTROL-0.23%
USA Waste Services, Inc.(a) 23,000 753,250
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.84%
American Stores Co. 13,000 591,500
- ---------------------------------------------------------------
Kroger Co.(a) 23,600 649,000
- ---------------------------------------------------------------
Rite Aid Corp. 19,000 874,000
- ---------------------------------------------------------------
Safeway, Inc.(a) 13,500 602,438
- ---------------------------------------------------------------
2,716,938
- ---------------------------------------------------------------
RETAIL (STORES)-1.88%
Bed Bath & Beyond, Inc.(a) 30,000 821,250
- ---------------------------------------------------------------
Blyth Industries, Inc.(a) 30,000 1,185,000
- ---------------------------------------------------------------
CVS Corp. 25,000 1,240,625
- ---------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 22,500 734,063
- ---------------------------------------------------------------
TJX Companies, Inc. 21,500 1,015,875
- ---------------------------------------------------------------
Toys "R" Us, Inc.(a) 12,000 342,000
- ---------------------------------------------------------------
U.S. Office Products Co.(a) 30,000 765,000
- ---------------------------------------------------------------
6,103,813
- ---------------------------------------------------------------
SEMICONDUCTORS-1.85%
Advanced Micro Devices, Inc.(a) 21,800 926,500
- ---------------------------------------------------------------
Applied Materials, Inc.(a) 19,000 1,042,625
- ---------------------------------------------------------------
Intel Corp. 4,500 689,063
- ---------------------------------------------------------------
KLA Instruments Corp.(a) 26,000 1,157,000
- ---------------------------------------------------------------
</TABLE>
F-17
<PAGE> 158
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS-(CONTINUED)
Micron Technology, Inc. 25,000 $ 881,250
- ---------------------------------------------------------------
Texas Instruments, Inc. 14,500 1,294,125
- ---------------------------------------------------------------
5,990,563
- ---------------------------------------------------------------
TELECOMMUNICATIONS-1.23%
ADC Telecommunications, Inc.(a) 15,200 397,100
- ---------------------------------------------------------------
Andrew Corp.(a) 9,750 241,313
- ---------------------------------------------------------------
Lucent Technologies, Inc. 18,500 1,093,813
- ---------------------------------------------------------------
PairGain Technologies, Inc.(a) 25,000 650,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 16,000 638,000
- ---------------------------------------------------------------
WorldCom, Inc.(a) 40,730 977,520
- ---------------------------------------------------------------
3,997,746
- ---------------------------------------------------------------
TEXTILES-0.04%
Fruit of The Loom, Inc.-Class A(a) 4,000 144,000
- ---------------------------------------------------------------
TOBACCO-0.81%
Philip Morris Companies, Inc. 21,000 826,875
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 30,000 892,500
- ---------------------------------------------------------------
Universal Corp. 32,000 896,000
- ---------------------------------------------------------------
2,615,375
- ---------------------------------------------------------------
Total Domestic Common Stocks 92,366,256
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-67.77%
ARGENTINA-1.13%
Banco de Galicia y Buenos Aires S.A.
de C.V.-ADR (Banking) 45,609 1,109,581
- ---------------------------------------------------------------
Perez Companc S.A.-Class B
(Oil & Gas-Services) 93,000 754,305
- ---------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Oil & Gas-Services) 65,600 1,812,200
- ---------------------------------------------------------------
3,676,086
- ---------------------------------------------------------------
AUSTRALIA-2.91%
Boral Ltd.
(Building Materials) 323,000 952,148
- ---------------------------------------------------------------
Coca-Cola Amatil Ltd.
(Consumer Non-Durables) 77,727 888,560
- ---------------------------------------------------------------
National Australia Bank Ltd.,
$1.97 Conv. Pfd., (Banking)(b) 42,500 1,126,250
- ---------------------------------------------------------------
National Australia Bank Ltd.
(Banking) 61,000 834,867
- ---------------------------------------------------------------
National Mutual Holdings Ltd.(a)
(Insurance-Multi-Line Property) 600,000 889,028
- ---------------------------------------------------------------
QBE Insurance Group Ltd.
(Insurance-Multi-Line Property) 181,125 1,035,363
- ---------------------------------------------------------------
QNI Ltd.
(Metals-Miscellaneous) 882,700 1,638,326
- ---------------------------------------------------------------
WMC Ltd.
(Metals-Miscellaneous) 350,000 2,074,398
- ---------------------------------------------------------------
9,438,940
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
AUSTRIA-0.67%
OMV A.G.
(Oil & Gas-Integrated) 9,400 $ 1,026,226
- ---------------------------------------------------------------
VA Technologie A.G.
(Engineering & Construction) 7,400 1,149,923
- ---------------------------------------------------------------
2,176,149
- ---------------------------------------------------------------
BELGIUM-1.17%
Barco Industries(a)
(Electronic
Components/Miscellaneous) 5,700 970,993
- ---------------------------------------------------------------
COLRUYT S.A.
(Retail-Food & Drug) 1,100 455,385
- ---------------------------------------------------------------
Delhaize-Le Lion, S.A.
(Retail-Food & Drug) 18,500 928,881
- ---------------------------------------------------------------
UCB S.A.
(Medical-Drugs) 520 1,426,909
- ---------------------------------------------------------------
3,782,168
- ---------------------------------------------------------------
CANADA-2.20%
Bank of Montreal
(Banking-Money Center) 20,500 743,987
- ---------------------------------------------------------------
Canadian National Railway Co.
(Railroads) 28,000 1,078,000
- ---------------------------------------------------------------
Canadian Natural Resources
Ltd.(a)
(Oil & Gas-Exploration &
Production) 48,000 1,144,166
- ---------------------------------------------------------------
Canadian Pacific, Ltd.
(Transportation) 20,000 487,500
- ---------------------------------------------------------------
Newbridge Networks Corp.(a)
(Computer Networking) 26,000 825,500
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 7,500 544,687
- ---------------------------------------------------------------
Philip Environmental, Inc.(a)
(Pollution Control) 65,000 1,023,750
- ---------------------------------------------------------------
Suncor, Inc.
(Oil & Gas-Exploration &
Production) 28,000 1,282,749
- ---------------------------------------------------------------
7,130,339
- ---------------------------------------------------------------
CHILE-0.31%
Cia. de Telecomunicaciones de
Chile S.A.-ADR
(Telephone) 30,600 990,675
- ---------------------------------------------------------------
DENMARK-0.91%
Novo Nordisk A/S-Class B
(Medical-Drugs) 30,000 2,967,818
- ---------------------------------------------------------------
FINLAND-0.26%
Nokia Oy A.B.-Class A
(Telecommunications) 13,800 853,146
- ---------------------------------------------------------------
FRANCE-8.35%
Alcatel Alsthom
(Telecommunications) 27,400 3,046,792
- ---------------------------------------------------------------
AXA S.A.
(Insurance-Life & Health) 11,250 692,174
- ---------------------------------------------------------------
</TABLE>
FS-18
<PAGE> 159
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Cap Gemini Sogeti S.A.
(Computer Software/Services) 27,000 $ 1,635,312
- ---------------------------------------------------------------
Carrefour Supermarche S.A.
(Retail-Food & Drug) 1,250 780,433
- ---------------------------------------------------------------
Cetelem
(Finance-Consumer Credit) 4,200 489,334
- ---------------------------------------------------------------
Compagnie Francaise d'Etudes et
de Construction Technip
(Engineering & Construction) 13,000 1,374,283
- ---------------------------------------------------------------
Compagnie Generale des Eaux
(Water Supply) 15,100 2,103,367
- ---------------------------------------------------------------
Elf Aquitaine S.A.
(Oil & Gas-Services) 13,500 1,309,175
- ---------------------------------------------------------------
Essilor International
(Medical Instruments/Products) 2,200 606,117
- ---------------------------------------------------------------
Etablissements Economiques du
Casino Guichard-Perrachon
(Retail-Food & Drug) 33,000 1,536,777
- ---------------------------------------------------------------
Lafarge S.A.
(Building Materials) 11,500 754,253
- ---------------------------------------------------------------
Michelin-Class B
(Automobile/Truck Parts &
Tires) 23,500 1,313,004
- ---------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-Stores) 2,900 1,219,824
- ---------------------------------------------------------------
Promodes
(Retail-Stores) 4,800 1,619,327
- ---------------------------------------------------------------
Rexel S.A.
(Electronic
Components/Miscellaneous) 2,600 692,710
- ---------------------------------------------------------------
Rhone-Poulenc-Class A
(Chemicals) 46,500 1,563,942
- ---------------------------------------------------------------
Schneider S.A.
(Electronic
Components/Miscellaneous) 5,500 310,032
- ---------------------------------------------------------------
Sidel, S.A.
(Machinery-Miscellaneous) 9,800 703,874
- ---------------------------------------------------------------
Societe BIC S.A.
(Office Products) 16,100 2,551,615
- ---------------------------------------------------------------
Sodexho S.A.
(Business Services) 1,100 505,097
- ---------------------------------------------------------------
Total S.A.-Class B
(Oil & Gas-Exploration &
Production) 13,100 1,086,336
- ---------------------------------------------------------------
Valeo S.A.
(Automobile/Truck Parts &
Tires) 19,400 1,196,608
- ---------------------------------------------------------------
27,090,386
- ---------------------------------------------------------------
GERMANY-3.66%
Adidas A.G.
(Shoes & Related Apparel) 16,350 1,704,108
- ---------------------------------------------------------------
Altana A.G.
(Chemicals) 1,850 1,431,459
- ---------------------------------------------------------------
Commerzbank A.G.
(Banking-Money Center) 44,000 1,180,159
- ---------------------------------------------------------------
Continental A.G.
(Automobile/Truck Parts &
Tires) 29,600 651,207
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY-(CONTINUED)
Deutsche Bank A.G.
(Banking) 29,000 $ 1,530,546
- ---------------------------------------------------------------
Dresdner Bank A.G.
(Banking) 36,000 1,151,634
- ---------------------------------------------------------------
SAP A.G.-Pfd.
(Computer Software/Services) 4,600 847,061
- ---------------------------------------------------------------
SAP A.G.
(Computer Software/Services) 4,600 837,499
- ---------------------------------------------------------------
Schering A.G.
(Medical-Drugs) 8,000 766,832
- ---------------------------------------------------------------
SGL Carbon A.G.
(Metals-Miscellaneous) 6,000 836,702
- ---------------------------------------------------------------
VEBA A.G.
(Electric Power) 18,000 927,128
- ---------------------------------------------------------------
11,864,335
- ---------------------------------------------------------------
HONG KONG-4.94%
Asia Satellite Telecommunications
Holdings Ltd.-ADR(a)
(Telecommunications) 24,500 630,875
- ---------------------------------------------------------------
Asia Satellite Telecommunications
Holdings Ltd.
(Telecommunications) 232,000 588,498
- ---------------------------------------------------------------
Cheung Kong (Holdings) Ltd.
(Real Estate) 267,000 2,343,768
- ---------------------------------------------------------------
Cosco Pacific Ltd.
(Transportation-Miscellaneous) 1,560,000 2,184,987
- ---------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banking) 266,000 1,263,642
- ---------------------------------------------------------------
First Pacific Company Ltd.
(Conglomerates) 1,323,000 1,579,778
- ---------------------------------------------------------------
Hang Seng Bank Ltd.
(Banking) 114,500 1,289,631
- ---------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
(Electric Power) 746,640 1,185,525
- ---------------------------------------------------------------
HSBC Holdings PLC
(Banking) 63,400 1,604,131
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Conglomerates) 169,000 1,254,437
- ---------------------------------------------------------------
New World Infrastructure Ltd.(a)
(Building Materials) 339,800 960,643
- ---------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Real Estate) 105,600 1,145,085
- ---------------------------------------------------------------
16,031,000
- ---------------------------------------------------------------
INDONESIA-0.72%
PT Bank Internasional Indonesia
(Banking) 2,566,684 1,848,435
- ---------------------------------------------------------------
PT Indosat
(Telcommunications) 84,500 232,984
- ---------------------------------------------------------------
PT Indosat-ADR
(Telecommunications) 9,050 248,875
- ---------------------------------------------------------------
2,330,294
- ---------------------------------------------------------------
</TABLE>
FS-19
<PAGE> 160
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
IRELAND-0.10%
Elan Corp. PLC-ADR(a)
(Medical-Drugs) 9,200 $ 312,800
- ---------------------------------------------------------------
ISRAEL-0.41%
Teva Pharmaceutical Industries
Ltd.-ADR
(Medical-Drugs) 26,500 1,344,875
- ---------------------------------------------------------------
ITALY-2.66%
Credito Italiano S.p.A.
(Banking) 1,040,000 1,458,402
- ---------------------------------------------------------------
Edison S.p.A.
(Electric Power) 232,000 1,229,122
- ---------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A.
(Oil & Gas-Exploration &
Production) 290,000 1,476,274
- ---------------------------------------------------------------
Istituto Mobiliare Italiano
S.p.A.
(Banking) 138,000 1,173,041
- ---------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications) 460,000 1,442,995
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 700,000 1,853,257
- ---------------------------------------------------------------
8,633,091
- ---------------------------------------------------------------
JAPAN-9.61%
Advantest Corp.
(Semiconductors) 17,930 995,836
- ---------------------------------------------------------------
Bridgestone Corp.
(Automobile/Truck Parts & Tires) 82,000 1,744,200
- ---------------------------------------------------------------
Canon, Inc.
(Office Automation) 97,000 2,300,154
- ---------------------------------------------------------------
DDI Corp.
(Telecommunications) 262 1,739,992
- ---------------------------------------------------------------
Fuji Photo Film Co.
(Electronic
Components/Miscellaneous) 61,000 2,330,720
- ---------------------------------------------------------------
Honda Motor Co., Ltd.
(Automobile-Manufacturers) 73,000 2,265,884
- ---------------------------------------------------------------
Ibiden Co., Ltd.
(Building Materials) 106,000 1,394,572
- ---------------------------------------------------------------
JUSCO Co.
(Retail-Stores) 40,000 1,228,975
- ---------------------------------------------------------------
Matsushita Electric Industrial
Co. Ltd.
(Electronic
Components\Miscellaneous) 61,000 975,539
- ---------------------------------------------------------------
Nippon Telegraph & Telephone Corp.
(Telecommunications) 250 1,762,713
- ---------------------------------------------------------------
Nippon Television Network
(Advertising/Broadcasting) 2,050 604,010
- ---------------------------------------------------------------
NSK Ltd.
(Metals) 230,000 1,387,954
- ---------------------------------------------------------------
NTT Data Communications Systems Co.
(Computer Software/Services) 470 1,373,695
- ---------------------------------------------------------------
Okuma Corp.(a)
(Machine Tools) 78,000 614,488
- ---------------------------------------------------------------
Ricoh Corp. Ltd.
(Office Automation) 124,000 1,475,086
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
SMC Corp.
(Machine-Miscellaneous) 6,800 $ 498,208
- ---------------------------------------------------------------
Sony Corp.
(Electronic
Components/Miscellaneous) 27,000 1,965,415
- ---------------------------------------------------------------
TDK Corp.
(Electronic
Components/Miscellaneous) 31,000 2,234,608
- ---------------------------------------------------------------
Tokyo Electron Ltd.
(Electronic
Components/Miscellaneous) 28,600 1,104,030
- ---------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers) 74,000 2,145,350
- ---------------------------------------------------------------
Yamatake-Honeywell Co.
(Airlines) 71,000 1,057,155
- ---------------------------------------------------------------
31,198,584
- ---------------------------------------------------------------
MALAYSIA-0.71%
Commerce Asset Holdings Berhad
(Finance-Asset Management) 93,000 555,600
- ---------------------------------------------------------------
Edaran Otomobil Nasional Berhad
(Automobile-Manufacturers) 70,000 660,746
- ---------------------------------------------------------------
Malayan Banking Berhad
(Banking) 109,000 1,085,311
- ---------------------------------------------------------------
2,301,657
- ---------------------------------------------------------------
MEXICO-1.75%
Coca-Cola Femsa S.A.-ADR
(Beverages-Soft Drinks) 24,200 843,975
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-Class B
(Beverages-Alcoholic) 261,050 1,225,340
- ---------------------------------------------------------------
Grupo Industrial Maseca S.A. de
C.V.-Class B
(Food/Processing) 807,600 790,679
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR(a)
(Advertising/Broadcasting) 36,900 853,313
- ---------------------------------------------------------------
Panamerican Beverages, Inc.-Class A
(Beverages-Soft Drinks) 68,000 1,972,000
- ---------------------------------------------------------------
5,685,307
- ---------------------------------------------------------------
NETHERLANDS-3.93%
DSM N.V.
(Chemicals-Specialty) 6,900 687,061
- ---------------------------------------------------------------
Elsevier N.V.
(Publishing) 23,000 368,321
- ---------------------------------------------------------------
Getronics N.V.
(Computer Software/Services) 41,000 1,241,595
- ---------------------------------------------------------------
Gucci Group N.V.-ADR -- New York
Registered Shares
(Textiles) 10,300 714,563
- ---------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food & Drugs) 10,200 696,299
- ---------------------------------------------------------------
Nutricia Verenigde Bedrijven N.V.
(Food/Processing) 11,750 1,782,734
- ---------------------------------------------------------------
Oce-Van Der Grinten N.V.
(Office Automation) 7,000 846,841
- ---------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 161
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Philips Electronics N.V.
(Electronic
Components/Miscellaneous) 60,500 $ 3,158,061
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.
(Oil & Gas-Services) 6,600 1,179,551
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.-ADR-New
York Shares
(Oil & Gas-Services) 6,000 1,081,500
- ---------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit
(Publishing) 15,500 320,613
- ---------------------------------------------------------------
Wolters Kluwer N.V.
(Publishing) 5,700 675,527
- ---------------------------------------------------------------
12,752,666
- ---------------------------------------------------------------
NORWAY-0.42%
Storebrand A.S.A.
(Insurance-Multi-Line Property)(a) 225,000 1,374,417
- ---------------------------------------------------------------
PHILIPPINES-0.97%
C & P Homes, Inc.
(Home Building) 1,280,000 485,400
- ---------------------------------------------------------------
Filinvest Land Inc.(a)
(Real Estate) 2,069,700 486,619
- ---------------------------------------------------------------
Metro Pacific Corp.
(Conglomerates) 2,309,000 534,126
- ---------------------------------------------------------------
Metropolitan Bank & Trust Co.
(Banking) 29,835 610,956
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co.
(Telecommunications) 8,230 469,706
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co.-ADR
(Telecommunications) 8,900 496,175
- ---------------------------------------------------------------
Southeast Asia Cement Holdings,
Inc.(a)
(Building Materials) 1,593,000 73,700
- ---------------------------------------------------------------
3,156,682
- ---------------------------------------------------------------
PORTUGAL-0.48%
Portugal Telecom S.A.(a)
(Telecommunications) 42,000 1,547,368
- ---------------------------------------------------------------
SINGAPORE-0.99%
City Developments Ltd.
(Real Estate) 129,000 1,042,694
- ---------------------------------------------------------------
DBS Land Ltd.
(Real Estate) 416,000 1,344,995
- ---------------------------------------------------------------
Overseas Union Bank Ltd.
(Banking) 125,000 820,380
- ---------------------------------------------------------------
3,208,069
- ---------------------------------------------------------------
SOUTH AFRICA-0.32%
Sasol Ltd.
(Oil & Gas-Exploration &
Production) 80,100 1,026,808
- ---------------------------------------------------------------
SPAIN-2.58%
Banco Bilbao Vizcaya, S.A.
(Banking) 24,500 1,648,918
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN-(CONTINUED)
Banco Popular Espanol S.A.
(Banking) 8,000 $ 1,696,248
- ---------------------------------------------------------------
Empresa Nacional de Electricidad, S.A.
(Electric Power) 18,300 1,279,204
- ---------------------------------------------------------------
Gas Natural SDG, S.A.-Class E
(Gas Distribution) 3,300 700,831
- ---------------------------------------------------------------
Iberdrola S.A.
(Electric Power) 60,000 677,131
- ---------------------------------------------------------------
Telefonica de Espana
(Telecommunications) 93,000 2,382,169
- ---------------------------------------------------------------
8,384,501
- ---------------------------------------------------------------
SWEDEN-1.08%
Hennes & Mauritz A.B.-B Shares
(Retail-Stores) 10,300 1,490,242
- ---------------------------------------------------------------
Securitas A.B.-Class B
(Security & Safety Services) 18,300 440,896
- ---------------------------------------------------------------
Sparbanken Sverige A.B.-Class A
(Banking) 46,000 820,936
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR
(Telecommunications) 22,000 739,750
- ---------------------------------------------------------------
3,491,824
- ---------------------------------------------------------------
SWITZERLAND-2.49%
ABB A.G.(a)
(Engineering & Construction) 1,280 1,549,963
- ---------------------------------------------------------------
Adecco S.A.
(Business Services) 5,000 1,668,815
- ---------------------------------------------------------------
Ciba Specialty Chemicals A.G.(a)
(Chemicals-Specialty) 1,393 120,013
- ---------------------------------------------------------------
Clariant A.G.
(Chemicals-Specialty) 1,650 944,712
- ---------------------------------------------------------------
Nestle S.A.
(Food/Processing) 680 825,724
- ---------------------------------------------------------------
Novartis A.G.
(Medical-Drugs) 2,268 2,987,895
- ---------------------------------------------------------------
8,097,122
- ---------------------------------------------------------------
THAILAND-0.14%
Bank of Ayudhya Public Co., Ltd.
(Banking) 11,400 29,239
- ---------------------------------------------------------------
Krung Thai Bank Public Co. Ltd.
(Banking) 230,000 288,353
- ---------------------------------------------------------------
Siam Commercial Bank PLC
(Banking) 21,900 128,269
- ---------------------------------------------------------------
445,861
- ---------------------------------------------------------------
UNITED KINGDOM-11.90%
Airtours PLC
(Leisure & Recreation) 71,900 1,068,595
- ---------------------------------------------------------------
B.A.T. Industries PLC
(Conglomerates) 174,000 1,469,271
- ---------------------------------------------------------------
Bass PLC
(Beverages-Alcoholic) 24,000 309,822
- ---------------------------------------------------------------
</TABLE>
FS-21
<PAGE> 162
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
British Aerospace PLC
(Aerospace/Defense) 64,000 $ 1,359,870
- ---------------------------------------------------------------
British Petroleum Co. PLC
(Oil & Gas-Services) 62,000 711,442
- ---------------------------------------------------------------
Burton Group PLC
(Retail-Stores) 473,000 1,169,084
- ---------------------------------------------------------------
Caradon PLC
(Building Materials) 136,000 547,747
- ---------------------------------------------------------------
Compass Group PLC
(Restaurants) 59,200 649,751
- ---------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 16,000 489,000
- ---------------------------------------------------------------
Dixons Group PLC
(Retail-Stores) 164,000 1,344,959
- ---------------------------------------------------------------
EMAP PLC
(Publishing) 51,000 635,640
- ---------------------------------------------------------------
FKI PLC
(Conglomerates) 155,000 457,212
- ---------------------------------------------------------------
General Electric Co. PLC
(Electronic
Components/Miscellaneous) 160,000 951,702
- ---------------------------------------------------------------
GKN PLC
(Automobile/Truck Parts &
Tires) 39,000 601,118
- ---------------------------------------------------------------
Granada Group PLC
(Leisure & Recreation) 130,000 1,875,203
- ---------------------------------------------------------------
Guinness PLC
(Beverages-Alcoholic) 195,000 1,611,831
- ---------------------------------------------------------------
Hays PLC
(Business Services) 178,000 1,576,613
- ---------------------------------------------------------------
Kingfisher PLC
(Retail-Stores) 140,000 1,515,721
- ---------------------------------------------------------------
Ladbroke Group PLC
(Hotels/Motels) 382,000 1,433,274
- ---------------------------------------------------------------
Lloyds TSB Group PLC
(Finance-Savings & Loans) 96,000 877,536
- ---------------------------------------------------------------
LucasVarity PLC
(Automobile/Truck Parts &
Tires) 484,000 1,466,904
- ---------------------------------------------------------------
Marks & Spencer PLC
(Retail-Stores) 110,000 873,582
- ---------------------------------------------------------------
Medeva PLC
(Medical-Drugs) 67,200 326,742
- ---------------------------------------------------------------
Next PLC
(Retail-Stores) 77,000 813,055
- ---------------------------------------------------------------
Orange PLC(a)
(Telecommunications) 215,000 752,674
- ---------------------------------------------------------------
Peninsular & Oriental Steam Navigation
Co. (The)
(Transportation-Miscellaneous) 6,550 63,748
- ---------------------------------------------------------------
Provident Financial PLC
(Finance-Consumer Credit) 137,400 1,271,562
- ---------------------------------------------------------------
Railtrack Group PLC
(Railroads) 235,000 1,772,974
- ---------------------------------------------------------------
Rentokil Initial PLC
(Business Services) 239,000 1,566,864
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Scottish & Newcastle PLC
(Beverages-Alcoholic) 60,000 $ 647,650
- ---------------------------------------------------------------
Siebe PLC
(Electronic
Components/Miscellaneous) 75,000 1,109,806
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Medical-Drugs) 15,000 1,209,375
- ---------------------------------------------------------------
Smiths Industries PLC
(Electronics/Defense) 30,000 367,341
- ---------------------------------------------------------------
Standard Chartered PLC
(Finance-Asset Management) 41,500 627,881
- ---------------------------------------------------------------
Tarmac PLC
(Building Materials) 840,000 1,681,361
- ---------------------------------------------------------------
Unilever PLC
(Consumer Non-Durables) 56,000 1,472,609
- ---------------------------------------------------------------
Vodafone Group PLC
(Telecommunications) 150,000 669,773
- ---------------------------------------------------------------
WPP Group PLC
(Advertising/Broadcasting) 316,000 1,293,193
- ---------------------------------------------------------------
38,642,485
- ---------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 219,935,453
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-0.25%
FINANCE (CONSUMER CREDIT)-0.10%
SunAmerica, Inc., $3.10 Conv.
Pfd. 3,300 336,600
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.15%
MGIC Investment Corp., $3.12
Conv. Pfd. 7,000 489,125
- ---------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 825,725
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT(c)
<S> <C> <C>
DOMESTIC CONVERTIBLE NOTES-0.30%
SEMICONDUCTORS-0.30%
Altera Corp.,
Conv. Sub. Notes
5.75%, 06/15/02(d)
(Acquired 02/10/97; cost
$869,363) $ 485,000 983,517
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES-0.68%
GERMANY-0.51%
Volkswagen International Finance N.V.,
Conv. Gtd. Notes,
(Automobile-Manufacturers)
3.00%, 01/24/02 1,330,000 1,652,525
- ---------------------------------------------------------------
HONG KONG-0.07%
New World Infrastructure Ltd.,
Conv. Bonds, (Banking)
5.00%, 07/15/01(d)
(Acquired 04/10/97-04/11/97;
cost $234,938) 200,000 227,500
- ---------------------------------------------------------------
</TABLE>
FS-22
<PAGE> 163
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(c) VALUE
<S> <C> <C>
PHILIPPINES-0.10%
Metropolitan Bank & Trust
International Finance Ltd.,
Conv. Deb., (Banking)
2.75%, 09/10/00 $ 245,000 $ 313,600
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Foreign Bonds & Notes 2,193,625
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
FOREIGN BONDS & NOTES-0.80%
FRANCE-0.20%
AXA-UAP,
Conv. Sr. Deb., (Insurance-Life
& Health)
4.50%, 01/01/99 FRF 2,835,000 673,959
- ---------------------------------------------------------------
ITALY-0.40%
Pirelli S.p.A.,
Conv. Bonds, (Automobile/Truck
Parts & Tires)
5.00%, 12/31/98 ITL 1,591,686,200 1,287,535
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(c) VALUE
<S> <C> <C>
JAPAN-0.20%
Ricoh Co., Ltd.,
Conv. Bonds, (Office
Automation)
0.35%, 03/31/03 JPY 65,000,000 $ 641,116
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Foreign Bonds &
Notes 2,602,610
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-0.40%(e)
HSBC Securities, Inc., 5.05%,
05/01/97(f) $ 1,287,908 1,287,908
- ---------------------------------------------------------------
TOTAL INVESTMENT-98.66% 320,195,094
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.34% 4,334,512
- ---------------------------------------------------------------
NET ASSETS-100.00% $324,529,606
===============================================================
</TABLE>
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
GDR - Global Depository Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Issued as a unit. This unit also includes 42,500 warrants to exchange into
one ordinary share per warrant.
(c) Principal in U.S. Dollars unless otherwise indicated.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at April 30, 1997 was $1,211,017
which represented 0.37% of the Fund's net assets.
(e) 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% of the sales price of the
repurchase agreement. The investment in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$100,014,028. Collateralized by $96,950,000 U.S. Government obligations,
7.50% to 7.875% due 10/31/99 to 12/31/99 with an aggregate market value at
April 30, 1997 of $102,002,050.
See Notes to Financial Statements.
FS-23
<PAGE> 164
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$284,581,349) $ 320,195,094
- --------------------------------------------------------
Foreign currencies, at market value
(cost $1,669,554) 1,649,017
- --------------------------------------------------------
Receivables for:
Investments sold 5,054,287
- --------------------------------------------------------
Capital stock sold 1,447,389
- --------------------------------------------------------
Dividends and interest 815,224
- --------------------------------------------------------
Investment for deferred compensation
plan 7,578
- --------------------------------------------------------
Other assets 28,977
- --------------------------------------------------------
Total assets 329,197,566
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 3,504,253
- --------------------------------------------------------
Capital stock reacquired 496,621
- --------------------------------------------------------
Deferred compensation 7,578
- --------------------------------------------------------
Accrued advisory fees 218,517
- --------------------------------------------------------
Accrued administrative services fees 6,958
- --------------------------------------------------------
Accrued distribution fees 225,871
- --------------------------------------------------------
Accrued transfer agent fees 81,800
- --------------------------------------------------------
Accrued operating expenses 126,362
- --------------------------------------------------------
Total liabilities 4,667,960
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 324,529,606
========================================================
NET ASSETS:
Class A $ 148,010,453
========================================================
Class B $ 176,519,153
========================================================
CAPITAL STOCK, $.001 PAR VALUE PER
SHARE:
Class A:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 9,811,280
========================================================
Class B:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 11,856,382
========================================================
Class A:
Net asset value and redemption price
per share $ 15.09
========================================================
Offering price per share:
(Net asset value $15.09 divided by
95.25%) $ 15.84
========================================================
Class B:
Net asset value and offering price per
share $ 14.89
========================================================
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<S> <C>
INVESTMENT INCOME:
Dividends (net of $191,730 foreign
withholding tax) $ 1,692,020
- --------------------------------------------------------
Interest 178,493
- --------------------------------------------------------
Total investment income 1,870,513
- --------------------------------------------------------
EXPENSES:
Advisory fees 1,210,003
- --------------------------------------------------------
Administrative services fees 42,968
- --------------------------------------------------------
Directors' fees 3,826
- --------------------------------------------------------
Distribution fees -- Class A 336,112
- --------------------------------------------------------
Distribution fees -- Class B 751,310
- --------------------------------------------------------
Custodian fees 168,387
- --------------------------------------------------------
Transfer agent fees -- Class A 147,965
- --------------------------------------------------------
Transfer agent fees -- Class B 209,315
- --------------------------------------------------------
Other 118,820
- --------------------------------------------------------
Total expenses 2,988,706
- --------------------------------------------------------
Less: Expenses paid indirectly (2,363)
- --------------------------------------------------------
Net expenses 2,986,343
- --------------------------------------------------------
Net investment income (loss) (1,115,830)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 3,518,326
- --------------------------------------------------------
Foreign currencies (160,717)
- --------------------------------------------------------
3,357,609
- --------------------------------------------------------
Net unrealized appreciation of:
Investment securities 12,527,245
- --------------------------------------------------------
Foreign currencies 36,629
- --------------------------------------------------------
12,563,874
- --------------------------------------------------------
Net gain on investment securities and
foreign currencies 15,921,483
- --------------------------------------------------------
Net increase in net assets resulting from
operations $14,805,653
========================================================
</TABLE>
See Notes to Financial Statements.
FS-24
<PAGE> 165
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND THE YEAR ENDED OCTOBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,115,830) $ (548,400)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities, foreign currencies and futures contracts 3,357,609 (604,088)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 12,563,874 20,032,132
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 14,805,653 18,879,644
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (516,173)
- -------------------------------------------------------------------------------------------
Class B -- (413,018)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 25,693,399 81,693,730
- -------------------------------------------------------------------------------------------
Class B 47,211,382 96,263,897
- -------------------------------------------------------------------------------------------
Net increase in net assets 87,710,434 195,908,080
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 236,819,172 40,911,092
- -------------------------------------------------------------------------------------------
End of period $324,529,606 $ 236,819,172
===========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $287,357,242 $ 214,452,461
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (1,108,292) 7,538
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities, foreign currencies and futures
contracts 2,695,402 (662,207)
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 35,585,254 23,021,380
- -------------------------------------------------------------------------------------------
$324,529,606 $ 236,819,172
===========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Growth Fund (the "Fund") is an investment 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 Global Growth Fund, AIM Global Aggressive Growth Fund,
AIM Global Income Fund and AIM International Equity Fund. The Fund currently
offers two different classes of shares: Class A shares and 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 Fund's investment objective is to provide long-term growth of capital. The
Fund seeks to achieve its objectives by investing in a portfolio of global
equity securities of selected companies which are considered by AIM to have
strong earnings momentum.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at the last sales price on the exchange where
the security is principally traded or, lacking any sales, at the mean between
the closing bid and asked prices on the day of valuation. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Securities traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) are valued at the mean between the closing bid and asked prices on
valuation date. Securities reported on the NASDAQ National Market System are
valued at the last sales price on the valuation date or, absent a
FS-25
<PAGE> 166
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by an independent
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
corporate and maturity date. Securities for which market quotations are
either not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
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 currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distribu-
tions--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. The Fund has a capital loss carryforward of
$630,387 (which may be carried forward to offset future taxable capital
gains, if any) which expires, if not previously utilized, in the year 2004.
F. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
G. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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 0.85% of
the first $1 billion of the Fund's average daily net assets, plus 0.80% of the
Fund's average daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $42,968 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the six months ended April 30, 1997, AFS was paid
$209,646 for such services.
The Fund received reductions in transfer agency fees of $2,234 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $129 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $2,363 during the six months ended
April 30, 1997.
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
distribution plans pursuant to
FS-26
<PAGE> 167
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, pays
AIM Distributors an annual rate of 0.50% 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. Of the
total compensation payable, a service fee of 0.25% is paid 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 Fund,
pursuant to the Class B Plan, pays 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 pays 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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more designees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) any contingent deferred sales charges received by
AIM Distributors related to the Class B shares. During the six months ended
April 30, 1997, the Class A shares and the Class B shares paid AIM Distributors
$336,112 and $751,310, respectively, as compensation under the Plans.
AIM Distributors received commissions of $166,163 from the sales of the Class
A shares of the Fund during the six months ended April 30, 1997. 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 six months
ended April 30, 1997, AIM Distributors received commissions of $18,107 in
contingent deferred sales charges imposed on redemptions of Fund shares. Certain
officers and directors of the Company are officers and directors of AIM, AFS and
AIM Distributors.
During the six months ended April 30, 1997, the Fund incurred legal fees of
$2,733 for services rendered by the law firm of Kramer, Levin, Naftalis &
Frankel as counsel to the Company's directors. A member of that firm is a
director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 1997, the Fund did not borrow under the
line of credit agreement. The funds which are party to the line of credit are
charged a commitment fee of 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1997 was
$192,660,508 and $120,261,274, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of April 30, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $43,030,878
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (7,429,856)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $35,601,022
=========================================================
</TABLE>
Cost of investments for tax purposes is $284,594,072.
FS-27
<PAGE> 168
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the six months ended
April 30, 1997 and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 2,689,114 $ 40,270,274 7,117,057 $ 94,636,553
- ------------------------------------------------------------ --------- ------------ ----------- ------------
Class B 3,790,488 56,209,738 7,683,810 101,786,913
- ------------------------------------------------------------ --------- ------------ ----------- ------------
Issued as reinvestment of distributions:
Class A -- -- 36,930 453,130
- ------------------------------------------------------------ --------- ------------ ----------- ------------
Class B -- -- 31,124 379,711
- ------------------------------------------------------------ --------- ------------ ----------- ------------
Reacquired:
Class A (975,862) (14,576,875) (983,830) (13,395,953)
- ------------------------------------------------------------ --------- ------------ ----------- ------------
Class B (607,226) (8,998,356) (441,521) (5,902,727)
- ------------------------------------------------------------ --------- ------------ ----------- ------------
4,896,514 $ 72,904,781 13,443,570 $177,957,627
============================================================ ========= ============ =========== ============
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share and a Class B share
outstanding during six months ended April 30, 1997, each of the years in the
two-year period ended October 31, 1996 and the period September 15, 1994 (date
operations commenced) through October 31, 1994.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, ---------------------------------
1997 1996 1995 1994
--------- --------- -------- --------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 14.20 $ 12.32 $ 10.23 $ 10.00
- ------------------------------------------------------------ -------- --------- -------- --------
Income from investment operations:
Net investment income (loss) (0.03) (0.01) (0.02) -
- ------------------------------------------------------------ -------- --------- -------- --------
Net gains on securities (both realized and unrealized) 0.92 2.11 2.11 0.23
- ------------------------------------------------------------ -------- --------- -------- --------
Total from investment operations 0.89 2.10 2.09 0.23
- ------------------------------------------------------------ -------- --------- -------- --------
Less distributions:
Dividends from net investment income - - (0.004) -
- ------------------------------------------------------------ -------- --------- -------- --------
Distributions from net realized capital gains - (0.22) - -
- ------------------------------------------------------------ -------- --------- -------- --------
Total distributions - (0.22) (0.004) -
- ------------------------------------------------------------ -------- --------- -------- --------
Net asset value, end of period $ 15.09 $ 14.20 $ 12.32 $ 10.23
============================================================ ======== ========= ======== ========
Total return(a) 6.27% 17.26% 20.48% 2.30%
============================================================ ======== ========= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $148,010 $ 114,971 $ 23,754 $ 3,093
============================================================ ======== ========= ======== ========
Ratio of expenses to average net assets(b) 1.81%(c)(d) 1.93% 2.12% 1.95%(e)
============================================================ ======== ========= ======== ========
Ratio of net investment income (loss) to average net
assets(f) (0.50)%(c) (0.13)% (0.28)% 0.10%(e)
============================================================ ======== ========= ======== ========
Portfolio turnover rate 43% 82% 79% 6%
============================================================ ======== ========= ======== ========
Average brokerage commission rate paid(g) $ 0.0427 $ 0.0234 N/A N/A
============================================================ ======== ========= ======== ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets prior to fee waivers and/or expense reimbursements were 1.94%,
2.98% and 5.67% (annualized) for the periods 1996-1994, respectively.
(c) Ratios are annualized and based on average net assets of $135,558,903.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) After fee waivers and expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.14)%, (1.14)% and (3.63)% (annualized) for the
periods 1996-1994, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
FS-28
<PAGE> 169
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, -------------------------------------
1997 1996 1995 1994
--------- --------- -------- --------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 14.05 $ 12.26 $ 10.22 $ 10.00
- ------------------------------------------------------------ --------- --------- -------- --------
Income from investment operations:
Net investment income (loss) (0.07) (0.05) (0.04) -
- ------------------------------------------------------------ --------- --------- -------- --------
Net gains on securities (both realized and unrealized) 0.91 2.06 2.08 0.22
- ------------------------------------------------------------ --------- --------- -------- --------
Total from investment operations 0.84 2.01 2.04 0.22
- ------------------------------------------------------------ --------- --------- -------- --------
Less distributions:
Distributions from net realized capital gains - (0.22) - -
- ------------------------------------------------------------ --------- --------- -------- --------
Total distributions - (0.22) - -
- ------------------------------------------------------------ --------- --------- -------- --------
Net asset value, end of period $ 14.89 $ 14.05 $ 12.26 $ 10.22
============================================================ ========= ========= ======== ========
Total return(a) 5.98% 16.60% 19.96% 2.20%
============================================================ ========= ========= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 176,519 $ 121,848 $ 17,157 $ 1,277
============================================================ ========= ========= ======== ========
Ratio of expenses to average net assets(b) 2.35%(c)(d) 2.48% 2.64% 2.51%(e)
============================================================ ========= ========= ======== ========
Ratio of net investment income (loss) to average net
assets(f) (1.04)%(c) (0.69)% (0.79)% (0.47)%(e)
============================================================ ========= ========= ======== ========
Portfolio turnover rate 43% 82% 79% 6%
============================================================ ========= ========= ======== ========
Average brokerage commission rate paid(g) $ 0.0427 $ 0.0234 N/A N/A
============================================================ ========= ========= ======== ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets prior to fee waivers and/or expense reimbursements were 2.49%,
3.38% and 6.20% (annualized) for the periods 1996-1994, respectively.
(c) Ratios are annualized and based on average net assets of $151,507,217.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) After fee waivers and expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.69)%, (1.54)% and (4.16)% (annualized) for the
periods 1996-1994, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
FS-29
<PAGE> 170
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ending October 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes For Against Abstentions
--------------- --------- ------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 130,433,380 0 3,798,959
Bruce L. Crockett........................................... 130,563,964 0 3,668,375
Owen Daly II................................................ 130,421,284 0 3,811,055
Carl Frischling............................................. 130,515,713 0 3,716,626
Robert H. Graham............................................ 130,587,498 0 3,644,841
John F. Kroeger............................................. 130,446,846 0 3,785,493
Lewis F. Pennock............................................ 130,506,142 0 3,726,197
Ian W. Robinson............................................. 130,446,093 0 3,786,246
Louis S. Sklar.............................................. 130,573,480 0 3,658,859
(2) Approval of new Investment Advisory Agreement............... 10,535,120 124,963 463,813
(3) Elimination of Fundamental Investment Policy................ 7,611,924 323,037 504,221
(4) KPMG Peat Marwick LLP....................................... 128,509,801 995,829 4,726,709
</TABLE>
FS-30
<PAGE> 171
AIM GLOBAL INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-46.26%
ADVERTISING/BROADCASTING-2.29%
Esat Holdings Ltd., Units,
12.50%, 02/01/07
(acquired 02/21/97-03/05/97;
cost $204,750)(b)(c)(d) $ 350,000 $ 199,062
- --------------------------------------------------------------
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 250,000 275,105
- --------------------------------------------------------------
SFX Broadcasting, Inc.,
Series B Sr. Sub. Notes, 10.75%,
05/15/06 200,000 210,000
- --------------------------------------------------------------
Time Warner, Inc.,
Notes, 8.18%, 08/15/07 200,000 204,972
- --------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 125,000 122,129
- --------------------------------------------------------------
United International Holdings, Inc.,
Sr. Sec. Disc. Notes, 12.85%,
11/15/99(e) 200,000 145,750
- --------------------------------------------------------------
1,157,018
- --------------------------------------------------------------
AIRLINES-2.37%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 230,000 254,295
- --------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 550,000 607,244
- --------------------------------------------------------------
United Air Lines, Inc.,
Pass Thru Certificates, 9.56%,
10/19/18 300,000 338,175
- --------------------------------------------------------------
1,199,714
- --------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-1.43%
Blue Bird Body Co.,
Series B Sr. Sub. Notes, 10.75%,
11/15/06 80,000 84,000
- --------------------------------------------------------------
CSK Auto Inc.,
Sr. Sub. Notes, 11.00%, 11/01/06
(acquired 10/23/96; cost $60,000)(b) 60,000 61,725
- --------------------------------------------------------------
Lear Seating,
Sr. Gtd. Sub. Notes, 11.25%,
07/15/00 570,000 579,263
- --------------------------------------------------------------
724,988
- --------------------------------------------------------------
BANKING-3.97%
Bankers Trust New York Corp.,
Gtd. Notes, 7.75%, 02/25/27 400,000 381,044
- --------------------------------------------------------------
Deutsche Bank Financial,
Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 720,375
- --------------------------------------------------------------
First Union Bancorp,
Sub. Deb., 7.50%, 04/15/35 200,000 205,122
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BANKING-(CONTINUED)
Royal Bank of Scotland PLC,
Yankee Sub. Notes, 6.375%,
02/01/11 $ 500,000 $ 451,235
- --------------------------------------------------------------
Sovereign Bancorp, Inc.,
Sub. Notes, 8.00%, 03/15/03 250,000 253,997
- --------------------------------------------------------------
2,011,773
- --------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-1.15%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.40%, 06/20/20(e) 3,113,000 579,827
- --------------------------------------------------------------
CABLE TELEVISION-2.94%
Comcast Cable Communications,
Notes, 8.50%, 05/01/27
(acquired 04/24/97; cost
$499,145)(b) 500,000 515,000
- --------------------------------------------------------------
Diamond Cable Communications PLC,
Sr. Yankee Disc. Notes, 10.75%,
02/15/07
(acquired 02/21/97; cost
$517,198)(b)(d) 870,000 522,000
- --------------------------------------------------------------
Fundy Cable Ltd.,
Sr. Yankee Sec. Second Priority
Notes, 11.00%, 11/15/05 30,000 31,350
- --------------------------------------------------------------
Kabelmedia Holdings
GmbH, Sr. Yankee Unsec. Disc. Notes,
13.625%, 08/01/06(d) 200,000 117,000
- --------------------------------------------------------------
Rifkin Acquisition Partners L.L.P.,
Sr. Sub. Notes, 11.125%, 01/15/06 40,000 41,000
- --------------------------------------------------------------
TeleWest Communications PLC,
Sr. Yankee Disc. Deb., 11.00%,
10/01/07(d) 50,000 34,000
- --------------------------------------------------------------
Viacom, Inc.,
Sr. Notes, 7.75%, 06/01/05 100,000 97,615
- --------------------------------------------------------------
Wireless One, Inc.,
Sr. Notes, 13.00%, 10/15/03 200,000 132,000
- --------------------------------------------------------------
1,489,965
- --------------------------------------------------------------
CHEMICALS-1.26%
BPC Holding Corp.,
Series B Sr. Notes, 12.50%, 06/15/06 100,000 104,500
- --------------------------------------------------------------
Crain Industries, Inc.,
Sr. Sub. Notes, 13.50%, 08/15/05 40,000 45,400
- --------------------------------------------------------------
LaRoche Industries, Inc.,
Sr. Sub. Notes, 13.00%, 08/15/04 100,000 109,500
- --------------------------------------------------------------
Polymer Group, Inc.,
Sr. Notes, 12.25%, 07/15/02 200,000 219,000
- --------------------------------------------------------------
</TABLE>
FS-31
<PAGE> 172
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CHEMICALS-(CONTINUED)
Sterling Chemicals, Inc.,
Sr. Unsec. Sub. Notes, 11.75%,
08/15/06 $ 150,000 $ 158,625
- --------------------------------------------------------------
637,025
- --------------------------------------------------------------
CONSUMER NON-DURABLES-0.21%
Hines Horticulture, Inc.,
Series B Sr. Gtd. Sub. Notes,
11.75%, 10/15/05 100,000 104,500
- --------------------------------------------------------------
CONTAINERS-2.38%
Ivex Holdings Corp.,
Series B Sr. Disc. Deb., 13.25%,
03/15/05(d) 500,000 414,375
- --------------------------------------------------------------
MVE Inc.,
Sr. Sec. Notes, 12.50%, 02/15/02 100,000 102,375
- --------------------------------------------------------------
National Fiberstock Corp.,
Series B Sr. Notes, 11.625%,
06/15/02 200,000 207,000
- --------------------------------------------------------------
Owens-Illinois, Inc.,
Sr. Sub Notes, 10.50%, 06/15/02 50,000 52,750
- --------------------------------------------------------------
Sr. Deb., 11.00%, 12/01/03 200,000 222,750
- --------------------------------------------------------------
Tekni-Plex Inc.,
Sr. Sub. Notes, 11.25%, 04/01/07
(acquired 04/01/97; cost
$200,000)(b) 200,000 206,120
- --------------------------------------------------------------
1,205,370
- --------------------------------------------------------------
ELECTRIC POWER-2.01%
AES China Generating Co.,
Sr. Yankee Unsec. Notes, 10.125%,
12/15/06 30,000 31,575
- --------------------------------------------------------------
El Paso Electric Co.,
Series D Sec. 1st Mortgage Bonds,
8.90%, 02/01/06 250,000 262,865
- --------------------------------------------------------------
Series E Sec. 1st Mortgage Bonds,
9.40%, 05/01/11 250,000 268,267
- --------------------------------------------------------------
Panda Funding Corp.,
Series A-1 Pooled Project Bonds,
11.625%, 08/20/12 199,591 206,577
- --------------------------------------------------------------
Panda Global Energy Co.,
Sr. Yankee Sec. Notes, 12.50%,
04/15/04 (acquired 04/11/97;
cost $242,954)(b) 260,000 248,300
- --------------------------------------------------------------
1,017,584
- --------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.59%
Electronic Retailing Systems
International, Inc., Units,
13.25%, 02/01/04 (acquired 01/21.97;
cost $298,685)(b)(d)(f) 440,000 299,200
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ENGINEERING & CONSTRUCTION-0.53%
MMI Products Inc.,
Sr. Sub. Notes, 11.25%, 04/15/07
(acquired 04/11/97; cost
$260,000)(b) $ 260,000 $ 269,100
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.57%
Associates Corp. of North America,
Series B Sr. Deb., 7.95%, 02/15/10 100,000 105,291
- --------------------------------------------------------------
Household Finance Corp.,
Notes, 7.125%, 09/01/05 700,000 691,187
- --------------------------------------------------------------
796,478
- --------------------------------------------------------------
FOOD/PROCESSING-1.79%
Chiquita Brands International, Inc.,
Sr. Unsec. Notes, 10.25%, 11/01/06 80,000 84,600
- --------------------------------------------------------------
ConAgra Inc.,
Sr. Unsec. Notes, 7.125%, 10/01/26 400,000 400,084
- --------------------------------------------------------------
Del Monte Corp.,
Sr. Sub. Notes, 12.25%, 04/15/07
(acquired 04/15/97;
cost $254,540)(b) 260,000 267,800
- --------------------------------------------------------------
International Home Foods, Inc.,
Sr. Gtd. Sub. Notes, 10.375%,
11/01/06 50,000 51,000
- --------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%, 08/01/03 100,000 103,625
- --------------------------------------------------------------
907,109
- --------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES-0.61%
Province of Manitoba,
Yankee Bonds, 7.75%, 07/17/16 300,000 309,297
- --------------------------------------------------------------
GAMING-0.89%
Coast Hotels & Casinos Inc.,
Series B Sec. 1st Mortgage Gtd.
Notes, 13.00%, 12/15/02 70,000 77,350
- --------------------------------------------------------------
Harvey Casinos Resorts,
Sr. Unsec. Sub. Notes, 10.625%,
06/01/06 100,000 106,125
- --------------------------------------------------------------
Showboat Marina Casino
Partnership & Showboat
Marina Financial Corp.,
Series B Sec. 1st Mortgage Notes,
13.50%, 03/15/03 100,000 114,000
- --------------------------------------------------------------
Trump Atlantic City Associates,
Sec. 1st Mortgage
Gtd. Notes, 11.25%, 05/01/06 155,000 151,125
- --------------------------------------------------------------
448,600
- --------------------------------------------------------------
GAS DISTRIBUTION-0.60%
Ferrellgas Partners,
Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 300,000 301,500
- --------------------------------------------------------------
</TABLE>
FS-32
<PAGE> 173
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
HOME BUILDING-0.11%
Continental Homes Holdings Corp.,
Sr. Unsec. Gtd. Notes, 10.00%,
04/15/06 $ 55,000 $ 54,450
- --------------------------------------------------------------
HOTELS/MOTELS-0.47%
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 150,000 136,933
- --------------------------------------------------------------
John Q. Hammons Hotels Inc.,
Sec. 1st Mortgage Notes, 9.75%,
10/01/05 100,000 100,750
- --------------------------------------------------------------
237,683
- --------------------------------------------------------------
LEISURE & RECREATION-0.36%
Cobblestone Golf Group Inc.,
Series B Sr. Notes, 11.50%, 06/01/03 100,000 104,000
- --------------------------------------------------------------
Icon Health & Fitness,
Series B Sr. Sub. Notes, 13.00%,
07/15/02 70,000 77,350
- --------------------------------------------------------------
181,350
- --------------------------------------------------------------
MACHINERY (HEAVY)-0.10%
Fairfield Manufacturing Co., Inc.,
Sr. Sub. Notes, 11.375%, 07/01/01 50,000 52,375
- --------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.09%
Interlake Corp.,
Sr. Notes, 12.00%, 11/15/01 40,000 44,300
- --------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.13%
Dynacare Inc.,
Sr. Yankee Notes, 10.75%, 01/15/06 80,000 82,000
- --------------------------------------------------------------
Tenet Healthcare Corp.,
Sr. Notes, 8.00%, 01/15/05 500,000 490,000
- --------------------------------------------------------------
572,000
- --------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.76%
Dade International Inc.,
Series B Sr. Sub. Notes, 11.125%,
05/01/06 100,000 110,000
- --------------------------------------------------------------
Graphic Controls Corp.,
Series A Sr. Sub. Notes, 12.00%,
09/15/05 70,000 76,300
- --------------------------------------------------------------
IMED Corp.,
Sr. Sub. Notes, 9.75%, 12/01/06
(acquired 11/19/96 to 04/01/97;
cost $198,050)(b) 200,000 200,000
- --------------------------------------------------------------
386,300
- --------------------------------------------------------------
METALS-0.40%
GS Industries, Inc.,
Sr. Gtd. Notes, 12.00%, 09/01/04 75,000 78,750
- --------------------------------------------------------------
Rio Algom Ltd.,
Yankee Unsec. Deb., 7.05%, 11/01/05 130,000 124,275
- --------------------------------------------------------------
203,025
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-1.62%
Abraxas Petroleum Corp.,
Series B Sr. Notes, 11.50%,
11/01/04 $ 120,000 $ 127,800
- --------------------------------------------------------------
Forest Oil Corp.,
Sr. Sub. Notes, 11.25%, 09/01/03 100,000 107,250
- --------------------------------------------------------------
Mariner Energy, Inc.,
Series B Sr. Sub. Notes, 10.50%,
08/01/06 110,000 112,750
- --------------------------------------------------------------
Maxus Energy Corp.,
Gtd. Deb., 11.50%, 11/15/15 170,000 178,712
- --------------------------------------------------------------
Plains Resources, Inc.,
Series B Sr. Gtd. Sub. Notes,
10.25%, 03/15/06 50,000 52,250
- --------------------------------------------------------------
Talisman Energy, Inc.,
Yankee Deb., 7.125%, 06/01/07 250,000 242,247
- --------------------------------------------------------------
821,009
- --------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.41%
Wainoco Oil Corp.,
Sr. Notes, 12.00%, 08/01/02 200,000 205,500
- --------------------------------------------------------------
OIL & GAS (SPECIALTY)-1.18%
Nova Chemicals Ltd.,
Yankee Deb., 7.00%, 08/15/26 600,000 595,242
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.04%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%, 01/15/01 20,000 20,500
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.37%
RAPP International Finance,
Gtd. Yankee Sec. Notes, 11.50%,
12/15/00 50,000 51,250
- --------------------------------------------------------------
United Stationer Supply,
Sr. Sub. Notes, 12.75%, 05/01/05 120,000 134,100
- --------------------------------------------------------------
185,350
- --------------------------------------------------------------
POLLUTION CONTROL-1.62%
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes, 13.00%,
11/15/05 150,000 165,750
- --------------------------------------------------------------
WMX Technologies, Inc.,
Unsec. Notes, 7.10%, 08/01/26 650,000 655,428
- --------------------------------------------------------------
821,178
- --------------------------------------------------------------
PUBLISHING-0.12%
MDC Communications Corp.,
Sr. Yankee Unsec. Sub. Notes,
10.50%, 12/01/06 60,000 63,000
- --------------------------------------------------------------
REAL ESTATE-0.99%
Finova Capital Corp.,
Unsec. Notes, 7.40%, 05/06/06 500,000 500,740
- --------------------------------------------------------------
</TABLE>
FS-33
<PAGE> 174
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RETAIL (FOOD & DRUG)-0.85%
Carr-Gottstein Foods Co.,
Sr. Sub. Notes, 12.00%, 11/15/05 $ 100,000 $ 107,750
- --------------------------------------------------------------
Great Atlantic & Pacific
Tea Co., Inc.,
Yankee Gtd. Notes, 7.78%, 11/01/00
(acquired 10/18/95;
cost $100,000)(b) 100,000 101,899
- --------------------------------------------------------------
Jitney-Jungle Stores of America Inc.,
Sr. Gtd. Notes, 12.00%, 03/01/06 200,000 218,250
- --------------------------------------------------------------
427,899
- --------------------------------------------------------------
RETAIL (STORES)-0.36%
Loehmann's Holdings, Inc.,
Sr. Unsec. Notes, 11.875%, 05/15/03 100,000 104,375
- --------------------------------------------------------------
Specialty Retailers Inc.,
Series B Sr. Sub. Notes, 11.00%,
08/15/03 75,000 78,656
- --------------------------------------------------------------
183,031
- --------------------------------------------------------------
SCHOOLS-0.38%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00%, 08/15/05 100,000 105,875
- --------------------------------------------------------------
Scholastic Brands Inc.,
Sr. Sub. Notes, 11.00%, 01/15/07
(acquired 12/10/96-12/12/96; cost
$85,694)(b) 85,000 87,125
- --------------------------------------------------------------
193,000
- --------------------------------------------------------------
SEMICONDUCTORS-0.24%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%, 08/01/03 110,000 120,038
- --------------------------------------------------------------
STEEL-0.11%
Gulf States Steel Corp.,
1st Mortgage Notes, 13.50%, 04/15/03 60,000 57,000
- --------------------------------------------------------------
TELECOMMUNICATIONS-6.08%
Capstar Broadcasting Partners,
Sr. Disc. Notes, 12.75%, 02/01/09
(acquired 02/14/97-02/19/97; cost
$213,762)(b)(d) 390,000 219,375
- --------------------------------------------------------------
Celcaribe S.A.,
Sr. Sec. Notes, 13.50%, 03/15/04(d) 500,000 447,500
- --------------------------------------------------------------
Dial Call Communications,
Sr. Disc. Notes, 12.25%, 04/15/04(d) 140,000 110,250
- --------------------------------------------------------------
ICG Holdings, Inc.,
Sr. Disc. Notes, 11.625%, 03/15/07
(acquired 03/06/97; cost
$227,064)(b)(d) 400,000 211,420
- --------------------------------------------------------------
Nextel Communications, Inc.,
Sr. Disc. Notes, 11.50%, 09/01/03(d) 220,000 182,600
- --------------------------------------------------------------
Orion Network Systems, Inc.,
Units, 11.25%, 01/15/07(g) 420,000 424,200
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
PriCellular Wireless Corp.,
Sr. Notes, 10.75%, 11/01/04 $ 130,000 $ 135,200
- --------------------------------------------------------------
PrimeCo Inc.,
Sr. Sub. Notes, 12.75%, 03/01/05 80,000 90,600
- --------------------------------------------------------------
ProNet, Inc.,
Sr. Sub. Notes, 11.875%, 06/15/05 30,000 28,050
- --------------------------------------------------------------
Sprint Spectrum L.P.,
Sr. Unsec. Notes, 11.00%, 08/15/06 200,000 217,000
- --------------------------------------------------------------
Sygnet Wireless Inc.,
Sr. Unsec. Notes, 11.50%, 10/01/06 160,000 159,800
- --------------------------------------------------------------
TCI Communications Inc.,
Sr. Notes, 8.00%, 08/01/05 150,000 148,425
- --------------------------------------------------------------
Teleport Communications Group Inc.,
Sr. Unsec. Disc. Notes, 11.125%,
07/01/07(d) 300,000 207,750
- --------------------------------------------------------------
360 Communications Co.,
Sr. Unsec. Notes, 7.50%, 03/01/06 500,000 494,350
- --------------------------------------------------------------
3,076,520
- --------------------------------------------------------------
TELEPHONE-0.16%
PhoneTel Technologies, Inc.,
Sr. Unsec. Gtd. Notes, 12.00%,
12/15/06 80,000 79,200
- --------------------------------------------------------------
TRANSPORTATION-1.12%
Stena A.B.,
Sr. Yankee Unsec. Notes, 10.50%,
12/15/05 80,000 85,200
- --------------------------------------------------------------
Transportacion Maritima
Mexicana S.A. de C.V.,
Sr. Yankee Unsec. Notes, 10.00%,
11/15/06 200,000 190,000
- --------------------------------------------------------------
Travelcenters of America,
Sr. Sub. Notes, 10.25%, 04/01/07
(acquired 03/24/97-04/07/97; cost
$288,500)(b) 290,000 290,000
- --------------------------------------------------------------
565,200
- --------------------------------------------------------------
TRUCKING-0.60%
AmeriTruck Distribution Corp.,
Series B Sr. Sub. Notes, 12.25%,
11/15/05 300,000 306,000
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 23,410,938
- --------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES-0.54%
TRANSPORTATION-0.54%
Laidlaw, Inc.,
Yankee Unsec. Conv. Deb., 6.00%,01/15/99
(acquired 08/19/96; cost $265,000)(b) 200,000 271,126
- --------------------------------------------------------------
</TABLE>
FS-34
<PAGE> 175
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES(h)-11.80%
CANADA-5.82%
Bank of Montreal (Banking),
Sub. Deb., 7.92%, 07/31/12 CAD 300,000 $ 228,876
- --------------------------------------------------------------
Bell Canada (Telecommunications),
Unsec. Deb., 10.875, 10/11/04 250,000 218,379
- --------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas),
Deb., 11.00%, 10/31/00 250,000 204,026
- --------------------------------------------------------------
NAV Canada (Transportation),
Bonds, 7.40%, 06/01/27 1,000,000 711,324
- --------------------------------------------------------------
Telegobe Canada, Inc.
(Telecommunications),
Unsec. Deb., 8.35%, 06/20/03 650,000 503,994
- --------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas)
Unsec. Notes, 8.55%, 02/01/06 500,000 393,880
- --------------------------------------------------------------
Series Q Deb., 10.625%, 10/20/09 375,000 337,956
- --------------------------------------------------------------
Westcoast Energy, Inc. (Electric Power),
Deb., 6.45%, 12/18/06 (acquired
12/03/96; cost $369,585)(b) 500,000 344,477
- --------------------------------------------------------------
2,942,912
- --------------------------------------------------------------
FRANCE-0.45%
Credit Foncier de France (Banking),
Sr. Unsec. Unsub. Eurobonds,
6.50%, 02/22/99 FRF 750,000 97,140
- --------------------------------------------------------------
Sr. Unsec. Unsub. Eurobonds,
6.00%, 11/15/01 250,000 44,920
- --------------------------------------------------------------
IBM International Finance N.V.
(Computer Mainframes),
Sr. Unsec. Unsub. Eurobonds,
10.00%, 08/29/97 500,000 87,857
- --------------------------------------------------------------
229,917
- --------------------------------------------------------------
GERMANY-2.60%
Daimler-Benz A.G. (Finance-Consumer Credit)
Gtd. Unsub. Eurobonds, 4.125%,
07/05/03 DEM 400,000 314,990
- --------------------------------------------------------------
International Bank for
Reconstruction & Development
(Supranational Organization),
Unsec. Global Bonds, 7.125%,
04/12/05 475,000 300,091
- --------------------------------------------------------------
LKB Global (Banking),
Gtd. Notes, 6.00%, 01/25/06 1,200,000 701,929
- --------------------------------------------------------------
1,317,010
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ITALY-1.48%
KFW International Finance Inc.
(Finance-Consumer Credit), Gtd.
Eurobonds, 11.625%, 11/27/98 ITL 1,200,000,000 $ 747,926
- --------------------------------------------------------------
SWEDEN-0.86%
Swedish Export Credit
(Finance-Consumer Credit),
Unsec. Unsub. Eurobonds,
11.70%, 12/04/98 SEK 700,000,000 437,210
- --------------------------------------------------------------
UNITED KINGDOM-0.59%
Ford Credit Europe PLC
(Automobile-Manufacturers),
Deb., 6.00%, 03/30/99 GBP 200,000 119,852
- --------------------------------------------------------------
KFW International Finance
(Finance-Asset Management),
Gtd. Eurobonds, 10.625%, 09/03/01 100,000 179,692
- --------------------------------------------------------------
299,544
- --------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 5,974,519
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES(h)-3.75%
FRANCE-0.10%
Societe Generale (Banking),
Conv. Deb., 3.50%, 01/01/00 FRF 231,000 47,542
- --------------------------------------------------------------
JAPAN-2.71%
JUSCO Co. Ltd.
(Consumer Non-Durables),
Conv. Bonds, 1.20%, 02/20/01 JPY 40,000,000 566,116
- --------------------------------------------------------------
Sony Corp.
(Electronic Components/Miscellaneous),
Conv. Deb., 1.40%, 03/31/05 8,000,000 75,472
- --------------------------------------------------------------
Sumitomo Bank International
Finance N.V. (Banking),
Conv. Gtd. Eurobonds, 0.75%,
05/31/01 60,000,000 505,180
- --------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers),
Conv. Bonds, 1.20%, 01/28/98 15,000,000 224,229
- --------------------------------------------------------------
1,370,997
- --------------------------------------------------------------
UNITED KINGDOM-0.09%
Glaxo Wellcome PLC (Medical-Drugs),
Conv. Unsub. Notes, 4.30%,
09/28/98 GBP 4,000,000 47,426
- --------------------------------------------------------------
</TABLE>
FS-35
<PAGE> 176
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SWITZERLAND-0.85%
Aderans Co. Ltd.
(Cosmetics & Toiletries),
Unsec. Conv. Deb., 0.875%,
08/31/98 CHF 300,000 $ 215,216
- --------------------------------------------------------------
Yamada Denki Co. Ltd.
(Retail-Stores),
Unsec. Conv. Notes, 0.25%,
03/31/00 300,000 216,234
- --------------------------------------------------------------
431,450
- --------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 1,897,415
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT
BONDS & NOTES(h)-22.28%
AUSTRALIA-3.72%
Australian Government,
Bonds, 7.50%, 07/15/05 AUD 750,000 576,198
- --------------------------------------------------------------
Western Australia Treasury Corp.,
Gtd. Notes, 8.00%, 07/15/03 1,650,000 1,306,869
- --------------------------------------------------------------
1,883,067
- --------------------------------------------------------------
CANADA-3.36%
B.C. Generic Residual,
Deb., 6.80%, 06/21/04(e) CAD 150,000 66,781
- --------------------------------------------------------------
Canadian Government,
Bonds, 7.00%, 12/01/06 1,000,000 734,789
- --------------------------------------------------------------
Municipal Finance Authority of
British Columbia,
Unsec. Bonds, 7.75%, 12/01/05 500,000 381,396
- --------------------------------------------------------------
Ontario Province,
Sr. Unsec. Unsub. Deb., 6.875%,
09/15/00 GBP 35,000 55,901
- --------------------------------------------------------------
Sr. Unsec. Unsub. Global Bonds,
8.00%, 03/11/03 CAD 600,000 463,636
- --------------------------------------------------------------
1,702,503
- --------------------------------------------------------------
FRANCE-1.22%
French Treasury Bill,
5.75%, 11/12/98 FRF 3,500,000 618,414
- --------------------------------------------------------------
GERMANY-1.42%
Bundesrepublic Deutschland
Bonds, 6.75, 07/15/04 DEM 750,000 466,812
- --------------------------------------------------------------
Bonds, 6.875%, 05/12/05 400,000 249,682
- --------------------------------------------------------------
716,494
- --------------------------------------------------------------
NEW ZEALAND-1.97%
New Zealand Government
Bonds, 10.00%, 07/15/97 NZD 425,000 296,513
- --------------------------------------------------------------
Bonds, 8.00%, 02/15/01 1,000,000 702,111
- --------------------------------------------------------------
998,624
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SWEDEN-4.34%
Swedish Government
Bonds, 13.00%, 06/15/01 SEK 3,000,000 $ 477,915
- --------------------------------------------------------------
Bonds, 10.25%, 05/05/03 5,000,000 751,431
- --------------------------------------------------------------
Bonds, 6.00%, 02/09/05 4,000,000 481,293
- --------------------------------------------------------------
Bonds, 6.50%, 10/25/06 4,000,000 486,188
- --------------------------------------------------------------
2,196,827
- --------------------------------------------------------------
UNITED KINGDOM-6.25%
Fannie Mae, Sr. Unsec. Notes,
6.875%, 06/07/02 GBP 350,000 558,213
- --------------------------------------------------------------
United Kingdom Treasury
Bonds, 8.00%, 12/07/00 350,000 583,712
- --------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 800,000 1,288,947
- --------------------------------------------------------------
Bonds, 7.50%, 12/07/06 450,000 732,300
- --------------------------------------------------------------
3,163,172
- --------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 11,279,101
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-1.66%
ELECTRIC POWER-0.50%
Citizens Utilities Co.-$2.50 Conv. Pfd. 5,000 253,750
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.16%
Conseco Inc.-$4.278 Conv. Pfd. PRIDES 4,000 586,000
- --------------------------------------------------------------
Total Convertible Preferred Stocks 839,750
- --------------------------------------------------------------
WARRANTS-0.02%
CABLE TELEVISION-0.00%
Wireless One, Inc., expiring 10/19/00(i) 150 0
- --------------------------------------------------------------
CONTAINERS-0.00%
MVE Inc., expiring 02/15/02(i) 100 2,000
- --------------------------------------------------------------
LEISURE & RECREATION-0.01%
IHF Capital Inc., expiring
11/14/99(b)(i)
(acquired 11/04/94-12/07/94; cost $0) 70 2,800
- --------------------------------------------------------------
STEEL-0.00%
Gulf States Steel Corp., expiring
04/15/03(i) 60 270
- --------------------------------------------------------------
TELECOMMUNICATIONS-0.01%
Clearnet Communications Inc.,
expiring 09/15/05(i) 330 1,155
- --------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(i) 150 3,000
- --------------------------------------------------------------
4,155
- --------------------------------------------------------------
Total Warrants 9,225
- --------------------------------------------------------------
</TABLE>
FS-36
<PAGE> 177
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-8.12%
Bonds, 6.50%, 05/31/01 $1,500,000 $ 1,498,650
- --------------------------------------------------------------
Notes, 6.50%, 08/15/05 1,200,000 1,182,648
- --------------------------------------------------------------
Notes, 6.50%, 10/15/06 500,000 492,005
- --------------------------------------------------------------
Notes, 6.50%, 11/15/26 1,000,000 938,600
- --------------------------------------------------------------
Total U.S. Treasury Securities 4,111,903
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY-0.79%
Tennessee Valley Authority, Bonds,
5.98%, 04/01/36 400,000 400,860
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-3.01%(j)
HSBC Securities Inc., 5.05%,
05/01/97(k) $1,522,498 $ 1,522,498
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.23% 49,717,335
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.77% 894,754
- --------------------------------------------------------------
NET ASSETS-100.00% $ 50,612,089
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by
note (h).
(b) Restricted Security. May be resold to qualified
institutional buyers in accordance with the provisions of
Rule 144A under the Securities Act of 1933, as amended. The
valuation of these securities has been determined in
accordance with procedures established by the Board of
Directors. The aggregate market value of these securities at
April 30, 1997 was $4,316,529 which represented 8.53% of the
Fund's net assets.
(c) Issued as a unit. This unit also includes one Sr. Deferred
Coupon Note plus one warrant to purchase 0.0447 shares of
common stock.
(d) Discounted bond at purchase. Interest rate represents coupon
rate at which the bond will accrue at a specified future
date.
(e) Zero coupon bond issued at a discount. The interest rate
shown represents the rate of original issue discount.
(f) Issued as a unit. This unit also includes one Sr. Disc. Note
plus one warrant to purchase 17.23 shares of common stock at
$5.23 per share.
(g) Issued as a unit. This unit also includes one Sr. Note plus
warrants to purchase 0.8444 shares of common stock.
(h) Foreign denominated security. Par value and coupon are
denominated in currency of country indicated.
(i) Non-income producing security acquired as part of a unit
with or in exchange for other securities.
(j) 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% of the sales
price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint
accounts with other mutual funds, private accounts, and
certain non-registered investment companies managed by the
investment advisor or its affiliates.
(k) Joint repurchase agreement entered into 04/30/97 with a
maturing value of $100,014,028. Collateralized by
$96,950,000 U.S. Treasury obligations, 7.50% to 7.875% due
10/31/99 to 12/31/99 with an aggregate market value at April
30, 1997 of $102,002,050.
Abbreviations:
AUD - Australian Dollar JPY - Japanese Yen
CAD - Canadian Dollar NZD - New Zealand Dollar
CHF - Swiss Franc PRIDES - Preferred Redemption Increase
Conv. - Convertible Dividend Equity Security
Deb. - Debentures Sec. - Secured
DEM - German Deutschemark SEK - Swedish Krona
Disc. - Discounted Sr. - Senior
FRF - French Franc Sub. - Subordinated
GBP - British Pound Sterling Unsec. - Unsecured
Gtd. - Guaranteed Unsub. - Unsubordinated
ITL - Italian Lire Wt. - Warrant
See Notes to Financial Statements.
FS-37
<PAGE> 178
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$50,131,433) $49,717,335
- -----------------------------------------------------------
Foreign currencies, at market value (cost
$42,577) 42,404
- -----------------------------------------------------------
Receivables for:
Capital stock sold 364,575
- -----------------------------------------------------------
Forward contracts 97,593
- -----------------------------------------------------------
Dividends and interest 1,158,168
- -----------------------------------------------------------
Investment for deferred compensation plan 7,236
- -----------------------------------------------------------
Other assets 24,242
- -----------------------------------------------------------
Total assets 51,411,553
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 617,970
- -----------------------------------------------------------
Capital stock reacquired 57,907
- -----------------------------------------------------------
Dividends 57,763
- -----------------------------------------------------------
Deferred compensation plan 7,236
- -----------------------------------------------------------
Accrued administrative service fees 6,692
- -----------------------------------------------------------
Accrued distribution fees 30,171
- -----------------------------------------------------------
Accrued transfer agent fees 11,258
- -----------------------------------------------------------
Accrued operating expenses 10,467
- -----------------------------------------------------------
Total liabilities 799,464
- -----------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $50,612,089
===========================================================
NET ASSETS:
Class A $28,252,818
- -----------------------------------------------------------
Class B $22,359,271
===========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,698,256
===========================================================
Class B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,137,569
===========================================================
Class A:
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 10.47
===========================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.47
divided by 95.25%) $ 10.99
===========================================================
Class B:
NET ASSET VALUE AND OFFERING PRICE PER SHARE $ 10.46
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,733,926
- -----------------------------------------------------------
Dividends 14,808
- -----------------------------------------------------------
1,748,734
- -----------------------------------------------------------
EXPENSES:
Advisory fees 156,434
- -----------------------------------------------------------
Administrative service fees 40,811
- -----------------------------------------------------------
Directors' fees 4,046
- -----------------------------------------------------------
Distribution fees-Class A 62,979
- -----------------------------------------------------------
Distribution fees-Class B 97,518
- -----------------------------------------------------------
Custodian fees 15,492
- -----------------------------------------------------------
Transfer agent fees-Class A 29,434
- -----------------------------------------------------------
Transfer agent fees-Class B 24,344
- -----------------------------------------------------------
Other 53,789
- -----------------------------------------------------------
Total expenses 484,847
- -----------------------------------------------------------
Less: Expenses assumed by advisor (156,434)
- -----------------------------------------------------------
Expenses paid indirectly (373)
- -----------------------------------------------------------
Net expenses 328,040
- -----------------------------------------------------------
Net investment income 1,420,694
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCY
TRANSACTIONS AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities (142,676)
- -----------------------------------------------------------
Foreign currency transactions (56,752)
- -----------------------------------------------------------
Forward currency contracts 396,716
- -----------------------------------------------------------
197,288
- -----------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities (1,346,639)
- -----------------------------------------------------------
Foreign currency transactions (32,761)
- -----------------------------------------------------------
Forward currency contracts 56,702
- -----------------------------------------------------------
(1,322,698)
- -----------------------------------------------------------
Net gain (loss) from investment securities,
foreign currency transactions and forward
currency contracts. (1,125,410)
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $ 295,284
===========================================================
</TABLE>
See Notes to Financial Statements.
FS-38
<PAGE> 179
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the year ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,420,694 $ 1,844,305
- -----------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currency transactions and forward currency
contracts 197,288 418,371
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currency transactions and forward
currency contracts (1,322,698) 543,300
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 295,284 2,805,976
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (828,771) (1,175,361)
- -----------------------------------------------------------------------------------------
Class B (591,923) (705,239)
- -----------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A (111,708)
- -----------------------------------------------------------------------------------------
Class B (86,484)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (213,278) (122,866)
- -----------------------------------------------------------------------------------------
Class B (162,115) (57,565)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 7,285,001 11,543,105
- -----------------------------------------------------------------------------------------
Class B 6,312,313 12,214,514
- -----------------------------------------------------------------------------------------
Net increase in net assets 11,898,319 24,502,564
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 38,713,770 14,211,206
- -----------------------------------------------------------------------------------------
End of period $50,612,089 $ 38,713,770
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $50,878,467 $ 37,281,153
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (74,537) 123,655
- -----------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currency transactions and forward
currency contracts 152,309 330,414
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currency transactions and forward
currency contracts (344,150) 978,548
- -----------------------------------------------------------------------------------------
$50,612,089 $ 38,713,770
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Income Fund (the "Fund") is an investment 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 Global Income Fund, AIM Global Aggressive Growth Fund,
AIM Global Growth Fund and AIM International Equity Fund. The Fund currently
offers two different classes of shares: Class A shares and 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 the financial statements pertains only to the Fund. The
Fund's investment objective is to provide high current income.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations-Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted
FS-39
<PAGE> 180
prices, and may reflect appropriate factors such as institution-size trading
in similar groups of securities, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which prices
are not provided by the pricing service and which are listed or traded on an
exchange (except convertible bonds) are valued at the last sales price on the
exchange where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on that
day unless the Board of Directors, or persons designated by the Board of
Directors, determines that the over-the-counter quotations more closely
reflect the current market value of the security. Securities traded in the
over-the-counter market, except (i) securities priced by the pricing service,
(ii) securities for which representative exchange prices are available, and
(iii) securities reported in the NASDAQ National Market System, are valued at
the mean between representative last bid and asked prices obtained from an
electronic quotation reporting system, if such prices are available, or from
established market makers. Each security reported in the NASDAQ National
Market System is valued at the last sales price on the valuation date or
absent a last sales price, at the mean between the closing bid and asked
prices. Securities for which market quotations are not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in accordance with methods
which are specifically authorized by the Board of Directors. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities, as
well as corporate bonds and U.S. Government 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 a 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 would not be reflected in
the computation of a Fund's net asset value. If events materially affecting
the value of such securities and exchange rates occur during such period,
then these securities and exchange rates 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 foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding contracts at April 30, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO APPRECIATION
DATE DELIVER VALUE RECEIVE (DEPRECIATION)
---------- ------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
06/10/97 CHF 100,000 $ 68,149 $ 67,866 $ (283)
07/31/97 CHF 525,000 359,906 362,419 2,513
05/20/97 DEM 1,400,000 809,554 835,821 26,267
07/14/97 DEM 570,000 330,951 333,528 2,577
07/28/97 DEM 1,700,000 988,037 996,483 8,446
06/05/97 JPY 47,500,000 374,227 396,858 22,631
06/17/97 JPY 18,000,000 141,815 147,905 6,090
07/14/97 JPY 70,000,000 551,525 558,414 6,889
08/06/97 JPY 32,000,000 252,135 258,065 5,930
07/29/97 SEK 16,000,000 2,047,450 2,063,983 16,533
---------- ---------- -------
$5,923,749 $6,021,342 $97,593
========== ========== =======
</TABLE>
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 is recorded on the ex-dividend
date. It is the policy of the Fund to declare daily dividends from net
investment income. Such dividends are paid monthly.
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. It is estimated that the Fund will incur a return
of capital for tax purposes during its year ended October 31, 1997.
F. Expenses-Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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 0.70% of
the first $1 billion of the Fund's average daily net assets, plus 0.65% of the
Fund's average daily net assets in excess of $1 billion. During the six months
ended April 30, 1997, AIM waived fees of $156,434.
The Fund, pursuant to a master administrative services agreement, has agreed
to reimburse AIM for administrative costs incurred in providing accounting
services to the Fund. During the six months ended April 30, 1997, AIM was
reimbursed $40,811 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for
FS-40
<PAGE> 181
providing transfer agency services to the Fund. During the six months ended
April 30, 1997, the Fund paid AFS $33,895 for such services.
The Fund received reductions in transfer agency fees of $352 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $21 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $373 during the six months ended April
30, 1997.
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
distribution 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, pays AIM Distributors an annual rate of 0.50% 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. Of the total compensation payable, the Fund pays a service fee of
0.25% of the average daily net assets attributable to the Class A shares to
selected 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, pays 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. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more designees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the six months ended April 30, 1997, the Class A shares
and the Class B shares paid AIM Distributors $62,979 and $97,518, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $35,437 from sales of the Class A
shares of the Fund during the six months ended April 30, 1997. 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 six months ended April 30,
1997, AIM Distributors received commissions of $1,208 in contingent deferred
sales charges imposed on redemptions of Fund shares. Certain officers and
directors of the Company are officers and directors of AIM, AFS and AIM
Distributors.
During the six months ended April 30, 1997, the Fund incurred legal fees of
$2,409 for services rendered by the law firm of Kramer, Levin, Naftalis, &
Frankel as counsel to the Company's directors. A member of that firm is a
director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 1997, the Fund did not borrow under the
line of credit agreement. The funds which are party to the line of credit are
charged a commitment fee of 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1997 was
$24,498,962 and $10,823,076, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1997, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,143,869
- ------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,557,967)
- ------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $ (414,098)
======================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
FS-41
<PAGE> 182
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the six months ended
April 30, 1997 and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 1,016,103 $10,879,307 1,609,644 $17,019,341
- ---------------------------------------------------------------------------------------------------------------
Class B 736,279 7,878,719 1,313,279 13,876,204
- ---------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 92,385 989,496 92,969 985,383
- ---------------------------------------------------------------------------------------------------------------
Class B 64,275 687,709 58,431 618,362
- ---------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (430,381) (4,583,802) (613,922) (6,461,619)
- ---------------------------------------------------------------------------------------------------------------
Class B (211,095) (2,254,115) (215,814) (2,280,052)
- ---------------------------------------------------------------------------------------------------------------
1,267,566 $13,597,314 2,244,587 $23,757,619
===============================================================================================================
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share and Class B share
outstanding during the six months ended April 30, 1997, each of the years in the
two-year period ended October 31, 1996 and the period September 15, 1994 (dates
operations commenced) through October 31, 1994.
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------ ----------------------------------------
OCTOBER 31, OCTOBER 31,
APRIL 30, ---------------------------- APRIL 30, --------------------------
1997 1996 1995 1994 1997 1996 1995 1994
---------- ------- ------- ------ ---------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.85 $10.74 $10.02 $10.00 $ 10.84 $10.73 $10.01 $10.00
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Income from investment operations:
Net investment income 0.35 0.79(a) 0.79 0.08 0.32 0.74(a) 0.74 0.07
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.23) 0.25 0.75 0.01 (0.23) 0.24 0.75 0.01
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Total from investment operations 0.12 1.04 1.54 0.09 0.09 0.98 1.49 0.08
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Less distributions:
Dividends from investment income (0.40) (0.81) (0.82) (0.07) (0.37) (0.75) (0.77) (0.07)
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Distributions from net realized capital
gains (0.10) (0.12) -- -- (0.10) (0.12) -- --
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Total distributions (0.50) (0.93) (0.82) (0.07) (0.47) (0.87) (0.77) (0.07)
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Net asset value, end of period $ 10.47 $10.85 $10.74 $10.02 $ 10.46 $10.84 $10.73 $10.01
========================================= ========================================= ========================================
Total return(b) 1.04% 10.22% 16.07% 0.93% 0.78% 9.66% 15.56% 0.79%
========================================= ========================================= ========================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,253 $21,926 $10,004 $2,661 $22,359 $16,787 $4,207 $362
========================================= ========================================= ========================================
Ratio of expenses to average net
assets(c) 1.25%(d)(e) 1.25% 1.25% 1.25%(f) 1.75%(d)(e) 1.75% 1.74% 1.73%(f)
========================================= ========================================== ========================================
Ratio of net investment income to
average net assets(c) 6.57%(d) 7.27% 7.38% 6.01%(f) 6.07%(d) 6.77% 6.88% 3.59%(f)
========================================= ========================================= ========================================
Portfolio turnover rate 25% 83% 128% 6% 25% 83% 128% 6%
========================================= ========================================= ========================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------- -------------------------
NET INVESTMENT NET INVESTMENT
EXPENSES INCOME EXPENSES INCOME
-------- -------------- -------- --------------
<S> <C> <C> <C> <C>
April 30, 1997 (annualized) 1.95% 5.87% 2.44% 5.38%
- ----------------------------------------------------------------------------------------------
October 31, 1996 2.02% 6.51% 2.53% 6.00%
- ----------------------------------------------------------------------------------------------
October 31, 1995 3.03% 5.59% 3.57% 5.05%
- ----------------------------------------------------------------------------------------------
October 31, 1994 (annualized) 5.61% 1.65% 22.09% (16.77)%
==============================================================================================
</TABLE>
(d) Ratios are annualized and based on average net assets of $25,400,530 for
Class A shares and $19,665,182 for Class B shares.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have remained the same for
both Class A shares and Class B shares.
(f) Annualized.
FS-42
<PAGE> 183
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ending October 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes For Against Abstentions
--------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 130,433,380 0 3,798,959
Bruce L. Crockett........................................... 130,563,964 0 3,668,375
Owen Daly II................................................ 130,421,284 0 3,811,055
Carl Frischling............................................. 130,515,713 0 3,716,626
Robert H. Graham............................................ 130,587,498 0 3,644,841
John F. Kroeger............................................. 130,446,846 0 3,785,493
Lewis F. Pennock............................................ 130,506,142 0 3,726,197
Ian W. Robinson............................................. 130,446,093 0 3,786,246
Louis S. Sklar.............................................. 130,573,480 0 3,658,859
(2) Approval of new Investment Advisory Agreement............... 2,328,031 16,695 93,860
(3) Elimination of Fundamental Investment Policy................ 1,812,986 52,636 101,451
(4) KPMG Peat Marwick LLP....................................... 128,509,801 995,829 4,726,709
</TABLE>
FS-43
<PAGE> 184
AIM INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-94.81%
ARGENTINA-1.57%
Banco de Galicia y Buenos Aires
S.A. de C.V.-ADR
(Banking)(a) 354,880 $ 8,633,565
- ----------------------------------------------------------------
Perez Companc S.A.-Class B
(Oil & Gas-Services) 878,000 7,121,292
- ----------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Oil & Gas-Services) 508,200 14,039,025
- ----------------------------------------------------------------
29,793,882
- ----------------------------------------------------------------
AUSTRALIA-3.54%
Boral Ltd.
(Building Materials)(a) 2,500,000 7,369,570
- ----------------------------------------------------------------
Coca-Cola Amatil Ltd.
(Beverages) 454,905 5,200,384
- ----------------------------------------------------------------
National Australia Bank Ltd.
(Banking)(a) 579,000 7,924,394
- ----------------------------------------------------------------
National Australia Bank Ltd.-Conv.
Preferred (Banking)(b) 240,000 6,360,000
- ----------------------------------------------------------------
National Mutual Holdings Ltd.
(Insurance-Multi-Line
Property)(a) 3,770,000 5,586,056
- ----------------------------------------------------------------
QBE Insurance Group Ltd.
(Insurance-Multi-Line Property) 1,870,277 10,691,048
- ----------------------------------------------------------------
QNI Ltd.
(Metals-Miscellaneous) 6,126,400 11,370,843
- ----------------------------------------------------------------
WMC Ltd.
(Metals-Miscellaneous) 2,125,000 12,594,557
- ----------------------------------------------------------------
67,096,852
- ----------------------------------------------------------------
AUSTRIA-0.76%
OMV A.G.
(Oil & Gas-Integrated) 66,000 7,205,417
- ----------------------------------------------------------------
VA Technologie A.G.
(Engineering & Construction) 45,700 7,101,553
- ----------------------------------------------------------------
14,306,970
- ----------------------------------------------------------------
BELGIUM-1.46%
Barco Industries
(Electronic
Components/Miscellaneous) 41,000 6,984,336
- ----------------------------------------------------------------
COLRUYT S.A.
(Retail-Food & Drug) 14,600 6,044,196
- ----------------------------------------------------------------
Delhaize-Le Lion, S.A.
(Retail-Food & Drug) 124,000 6,226,014
- ----------------------------------------------------------------
UCB S.A.
(Medical-Drugs) 3,100 8,506,573
- ----------------------------------------------------------------
27,761,119
- ----------------------------------------------------------------
BRAZIL-1.07%
Telecomunicacoes Brasileiras
S.A.-Telebras-ADR
(Telecommunications) 177,000 20,310,750
- ----------------------------------------------------------------
CANADA-2.64%
Bank of Montreal
(Banking-Money Center) 118,000 4,282,462
- ----------------------------------------------------------------
Canadian National Railway Co.
(Railroads) 170,000 6,545,000
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Canadian Natural Resources Ltd.
(Oil & Gas-Exploration &
Production)(a) 335,000 $ 7,985,326
- ----------------------------------------------------------------
Canadian Pacific, Ltd.
(Transportation) 307,000 7,483,125
- ----------------------------------------------------------------
Newbridge Networks Corp.
(Computer Networking)(a) 188,000 5,969,000
- ----------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 124,700 9,056,338
- ----------------------------------------------------------------
Suncor, Inc.
(Oil & Gas-Exploration &
Production) 190,000 8,704,367
- ----------------------------------------------------------------
50,025,618
- ----------------------------------------------------------------
CHILE-0.45%
Cia. de Telecomunicaciones de Chile
S.A.-ADR
(Telephone) 263,925 8,544,572
- ----------------------------------------------------------------
DENMARK-0.92%
Novo Nordisk A/S-Class B
(Medical-Drugs) 176,600 17,470,557
- ----------------------------------------------------------------
FINLAND-0.23%
Nokia Oy A.B.-Class A
(Telecommunications) 70,000 4,327,552
- ----------------------------------------------------------------
FRANCE-11.01%
Alcatel Alsthom
(Telecommunications) 160,000 17,791,485
- ----------------------------------------------------------------
AXA S.A.
(Insurance-Life & Health) 132,000 8,121,511
- ----------------------------------------------------------------
Cap Gemini Sogeti S.A.
(Computer Software/Services)(a) 162,000 9,811,874
- ----------------------------------------------------------------
Carrefour S.A.
(Retail-Food & Drug) 7,500 4,682,601
- ----------------------------------------------------------------
Cetelem
(Finance-Consumer Credit) 44,800 5,219,567
- ----------------------------------------------------------------
Compagnie Francaise d'Etudes et de
Construction Technip
(Engineering & Construction) 86,000 9,091,408
- ----------------------------------------------------------------
Compagnie Generale des Eaux
(Water Supply) 126,000 17,551,272
- ----------------------------------------------------------------
Elf Aquitaine S.A.
(Oil & Gas-Services) 180,500 17,504,155
- ----------------------------------------------------------------
Essilor International
(Medical Instruments/Products) 24,940 6,871,159
- ----------------------------------------------------------------
Etablissements Economiques du
Casino Guichard-Perrachon
(Retail-Food & Drug) 195,000 9,080,956
- ----------------------------------------------------------------
Lafarge S.A.
(Building Materials)(a) 66,500 4,361,552
- ----------------------------------------------------------------
Michelin-Class B
(Automobile/Truck Parts & Tires) 134,000 7,486,919
- ----------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-Stores) 34,800 14,637,882
- ----------------------------------------------------------------
Promodes
(Retail-Stores)(a) 28,000 9,446,072
- ----------------------------------------------------------------
Rexel S.A.
(Electronic
Components/Miscellaneous) 23,200 6,181,102
- ----------------------------------------------------------------
</TABLE>
FS-44
<PAGE> 185
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Rhone-Poulenc-Class A
(Chemicals) 270,000 $ 9,080,956
- ----------------------------------------------------------------
Schneider S.A.
(Electronic
Components/Miscellaneous) 160,000 9,019,104
- ----------------------------------------------------------------
Sidel, S.A.
(Machinery-Miscellaneous) 57,000 4,093,960
- ----------------------------------------------------------------
Societe BIC S.A.
(Office Products) 111,000 17,591,879
- ----------------------------------------------------------------
Sodexho S.A.
(Business Services) 9,200 4,224,450
- ----------------------------------------------------------------
Total S.A.-Class B
(Oil & Gas-Exploration &
Production) 111,000 9,204,832
- ----------------------------------------------------------------
Valeo S.A.
(Automobile/Truck Parts & Tires) 128,500 7,925,983
- ----------------------------------------------------------------
208,980,679
- ----------------------------------------------------------------
GERMANY-4.64%
Adidas A.G.
(Shoes & Related Apparel) 42,000 4,377,526
- ----------------------------------------------------------------
Adidas A.G.-ADR
(Shoes & Related Apparel)
(Acquired 04/11/97; cost
$8,533,263)(c) 81,000 8,442,372
- ----------------------------------------------------------------
Altana A.G.
(Chemicals) 13,350 10,329,715
- ----------------------------------------------------------------
Commerzbank A.G.
(Banking-Money Center) 295,000 7,912,432
- ----------------------------------------------------------------
Continental A.G.
(Automobile/Truck Parts & Tires) 285,000 6,270,066
- ----------------------------------------------------------------
Deutsche Bank A.G.
(Banking)(a) 170,500 8,998,556
- ----------------------------------------------------------------
Dresdner Bank A.G.
(Banking) 240,000 7,677,561
- ----------------------------------------------------------------
SAP A.G.
(Computer Software/Services)(a) 27,000 4,915,752
- ----------------------------------------------------------------
SAP A.G. -Preferred
(Computer Software/Services) 27,000 4,971,879
- ----------------------------------------------------------------
Schering A.G.
(Medical-Drugs) 94,000 9,010,278
- ----------------------------------------------------------------
SGL Carbon A.G.
(Metals-Miscellaneous) 50,500 7,042,239
- ----------------------------------------------------------------
VEBA A.G.
(Electric Power) 155,000 7,983,601
- ----------------------------------------------------------------
87,931,977
- ----------------------------------------------------------------
HONG KONG-7.63%
Asia Satellite Telecommunications
Holdings Ltd.
(Telecommunications) 1,000,000 2,536,629
- ----------------------------------------------------------------
Asia Satellite Telecommunications
Holdings Ltd.-ADR
(Telecommunications) 174,500 4,493,375
- ----------------------------------------------------------------
Cheung Kong (Holdings) Ltd.
(Real Estate) 1,795,000 15,756,793
- ----------------------------------------------------------------
Cosco Pacific Ltd.
(Transportation-Miscellaneous) 14,908,000 20,880,630
- ----------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banking) 2,564,700 12,183,691
- ----------------------------------------------------------------
First Pacific Company Ltd.
(Conglomerates) 11,493,908 13,724,734
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HONG KONG-(CONTINUED)
Hang Seng Bank Ltd.
(Banking) 834,100 $ 9,394,594
- ----------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
(Electric Power) 7,764,960 12,329,311
- ----------------------------------------------------------------
HSBC Holdings PLC
(Banking) 675,000 17,078,681
- ----------------------------------------------------------------
Hutchison Whampoa Ltd.
(Conglomerates)(a) 1,830,000 13,583,554
- ----------------------------------------------------------------
New World Infrastructure Ltd.
(Building Materials)(a) 3,321,400 9,389,874
- ----------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Real Estate) 1,240,100 13,447,157
- ----------------------------------------------------------------
144,799,023
- ----------------------------------------------------------------
INDONESIA-1.00%
PT Bank Dagang Nasional
(Banking) 602,500 601,260
- ----------------------------------------------------------------
PT Bank Internasional Indonesia
(Banking)(a) 19,635,906 14,141,085
- ----------------------------------------------------------------
PT Indosat
(Telecommunications) 933,000 2,572,469
- ----------------------------------------------------------------
PT Indosat-ADR
(Telecommunications) 63,500 1,746,250
- ----------------------------------------------------------------
19,061,064
- ----------------------------------------------------------------
IRELAND-0.28%
Elan Corp. PLC-ADR
(Medical-Drugs)(a) 158,800 5,399,200
- ----------------------------------------------------------------
ISRAEL-0.50%
Teva Pharmaceutical Industries
Ltd.-ADR
(Medical-Drugs) 186,800 9,480,100
- ----------------------------------------------------------------
ITALY-3.25%
Credito Italiano S.p.A.
(Banking)(a) 6,200,000 8,694,322
- ----------------------------------------------------------------
Edison S.p.A.
(Electric Power) 1,940,000 10,278,003
- ----------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A.
(Oil & Gas-Exploration &
Production) 2,050,000 10,435,732
- ----------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A.
(Banking) 825,000 7,012,747
- ----------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications) 3,800,000 11,920,394
- ----------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 5,000,000 13,237,549
- ----------------------------------------------------------------
61,578,747
- ----------------------------------------------------------------
JAPAN-14.47%
Advantest Corp.
(Semiconductors) 249,700 13,868,397
- ----------------------------------------------------------------
Bridgestone Corp.
(Automobile/Truck Parts & Tires) 685,000 14,570,449
- ----------------------------------------------------------------
Canon, Inc.
(Office Automation) 797,000 18,899,200
- ----------------------------------------------------------------
DDI Corp.
(Telecommunications) 2,120 14,079,332
- ----------------------------------------------------------------
Fuji Photo Film Co.
(Electronic
Components/Miscellaneous) 530,000 20,250,522
- ----------------------------------------------------------------
Honda Motor Co., Ltd.
(Automobile-Manufacturers) 610,000 18,934,100
- ----------------------------------------------------------------
</TABLE>
FS-45
<PAGE> 186
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Ibiden Co., Ltd.
(Building Materials) 946,000 $ 12,445,898
- ----------------------------------------------------------------
Matsushita Electric Industrial Co.
Ltd.
(Electronic
Components/Miscellaneous) 569,000 9,099,697
- ----------------------------------------------------------------
Nippon Telegraph & Telephone Corp.
(Telecommunications) 2,320 16,357,978
- ----------------------------------------------------------------
Nippon Television Network
(Advertising/Broadcasting) 26,530 7,816,772
- ----------------------------------------------------------------
NSK Ltd.
(Metals) 1,750,000 10,560,523
- ----------------------------------------------------------------
NTT Data Communications Systems Co.
(Computer Software/Services) 4,500 13,152,401
- ----------------------------------------------------------------
Okuma Corp.
(Machine Tools) 871,000 6,861,780
- ----------------------------------------------------------------
Ricoh Corp. Ltd.
(Office Automation) 1,095,000 13,025,958
- ----------------------------------------------------------------
SMC
(Machinery-Miscellaneous) 100,000 7,326,584
- ----------------------------------------------------------------
Sony Corp.
(Electronic
Components/Miscellaneous) 234,000 17,033,600
- ----------------------------------------------------------------
TDK Corp.
(Electronic
Components/Miscellaneous) 244,000 17,588,530
- ----------------------------------------------------------------
Tokyo Electron Ltd.
(Electronic
Components/Miscellaneous)(a) 397,100 15,329,027
- ----------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers) 604,000 17,510,694
- ----------------------------------------------------------------
Yamatake-Honeywell
(Airlines) 665,000 9,901,524
- ----------------------------------------------------------------
274,612,966
- ----------------------------------------------------------------
MALAYSIA-1.55%
Commerce Asset Holdings Berhad
(Finance-Asset Management) 1,469,000 8,776,087
- ----------------------------------------------------------------
Edaran Otomobil Nasional Berhad
(Automobile-Manufacturers) 618,000 5,833,440
- ----------------------------------------------------------------
Malayan Banking Berhad
(Banking) 1,032,000 10,275,609
- ----------------------------------------------------------------
UMW Holdings Berhad
(Finance-Asset Management) 856,000 4,500,239
- ----------------------------------------------------------------
29,385,375
- ----------------------------------------------------------------
MEXICO-2.18%
Coca-Cola Femsa S.A.-ADR
(Beverages-Soft Drinks) 142,100 4,955,738
- ----------------------------------------------------------------
Fomento Economico Mexicano, S.A. de
C.V.-Class B
(Beverages-Alcoholic)(a) 1,900,050 8,918,626
- ----------------------------------------------------------------
Grupo Industrial Maseca S.A. de
C.V.-Class B
(Food/Processing) 6,469,600 6,334,045
- ----------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Advertising/Broadcasting)(a) 270,800 6,262,250
- ----------------------------------------------------------------
Panamerican Beverages, Inc.-Class A
(Beverages-Soft Drinks) 514,000 14,906,000
- ----------------------------------------------------------------
41,376,659
- ----------------------------------------------------------------
NETHERLANDS-5.01%
DSM N.V.
(Chemicals-Specialty)(a) 80,750 8,040,600
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Elsevier N.V.
(Publishing) 383,000 $ 6,133,347
- ----------------------------------------------------------------
Getronics N.V.
(Computer Software/Services) 292,000 8,842,581
- ----------------------------------------------------------------
Gucci Group N.V.-New York
shares-ADR
(Textiles) 61,000 4,231,875
- ----------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food & Drug) 142,000 9,693,579
- ----------------------------------------------------------------
Nutricia Verenigde Bedrijven N.V.
(Food/Processing) 69,150 10,491,577
- ----------------------------------------------------------------
Oce-Van Der Grinten N.V.
(Office Automation) 60,000 7,258,636
- ----------------------------------------------------------------
Philips Electronics N.V.
(Electronic
Components/Miscellaneous)(a) 358,000 18,687,368
- ----------------------------------------------------------------
Royal Dutch Petroleum Co.
(Oil & Gas-Services) 44,500 7,953,036
- ----------------------------------------------------------------
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit
(Publishing) 332,000 6,867,320
- ----------------------------------------------------------------
Wolters Kluwer N.V.
(Publishing) 58,000 6,873,787
- ----------------------------------------------------------------
95,073,706
- ----------------------------------------------------------------
NORWAY-0.42%
Storebrand A.S.A.
(Insurance-Multi-Line
Property)(a) 1,300,000 7,941,077
- ----------------------------------------------------------------
PHILIPPINES-1.99%
C & P Homes, Inc.
(Home Building) 19,200,000 7,281,001
- ----------------------------------------------------------------
Filinvest Land Inc.
(Real Estate)(a) 27,303,500 6,419,480
- ----------------------------------------------------------------
Metro Pacific Corp.
(Conglomerates) 33,845,000 7,829,143
- ----------------------------------------------------------------
Metropolitan Bank & Trust Co.
(Banking) 379,174 7,764,655
- ----------------------------------------------------------------
Philippine Long Distance Telephone
Co.
(Telecommunications) 84,480 4,821,479
- ----------------------------------------------------------------
Philippine Long Distance Telephone
Co.-ADR
(Telecommunications) 59,600 3,322,700
- ----------------------------------------------------------------
Southeast Asia Cement Holdings,
Inc.
(Building Materials)(a) 8,777,000 406,065
- ----------------------------------------------------------------
37,844,523
- ----------------------------------------------------------------
PORTUGAL-0.99%
Portugal Telecom S.A.
(Telecommunications)(a) 510,000 18,789,474
- ----------------------------------------------------------------
SINGAPORE-1.79%
City Developments Ltd.
(Real Estate) 1,600,000 12,932,642
- ----------------------------------------------------------------
DBS Land Ltd.
(Real Estate) 3,391,000 10,963,648
- ----------------------------------------------------------------
Overseas Union Bank Ltd.
(Banking) 1,539,000 10,100,518
- ----------------------------------------------------------------
33,996,808
- ----------------------------------------------------------------
SOUTH AFRICA-0.40%
Sasol Ltd.
(Oil & Gas-Exploration &
Production) 590,700 7,572,225
- ----------------------------------------------------------------
</TABLE>
FS-46
<PAGE> 187
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN-3.15%
Banco Bilbao Vizcaya, S.A.
(Banking) 144,000 $ 9,691,597
- ----------------------------------------------------------------
Banco Popular Espanol S.A.
(Banking) 47,000 9,965,459
- ----------------------------------------------------------------
Empresa Nacional de Electricidad,
S.A.
(Electric Power) 125,250 8,755,207
- ----------------------------------------------------------------
Gas Natural SDG, S.A.-Class E
(Gas Distribution) 40,000 8,494,922
- ----------------------------------------------------------------
Iberdrola S.A.
(Electric Power) 745,000 8,407,715
- ----------------------------------------------------------------
Telefonica de Espana
(Telecommunications) 565,000 14,472,316
- ----------------------------------------------------------------
59,787,216
- ----------------------------------------------------------------
SWEDEN-1.64%
Hennes & Mauritz A.B.-B Shares
(Retail-Stores) 74,000 10,706,592
- ----------------------------------------------------------------
Securitas A.B.-Class B
(Security & Safety Services) 267,000 6,432,751
- ----------------------------------------------------------------
Sparbanken Sverige A.B.-Class A
(Banking) 530,000 9,458,615
- ----------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 133,480 4,488,265
- ----------------------------------------------------------------
31,086,223
- ----------------------------------------------------------------
SWITZERLAND-3.09%
ABB A.G.
(Engineering & Construction)(a) 7,500 9,081,813
- ----------------------------------------------------------------
Adecco S.A.
(Business Services) 30,000 10,012,889
- ----------------------------------------------------------------
Ciba Specialty Chemicals A.G.
(Chemicals-Specialty)(a) 11,046 951,660
- ----------------------------------------------------------------
Clariant A.G.
(Chemicals-Specialty) 19,200 10,993,013
- ----------------------------------------------------------------
Nestle S.A.
(Food/Processing)(a) 7,800 9,471,542
- ----------------------------------------------------------------
Novartis A.G.
(Medical-Drugs)(a) 13,696 18,043,302
- ----------------------------------------------------------------
58,554,219
- ----------------------------------------------------------------
THAILAND-0.23%
Bank of Ayudhya Public Co., Ltd.
(Banking) 120,150 308,165
- ----------------------------------------------------------------
Krung Thai Bank Public Co. Ltd.
(Banking) 1,502,920 1,884,224
- ----------------------------------------------------------------
Siam Commercial Bank Public Co.
Ltd.
(Banking) 375,500 2,199,311
- ----------------------------------------------------------------
4,391,700
- ----------------------------------------------------------------
UNITED KINGDOM-16.95%
Airtours PLC
(Leisure & Recreation) 466,450 6,932,490
- ----------------------------------------------------------------
B.A.T. Industries PLC
(Conglomerates) 1,285,000 10,850,648
- ----------------------------------------------------------------
Bass PLC
(Beverages-Alcoholic) 650,000 8,391,005
- ----------------------------------------------------------------
British Aerospace PLC
(Aerospace/Defense) 425,000 9,030,389
- ----------------------------------------------------------------
British Petroleum Co. PLC
(Oil & Gas-Services) 1,410,000 16,179,579
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Burton Group PLC
(Retail-Stores) 3,140,000 $ 7,760,940
- ----------------------------------------------------------------
Caradon PLC
(Building Materials) 1,800,000 7,249,595
- ----------------------------------------------------------------
Compass Group PLC
(Restaurants) 970,000 10,646,261
- ----------------------------------------------------------------
Dixons Group PLC
(Retail-Stores) 1,370,000 11,235,332
- ----------------------------------------------------------------
EMAP PLC
(Publishing) 625,000 7,789,708
- ----------------------------------------------------------------
FKI PLC
(Conglomerates) 1,110,000 3,274,230
- ----------------------------------------------------------------
General Electric Co. PLC
(Electronic
Components/Miscellaneous) 1,140,000 6,780,875
- ----------------------------------------------------------------
GKN PLC
(Automobile/Truck Parts & Tires) 530,000 8,169,044
- ----------------------------------------------------------------
Granada Group PLC
(Leisure & Recreation) 785,000 11,323,339
- ----------------------------------------------------------------
Guinness PLC
(Beverages-Alcoholic) 2,130,000 17,606,159
- ----------------------------------------------------------------
Hays PLC
(Business Services) 1,050,050 9,300,686
- ----------------------------------------------------------------
Kingfisher PLC
(Retail-Stores) 825,000 8,931,929
- ----------------------------------------------------------------
Ladbroke Group PLC
(Hotels/Motels) 4,325,000 16,227,512
- ----------------------------------------------------------------
Lloyds TSB Group PLC
(Finance-Savings & Loans) 570,000 5,210,373
- ----------------------------------------------------------------
LucasVarity PLC
(Automobile/Truck Parts &
Tires)(a) 2,300,000 6,970,827
- ----------------------------------------------------------------
Marks & Spencer PLC
(Retail-Stores) 850,000 6,750,405
- ----------------------------------------------------------------
Medeva PLC
(Medical-Drugs) 1,490,000 7,244,733
- ----------------------------------------------------------------
Next PLC
(Retail-Stores) 1,010,000 10,664,749
- ----------------------------------------------------------------
Orange PLC
(Telecommunications)(a) 2,550,000 8,927,066
- ----------------------------------------------------------------
Peninsular & Oriental Steam
Navigation Co.
(The)
(Transportation-Miscellaneous) 85,100 828,242
- ----------------------------------------------------------------
Provident Financial PLC
(Finance-Consumer Credit) 942,400 8,721,400
- ----------------------------------------------------------------
Railtrack Group PLC
(Railroads) 1,450,000 10,939,627
- ----------------------------------------------------------------
Rentokil Initial PLC
(Business Services) 1,380,000 9,047,164
- ----------------------------------------------------------------
Scottish & Newcastle PLC
(Beverages-Alcoholic) 730,000 7,879,741
- ----------------------------------------------------------------
Siebe PLC
(Electronic
Components/Miscellaneous) 370,000 5,475,041
- ----------------------------------------------------------------
Smiths Industries PLC
(Electronics/Defense) 256,000 3,134,652
- ----------------------------------------------------------------
Standard Chartered PLC
(Finance-Asset Management) 645,000 9,758,630
- ----------------------------------------------------------------
Tarmac PLC
(Building Materials) 5,000,000 10,008,104
- ----------------------------------------------------------------
Unilever PLC
(Consumer Non-Durables) 516,000 13,569,044
- ----------------------------------------------------------------
</TABLE>
FS-47
<PAGE> 188
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Vodafone Group PLC
(Telecommunications) 1,865,000 $ 8,327,512
- ----------------------------------------------------------------
WPP Group PLC
(Advertising/Broadcasting) 2,575,000 10,537,884
- ----------------------------------------------------------------
321,674,915
- ----------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 1,798,955,748
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(d)
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS-1.79%
FRANCE-0.42%
AXA-UAP
(Insurance-Life & Health),
Conv. Sr. Deb., 4.50%,
01/01/99 FRF 33,885,000 8,055,416
- ---------------------------------------------------------------
GERMANY-0.52%
Volkswagen International Finance
N.V.
(Automobile-Manufacturers),
Conv. Gtd. Notes, 3.00%,
01/24/02 DEM 7,880,000 9,790,900
- ---------------------------------------------------------------
HONG KONG-0.12%
New World Infrastructure Ltd.
(Banking), Conv. Bonds, 5.00%,
07/15/01 $ 250,000 284,375
- ---------------------------------------------------------------
New World Infrastructure Ltd.
(Banking), Conv. Bonds, 5.00%,
07/15/01
(Acquired 04/10/97 - 04/11/97;
cost $2,056,313)(c) $ 1,750,000 1,990,625
- ---------------------------------------------------------------
2,275,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
ITALY-0.43%
Pirelli S.p.A.
(Automobile/Truck Parts &
Tires), Conv. Bonds, 5.00%,
12/31/98 ITL 10,062,964,600 $ 8,140,059
- ---------------------------------------------------------------
JAPAN-0.20%
Ricoh Co., Ltd.
(Office Automation), Conv.
Bonds,
0.35%, 03/31/03 JPY 395,000,000 3,896,010
- ---------------------------------------------------------------
PHILIPPINES-0.10%
Metropolitan Bank & Trust
International Finance Ltd.
(Banking), Conv. Deb., 2.75%,
09/10/00 PHP 1,535,000 1,964,800
- ---------------------------------------------------------------
Total Foreign Convertible Bonds 34,122,185
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-1.94%(e)
Greenwich Capital Markets, Inc.,
5.55%, 05/01/97(f) 36,790,376 36,790,376
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.54% 1,869,868,309
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.46% 27,639,417
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,897,507,726
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
DEM - German Deutschemark
FRF - French Franc
GDR - Global Depositary Receipt
Gtd. - Guaranteed
HKD - Hong Kong Dollar
ITL - Italian Lira
JPY - Japanese Yen
PHP - Philippine Peso
Sr. - Senior
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Issued as a unit. This unit also includes 240,000 warrants exchangeable into
one ordinary share per warrant.
(c) Restricted securities. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of these securities has been determined in accordance
with procedures established by the Board of Directors. The aggregate market
value of these securities at 04/30/97 was $10,432,997 which represented
0.55% of the Fund's net assets.
(d) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(e) 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% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 04/30/97 with a maturing value of
$500,077,083. Collateralized by $1,057,237,408 U.S. Government obligations,
0% to 14.00% due 06/01/97 to 10/01/30 with an aggregate market value at
04/30/97 of $510,000,397.
See Notes to Financial Statements.
FS-48
<PAGE> 189
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,584,256,086) $1,869,868,309
- ------------------------------------------------------------
Foreign currencies, at market value
(cost $21,256,687) 20,972,541
- ------------------------------------------------------------
Receivables for:
Investments sold 30,169,202
- ------------------------------------------------------------
Capital stock sold 9,467,901
- ------------------------------------------------------------
Dividends and interest 7,629,534
- ------------------------------------------------------------
Investment for deferred compensation plan 20,173
- ------------------------------------------------------------
Other assets 77,624
- ------------------------------------------------------------
Total assets 1,938,205,284
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 34,722,376
- ------------------------------------------------------------
Capital stock reacquired 2,511,451
- ------------------------------------------------------------
Deferred compensation 20,173
- ------------------------------------------------------------
Accrued advisory fees 1,345,407
- ------------------------------------------------------------
Accrued administrative services fees 8,587
- ------------------------------------------------------------
Accrued directors' fees 3,619
- ------------------------------------------------------------
Accrued distribution fees 996,324
- ------------------------------------------------------------
Accrued transfer agent fees 408,011
- ------------------------------------------------------------
Accrued operating expenses 681,610
- ------------------------------------------------------------
Total liabilities 40,697,558
- ------------------------------------------------------------
Net assets applicable to shares outstanding $1,897,507,726
============================================================
NET ASSETS:
Class A $1,368,063,068
============================================================
Class B $ 529,444,658
============================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 86,396,122
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 34,067,228
============================================================
Class A:
Net asset value and redemption price per
share $ 15.83
============================================================
Offering price per share:
(Net asset value of $15.83 divided
by 94.50%) $ 16.75
============================================================
Class B:
Net asset value and offering price per
share $ 15.54
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,743,173 foreign
withholding tax) $11,783,482
- -----------------------------------------------------------
Interest 1,993,445
- -----------------------------------------------------------
Total investment income 13,776,927
- -----------------------------------------------------------
EXPENSES:
Advisory fees 7,878,482
- -----------------------------------------------------------
Administrative services fees 52,210
- -----------------------------------------------------------
Directors' fees 6,892
- -----------------------------------------------------------
Distribution fees-Class A 1,863,767
- -----------------------------------------------------------
Distribution fees-Class B 2,265,816
- -----------------------------------------------------------
Custodian fees 687,636
- -----------------------------------------------------------
Transfer agent fees-Class A 1,051,021
- -----------------------------------------------------------
Transfer agent fees-Class B 570,724
- -----------------------------------------------------------
Other 365,738
- -----------------------------------------------------------
Total expenses 14,742,286
- -----------------------------------------------------------
Less: Advisory fees waived (299,946)
- -----------------------------------------------------------
Expenses paid indirectly (14,119)
- -----------------------------------------------------------
Net expenses 14,428,221
- -----------------------------------------------------------
Net investment income (loss) (651,294)
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) on sales of:
Investment securities 1,824,102
- -----------------------------------------------------------
Foreign currencies (1,195,856)
- -----------------------------------------------------------
628,246
- -----------------------------------------------------------
Net unrealized appreciation of:
Investment securities 90,680,075
- -----------------------------------------------------------
Foreign currencies 92,762
- -----------------------------------------------------------
90,772,837
- -----------------------------------------------------------
Net gain on investment securities and
foreign currencies 91,401,083
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $90,749,789
===========================================================
</TABLE>
See Notes to Financial Statements.
FS-49
<PAGE> 190
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the year ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (651,294) $ 1,130,094
- -----------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities and
foreign currencies 628,246 43,829,404
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 90,772,837 98,461,748
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 90,749,789 143,421,246
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (1,581,010) (295,965)
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized capital gains:
Class A (31,480,110) (18,468,041)
- -----------------------------------------------------------------------------------------------
Class B (11,363,723) (1,875,276)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 223,501,986 350,398,961
- -----------------------------------------------------------------------------------------------
Class B 150,931,326 296,841,074
- -----------------------------------------------------------------------------------------------
Net increase in net assets 420,758,258 770,021,999
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,476,749,468 706,727,469
- -----------------------------------------------------------------------------------------------
End of period $1,897,507,726 $1,476,749,468
- -----------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,612,559,633 $1,238,126,321
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (1,119,193) 1,113,111
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities
and foreign currencies 733,683 42,949,270
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 285,333,603 194,560,766
- -----------------------------------------------------------------------------------------------
$1,897,507,726 $1,476,749,468
- -----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
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: Class A shares and 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 Fund's investment objective is to provide long-term growth of capital. The
Fund seeks to achieve its objective by investing in a diversified portfolio of
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) is valued at the last sales price on the exchange where
the security is principally traded or, lacking any sales on a particular day,
at the mean between the closing bid and asked prices on that day. If a mean
is not
FS-50
<PAGE> 191
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Securities traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) are valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. Securities
reported on the NASDAQ National Market System are valued at the last sales
price on the valuation date or absent a last sales price, at the mean of the
closing bid and asked prices. Debt obligations (including convertible bonds)
are valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors, such as
yield, type of issue, coupon rate and maturity date. Securities for which
market quotations are either not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Company's 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 would not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at the date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
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 currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses 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. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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.
Under the voluntary waiver, 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 voluntary and the Board of Directors
of the Company would be advised of any decision by AIM to discontinue the
waiver. During the six months ended April 30, 1997, AIM waived fees of $299,946.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended April 30, 1997, AIM
was reimbursed $52,210 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the six months ended April 30,
1997, the Fund paid AFS $833,648 for such services.
The Fund received reductions in transfer agency fees of $13,313 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $806 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $14,119 during the six months ended
April 30, 1997.
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
distribution Plans pursuant to
FS-51
<PAGE> 192
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, pays
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. Of the
total compensation payable, the Fund pays a service fee of 0.25% 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
Fund, pursuant to the Class B Plan, pays AIM Distributors 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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more designees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) any contingent deferred sales charges received by
AIM Distributors related to the Class B shares. During the six months ended
April 30, 1997, the Class A shares and the Class B shares paid AIM Distributors
$1,863,767 and $2,265,816, respectively, as compensation under the Plans.
AIM Distributors received commissions of $632,873 from sales of the Class A
shares of the Fund during the six months ended April 30, 1997. 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 six months ended April 30,
1997, AIM Distributors received commissions of $45,741 in contingent deferred
sales charges imposed on redemptions of Fund shares. Certain officers and
directors of the Company are officers and directors of AIM, AFS and AIM
Distributors.
During the six months ended April 30, 1997, the Fund incurred legal fees of
$4,669 for services rendered by the law firm of Kramer, Levin, Naftalis &
Frankel as counsel to the Company's directors. A member of that firm is a
director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 1997, the Fund did not borrow under the
line of credit agreement. The funds which are party to the line of credit are
charged a commitment fee of 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1997 was
$785,132,255 and $396,864,292, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of April 30, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $324,485,027
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (38,950,109)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $285,534,918
=========================================================
</TABLE>
Costs of investments for tax purposes is $1,584,333,391.
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the six months ended
April 30, 1997 and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 42,678,604 673,877,033 41,055,911 $ 601,559,902
- --------------------- ----------- ------------- ----------- -------------
Class B 10,911,373 169,633,951 21,641,528 313,690,762
- --------------------- ----------- ------------- ----------- -------------
Issued as
reinvestment of
dividends:
Class A 2,035,615 31,230,705 1,305,811 17,576,215
- --------------------- ----------- ------------- ----------- -------------
Class B 707,989 10,690,410 130,593 1,741,975
- --------------------- ----------- ------------- ----------- -------------
Reacquired:
Class A (30,426,860) (481,605,752) (18,205,834) (268,737,156)
- --------------------- ----------- ------------- ----------- -------------
Class B (1,890,100) (29,393,035) (1,270,776) (18,591,663)
- --------------------- ----------- ------------- ----------- -------------
24,016,621 $ 374,433,312 44,657,233 $ 647,240,035
===================== =========== ============= =========== =============
</TABLE>
FS-52
<PAGE> 193
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
the six months ended April 30, 1997, each of the years in the four-year period
ended October 31, 1996 and the period November 5, 1991 (date operations
commenced) through October 31, 1992 and for a Class B share outstanding during
the six months ended April 30, 1997, each of the years in the two-year period
ended October 31, 1996 and the period September 15, 1994 (date sales commenced)
through October 31, 1994.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, -------------------------------------
1997 1996 1995 1994
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 15.37 $ 13.65 $ 13.50 $ 12.18
- -------------------------------------------------- ----------- ----------- --------- ---------
Income from investment operations:
Net investment income 0.01 0.04(b) 0.01 0.02
- -------------------------------------------------- ----------- ----------- --------- ---------
Net gains on securities (both realized and
unrealized) 0.90 2.07 0.62 1.31
- -------------------------------------------------- ----------- ----------- --------- ---------
Total from investment operations 0.91 2.11 0.63 1.33
- -------------------------------------------------- ----------- ----------- --------- ---------
Less distributions:
Dividends from net investment income (0.02) (0.01) (0.04) (0.01)
- -------------------------------------------------- ----------- ----------- --------- ---------
Distributions from capital gains (0.43) (0.38) (0.44) --
- -------------------------------------------------- ----------- ----------- --------- ---------
Total distributions (0.45) (0.39) (0.48) (0.01)
- -------------------------------------------------- ----------- ----------- --------- ---------
Net asset value, end of period $ 15.83 $ 15.37 $ 13.65 $ 13.50
================================================== =========== =========== ========= =========
Total return(c) 6.01% 15.79% 5.24% 10.94%
================================================== =========== =========== ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,368,063 $ 1,108,395 $ 654,764 $ 708,159
================================================== =========== =========== ========= =========
Ratio of expenses to average net assets(d) 1.50%(e)(f) 1.58% 1.67% 1.64%
================================================== =========== =========== ========= =========
Ratio of net investment income to average net
assets(h) 0.13%(e) 0.25% 0.10% 0.22%
================================================== =========== =========== ========= =========
Portfolio turnover rate 24% 66% 68% 67%
================================================== =========== =========== ========= =========
Average brokerage commission rate(i) $ 0.0196 $ 0.0192 N/A N/A
================================================== =========== =========== ========= =========
<CAPTION>
OCTOBER 31,
---------------------
1993 1992
--------- ---------
<S> <C> <C>
CLASS A:
Net asset value, beginning of period $ 8.88 $ 8.61(a)
- -------------------------------------------------- --------- ---------
Income from investment operations:
Net investment income 0.02 0.03
- -------------------------------------------------- --------- ---------
Net gains on securities (both realized and
unrealized) 3.29 0.26
- -------------------------------------------------- --------- ---------
Total from investment operations 3.31 0.29
- -------------------------------------------------- --------- ---------
Less distributions:
Dividends from net investment income (0.01) (0.02)
- -------------------------------------------------- --------- ---------
Distributions from capital gains -- --
- -------------------------------------------------- --------- ---------
Total distributions (0.01) (0.02)
- -------------------------------------------------- --------- ---------
Net asset value, end of period $ 12.18 $ 8.88
================================================== ========= =========
Total return(c) 37.36% 3.36%
================================================== ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 372,282 $ 122,663
================================================== ========= =========
Ratio of expenses to average net assets(d) 1.78% 1.80%(g)
================================================== ========= =========
Ratio of net investment income to average net
assets(h) 0.28% 0.30%(g)
================================================== ========= =========
Portfolio turnover rate 62% 41%
================================================== ========= =========
Average brokerage commission rate(i) N/A N/A
================================================== ========= =========
</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) Calculated using average shares outstanding.
(c) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(d) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets before fee waivers and expense reimbursements are 1.53%
(annualized), 1.60%, 1.68% and 1.89% (annualized), respectively for 1997,
1996, 1995 and 1992.
(e) Ratios are annualized and based on average net assets of $1,252,808,764.
(f) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been
1.49%.
(g) Annualized.
(h) After fee waivers and expense reimbursements. Ratios of net investment
income to average net assets before fee waivers and expense reimbursements
are 0.09% (annualized), 0.22%, 0.09% and 0.22% (annualized), respectively
for 1997, 1996, 1995 and 1992.
(i) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
<TABLE>
<CAPTION>
OCTOBER 31,
APRIL 30, --------------------------------------
1997 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 15.13 $ 13.54 $ 13.49 $ 13.42
- ------------------------------------------------------------ --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss) (0.05) (0.07)(a) (0.09) (0.01)
- ------------------------------------------------------------ --------- --------- --------- ---------
Net gains on securities (both realized and unrealized) 0.89 2.04 0.61 0.08
- ------------------------------------------------------------ --------- --------- --------- ---------
Total from investment operations 0.84 1.97 0.52 0.07
- ------------------------------------------------------------ --------- --------- --------- ---------
Less distributions:
Dividends from net investment income -- -- (0.03) --
- ------------------------------------------------------------ --------- --------- --------- ---------
Distributions from capital gains (0.43) (0.38) (0.44) --
- ------------------------------------------------------------ --------- --------- --------- ---------
Total distributions (0.43) (0.38) (0.47) --
- ------------------------------------------------------------ --------- --------- --------- ---------
Net asset value, end of period $ 15.54 $ 15.13 $ 13.54 $ 13.49
============================================================ ========= ========= ========= =========
Total return(b) 5.65% 14.88% 4.35% 0.52%
============================================================ ========= ========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 529,445 $ 368,355 $ 51,964 $ 4,833
============================================================ ========= ========= ========= =========
Ratio of expenses to average net assets(c) 2.27%(d)(e) 2.35% 2.55% 2.53%(f)
============================================================ ========= ========= ========= =========
Ratio of net investment income (loss) to average net
assets(g) (0.65)%(d) (0.53)% (0.78)% (0.67)%(f)
============================================================ ========= ========= ========= =========
Portfolio turnover rate 24% 66% 68% 67%
============================================================ ========= ========= ========= =========
Average brokerage commission rate(h) $ 0.0196 $ 0.0192 N/A N/A
============================================================ ========= ========= ========= =========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and for periods less than
one year, total returns are not annualized.
(c) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets before fee waivers are 2.31% (annualized), 2.37% and 2.56%,
respectively for 1997, 1996 and 1995.
(d) Ratios are annualized and based on average net assets of $456,918,626.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(f) Annualized.
(g) After fee waivers and expense reimbursements. Ratios of net investment
income (loss) to average net assets before fee waivers are (0.69)%
(annualized), (0.55)% and (0.79)%, respectively for 1997, 1996 and 1995.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
FS-53
<PAGE> 194
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) To approve the elimination of the fundamental investment policy prohibiting
investments in companies with less than three years of continuous operation.
(5) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ending October 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes For Against Abstentions
--------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 130,433,380 0 3,798,959
Bruce L. Crockett........................................... 130,563,964 0 3,668,375
Owen Daly II................................................ 130,421,284 0 3,811,055
Carl Frischling............................................. 130,515,713 0 3,716,626
Robert H. Graham............................................ 130,587,498 0 3,644,841
John F. Kroeger............................................. 130,446,846 0 3,785,493
Lewis F. Pennock............................................ 130,506,142 0 3,726,197
Ian W. Robinson............................................. 130,446,093 0 3,786,246
Louis S. Sklar.............................................. 130,573,480 0 3,658,859
(2) Approval of new Investment Advisory Agreement............... 54,370,676 742,775 2,283,704
(3) Elimination of policy restricting investments in other
investment companies........................................ 39,608,624 1,920,390 2,447,220
(4) Elimination of policy prohibiting investments in companies
with less than three years of operations.................... 39,192,652 2,454,024 2,329,557
(5) KPMG Peat Marwick LLP....................................... 128,509,801 995,829 4,726,709
</TABLE>
FS-54
<PAGE> 195
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 the AIM Global Aggressive Growth Fund (a
portfolio of AIM International Funds, Inc.), including the
schedule of investments, as of October 31, 1996, and the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended and the financial
highlights for the two-year period then ended and the
period September 15, 1994 (date operations commenced)
through October 31, 1994. 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, 1996, 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 Global
Aggressive Growth Fund as of October 31, 1996, 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 the
two-year period then ended and the period September 15,
1994 (date operations commenced) through October 31, 1994,
in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-55
<PAGE> 196
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-38.11%
ADVERTISING/BROADCASTING-0.80%
Clear Channel Communications,
Inc.(a) 62,300 $ 4,547,900
- -----------------------------------------------------------------
Heftel Broadcasting Corp.(a) 100,000 3,625,000
- -----------------------------------------------------------------
Jacor Communications, Inc.(a) 100,000 2,800,000
- -----------------------------------------------------------------
Paxson Communications Corp.(a) 70,000 621,250
- -----------------------------------------------------------------
SFX Broadcasting, Inc.-Class A(a) 50,000 2,150,000
- -----------------------------------------------------------------
13,744,150
- -----------------------------------------------------------------
AEROSPACE/DEFENSE-0.17%
BE Aerospace, Inc.(a) 137,500 2,990,625
- -----------------------------------------------------------------
AIRLINES-0.06%
Reno Air, Inc.(a) 150,000 1,050,000
- -----------------------------------------------------------------
AUTOMOBILE/TRUCKS PARTS &
TIRES-0.04%
Borg-Warner Automotive, Inc. 8,000 307,000
- -----------------------------------------------------------------
Mark IV Industries, Inc. 15,750 340,594
- -----------------------------------------------------------------
647,594
- -----------------------------------------------------------------
BANKING-0.51%
Bank of Boston Corp. 45,000 2,880,000
- -----------------------------------------------------------------
Cole Taylor Financial Group, Inc. 100,000 3,006,250
- -----------------------------------------------------------------
Washington Mutual, Inc. 70,800 2,991,300
- -----------------------------------------------------------------
8,877,550
- -----------------------------------------------------------------
BIOTECHNOLOGY-0.11%
Guidant Corp. 40,900 1,886,512
- -----------------------------------------------------------------
BUSINESS SERVICES-1.34%
APAC Teleservices, Inc.(a) 40,000 1,845,000
- -----------------------------------------------------------------
Cambridge Technology Partners,
Inc.(a) 100,200 3,306,600
- -----------------------------------------------------------------
Career Horizons, Inc.(a) 80,300 3,262,188
- -----------------------------------------------------------------
Claremont Technology Group,
Inc.(a) 50,700 1,546,350
- -----------------------------------------------------------------
CUC International Inc.(a) 56,550 1,385,475
- -----------------------------------------------------------------
Data Processing Resources Corp.(a) 13,500 271,688
- -----------------------------------------------------------------
Equifax, Inc. 5,200 154,700
- -----------------------------------------------------------------
IntelliQuest Information Group,
Inc.(a) 70,000 1,540,000
- -----------------------------------------------------------------
Pharmaceutical Product
Development, Inc.(a) 100,810 1,927,991
- -----------------------------------------------------------------
RemedyTemp, Inc.-Class A(a) 38,000 760,000
- -----------------------------------------------------------------
Robert Half International, Inc.(a) 65,000 2,608,125
- -----------------------------------------------------------------
Romac International, Inc.(a) 50,000 1,437,500
- -----------------------------------------------------------------
Sterling Healthcare Group(a) 12,100 213,263
- -----------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 32,300 791,350
- -----------------------------------------------------------------
Vincam Group, Inc. (The)(a) 49,500 1,571,625
- -----------------------------------------------------------------
Whittman-Hart, Inc.(a) 10,800 513,000
- -----------------------------------------------------------------
23,134,855
- -----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.31%
Airgas, Inc.(a) 150,000 3,393,750
- -----------------------------------------------------------------
IMC Global, Inc. 50,000 1,875,000
- -----------------------------------------------------------------
5,268,750
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER MINI/PCS-0.65%
Dell Computer Corp.(a) 50,000 $ 4,068,750
- -----------------------------------------------------------------
Rational Software Corp.(a) 50,000 1,918,750
- -----------------------------------------------------------------
Sun Microsystems, Inc.(a) 86,100 5,252,100
- -----------------------------------------------------------------
11,239,600
- -----------------------------------------------------------------
COMPUTER NETWORKING-1.34%
ACT Networks, Inc.(a) 83,400 2,856,450
- -----------------------------------------------------------------
Ascend Communications, Inc.(a) 68,200 4,458,575
- -----------------------------------------------------------------
Auspex Systems, Inc.(a) 71,700 734,925
- -----------------------------------------------------------------
Cascade Communications Corp.(a) 53,100 3,856,388
- -----------------------------------------------------------------
Cisco Systems, Inc.(a) 33,600 2,079,000
- -----------------------------------------------------------------
Digital Systems International,
Inc.(a) 14,500 197,563
- -----------------------------------------------------------------
FORE Systems, Inc.(a) 66,600 2,647,350
- -----------------------------------------------------------------
Sync Research, Inc.(a) 40,900 541,925
- -----------------------------------------------------------------
3Com Corp.(a) 64,900 4,388,863
- -----------------------------------------------------------------
Xircom, Inc.(a) 69,100 1,399,275
- -----------------------------------------------------------------
23,160,314
- -----------------------------------------------------------------
COMPUTER PERIPHERALS-0.32%
American Power Conversion Corp.(a) 84,500 1,806,188
- -----------------------------------------------------------------
U.S. Robotics Corp.(a) 58,100 3,653,038
- -----------------------------------------------------------------
5,459,226
- -----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-6.31%
Affiliated Computer Services,
Inc.(a) 64,200 3,531,000
- -----------------------------------------------------------------
Amisys Managed Care Systems(a) 64,800 988,200
- -----------------------------------------------------------------
ANSYS, Inc.(a) 105,300 1,289,925
- -----------------------------------------------------------------
Applied Microsystems Corp.(a) 60,000 652,500
- -----------------------------------------------------------------
Applix, Inc.(a) 74,500 1,806,625
- -----------------------------------------------------------------
Bell & Howell Co.(a) 68,800 1,840,400
- -----------------------------------------------------------------
BISYS Group, Inc. (The)(a) 81,900 3,050,775
- -----------------------------------------------------------------
Cellular Technical Services Co.(a) 180,000 2,902,500
- -----------------------------------------------------------------
Citrix Systems, Inc.(a) 50,000 2,762,500
- -----------------------------------------------------------------
Clarify, Inc.(a) 5,300 255,725
- -----------------------------------------------------------------
Computer Associates International,
Inc. 45,375 2,682,796
- -----------------------------------------------------------------
Computer Data Systems, Inc. 4,100 110,700
- -----------------------------------------------------------------
Computer Task Group, Inc. 53,700 2,027,175
- -----------------------------------------------------------------
CSG Systems International, Inc.(a) 85,000 1,423,750
- -----------------------------------------------------------------
Dendrite International, Inc.(a) 79,600 2,119,350
- -----------------------------------------------------------------
Documentum, Inc.(a) 40,000 1,490,000
- -----------------------------------------------------------------
DST Systems, Inc.(a) 34,200 1,051,650
- -----------------------------------------------------------------
Electronic Arts, Inc.(a) 77,200 2,895,000
- -----------------------------------------------------------------
Engineering Animation, Inc.(a) 126,800 3,106,600
- -----------------------------------------------------------------
Forte Software, Inc.(a) 32,000 1,208,000
- -----------------------------------------------------------------
GT Interactive Software Corp.(a) 60,900 1,164,712
- -----------------------------------------------------------------
HBO & Co.(a) 36,500 2,194,562
- -----------------------------------------------------------------
HPR, Inc.(a) 150,000 2,100,000
- -----------------------------------------------------------------
Indus Group, Inc.(a) 37,500 759,375
- -----------------------------------------------------------------
Integrated Systems, Inc.(a) 69,900 1,887,300
- -----------------------------------------------------------------
</TABLE>
FS-56
<PAGE> 197
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-
(CONTINUED)
Intuit, Inc.(a) 20,000 $ 540,000
- -----------------------------------------------------------------
JDA Software Group, Inc.(a) 50,000 1,718,750
- -----------------------------------------------------------------
McAfee Associates, Inc.(a) 118,125 5,374,687
- -----------------------------------------------------------------
Mechanical Dynamics, Inc.(a) 70,000 1,006,250
- -----------------------------------------------------------------
Medic Computer Systems, Inc.(a) 62,000 1,751,500
- -----------------------------------------------------------------
Microsoft Corp.(a) 21,200 2,909,700
- -----------------------------------------------------------------
National Data Corp. 75,000 3,084,375
- -----------------------------------------------------------------
Network General Corp.(a) 75,800 1,828,675
- -----------------------------------------------------------------
OpenVision Technologies, Inc.(a) 200,000 2,150,000
- -----------------------------------------------------------------
Oracle Systems Corp.(a) 53,200 2,251,025
- -----------------------------------------------------------------
Parametric Technology Co.(a) 30,200 1,476,025
- -----------------------------------------------------------------
Physician Computer Network,
Inc.(a) 170,500 1,523,843
- -----------------------------------------------------------------
Pure Atria Corp.(a) 130,800 3,564,300
- -----------------------------------------------------------------
Renaissance Solutions, Inc.(a) 65,000 2,616,250
- -----------------------------------------------------------------
S3 Inc.(a) 200,000 3,775,000
- -----------------------------------------------------------------
Scopus Technology, Inc.(a) 18,800 723,800
- -----------------------------------------------------------------
Segue Software, Inc.(a) 50,000 668,750
- -----------------------------------------------------------------
Sterling Commerce, Inc.(a) 69,200 1,946,250
- -----------------------------------------------------------------
Structural Dynamics Research
Corp.(a) 60,000 1,065,000
- -----------------------------------------------------------------
Sungard Data Systems Inc.(a) 40,100 1,714,275
- -----------------------------------------------------------------
Sykes Enterprises, Inc.(a) 10,200 474,300
- -----------------------------------------------------------------
Synopsys, Inc.(a) 46,300 2,083,500
- -----------------------------------------------------------------
Systemsoft Corp.(a) 75,000 2,118,750
- -----------------------------------------------------------------
Transition Systems, Inc.(a) 14,700 139,650
- -----------------------------------------------------------------
Vanstar Corp.(a) 95,000 2,256,250
- -----------------------------------------------------------------
Veritas Software Corp.(a) 75,000 3,787,500
- -----------------------------------------------------------------
Viasoft, Inc.(a) 75,000 3,693,750
- -----------------------------------------------------------------
Visio Corp.(a) 53,000 2,444,625
- -----------------------------------------------------------------
Wind River Systems(a) 76,500 3,251,250
- -----------------------------------------------------------------
Xylan Corp.(a) 43,700 1,748,000
- -----------------------------------------------------------------
108,987,150
- -----------------------------------------------------------------
CONSUMER NON-DURABLES-0.24%
Central Garden and Pet Co.(a) 75,000 1,771,875
- -----------------------------------------------------------------
Herbalife International, Inc. 38,000 755,250
- -----------------------------------------------------------------
USA Detergents, Inc.(a) 50,000 1,650,000
- -----------------------------------------------------------------
4,177,125
- -----------------------------------------------------------------
COSMETICS & TOILETRIES-0.62%
Helen Of Troy Ltd.(a) 170,800 3,117,100
- -----------------------------------------------------------------
Nature's Sunshine Products, Inc. 150,000 3,318,750
- -----------------------------------------------------------------
NBTY, Inc.(a) 275,000 4,296,875
- -----------------------------------------------------------------
10,732,725
- -----------------------------------------------------------------
ELECTRONIC COMPONENTS/
MISCELLANEOUS-0.49%
Berg Electronics Corp.(a) 76,400 2,158,300
- -----------------------------------------------------------------
BMC Industries, Inc. 110,000 3,258,750
- -----------------------------------------------------------------
Checkpoint Systems, Inc.(a) 50,000 1,118,750
- -----------------------------------------------------------------
Harman International Industries,
Inc. 1,785 91,704
- -----------------------------------------------------------------
Sawtek Inc.(a) 20,500 620,125
- -----------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 20,000 605,000
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/
MISCELLANEOUS-(CONTINUED)
ThermoQuest Corp.(a) 45,000 $ 590,625
- -----------------------------------------------------------------
8,443,254
- -----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.10%
Imperial Credit Industries,
Inc.(a) 100,000 1,812,500
- -----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.32%
AmeriCredit Corp.(a) 50,000 950,000
- -----------------------------------------------------------------
Amresco, Inc.(a) 70,000 1,478,750
- -----------------------------------------------------------------
Cityscape Financial Corp.(a) 18,400 473,800
- -----------------------------------------------------------------
CMAC Investment Corp. 12,200 843,325
- -----------------------------------------------------------------
Concord EFS, Inc.(a) 92,737 2,689,373
- -----------------------------------------------------------------
Credit Acceptance Corp.(a) 77,400 2,089,800
- -----------------------------------------------------------------
Green Tree Financial Corp. 38,500 1,525,563
- -----------------------------------------------------------------
Money Store, Inc. (The) 69,275 1,783,831
- -----------------------------------------------------------------
Olympic Financial Ltd.(a) 143,500 2,278,063
- -----------------------------------------------------------------
PMT Services, Inc.(a) 100,000 2,000,000
- -----------------------------------------------------------------
RAC Financial Group, Inc.(a) 34,000 2,040,000
- -----------------------------------------------------------------
Student Loan Marketing Association 25,000 2,068,750
- -----------------------------------------------------------------
SunAmerica, Inc. 70,000 2,625,000
- -----------------------------------------------------------------
22,846,255
- -----------------------------------------------------------------
FOOD/PROCESSING-0.20%
Richfood Holdings, Inc. 146,200 3,527,075
- -----------------------------------------------------------------
FUNERAL SERVICES-0.14%
Equity Corp. International(a) 105,000 2,415,000
- -----------------------------------------------------------------
FURNITURE-0.18%
Ethan Allen Interiors, Inc. 86,000 3,074,500
- -----------------------------------------------------------------
GAMING-0.34%
GTECH Holdings Corp.(a) 47,600 1,404,200
- -----------------------------------------------------------------
Primadonna Resorts, Inc.(a) 150,000 2,418,750
- -----------------------------------------------------------------
Trump Hotels & Casino Resorts,
Inc.(a) 132,800 2,108,200
- -----------------------------------------------------------------
5,931,150
- -----------------------------------------------------------------
HOMEBUILDING-0.24%
American Homestar Corp.(a) 50,000 1,062,500
- -----------------------------------------------------------------
Southern Energy Homes, Inc.(a) 202,500 3,012,188
- -----------------------------------------------------------------
4,074,688
- -----------------------------------------------------------------
HOTELS/MOTELS-0.16%
Prime Hospitality Corp.(a) 30,000 457,500
- -----------------------------------------------------------------
Suburban Lodges Of America,
Inc.(a) 20,000 417,500
- -----------------------------------------------------------------
Sun International Hotels Ltd.(a) 33,100 1,563,975
- -----------------------------------------------------------------
Wyndham Hotel Corp.(a) 16,700 317,300
- -----------------------------------------------------------------
2,756,275
- -----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.35%
Compdent Corp.(a) 60,000 2,062,500
- -----------------------------------------------------------------
CRA Managed Care, Inc.(a) 30,300 1,537,725
- -----------------------------------------------------------------
First Commonwealth, Inc.(a) 45,000 945,000
- -----------------------------------------------------------------
United Companies Financial Corp. 50,000 1,493,750
- -----------------------------------------------------------------
6,038,975
- -----------------------------------------------------------------
</TABLE>
FS-57
<PAGE> 198
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE
PROPERTY)-0.27%
CapMAC Holdings, Inc. 70,000 $ 2,336,250
- -----------------------------------------------------------------
HCC Insurance Holdings, Inc. 77,250 1,969,875
- -----------------------------------------------------------------
Vesta Insurance Group, Inc. 12,000 307,500
- -----------------------------------------------------------------
4,613,625
- -----------------------------------------------------------------
LEISURE & RECREATION-0.83%
Callaway Golf Co. 60,000 1,837,500
- -----------------------------------------------------------------
Cannondale Corp.(a) 100,000 1,925,000
- -----------------------------------------------------------------
Lewis Galoob Toys, Inc.(a) 50,000 1,343,750
- -----------------------------------------------------------------
Harley-Davidson, Inc. 34,100 1,538,763
- -----------------------------------------------------------------
Imax Corp.(a) 75,000 2,700,000
- -----------------------------------------------------------------
West Marine, Inc.(a) 70,600 2,488,650
- -----------------------------------------------------------------
WMS Industries, Inc.(a) 100,000 2,450,000
- -----------------------------------------------------------------
14,283,663
- -----------------------------------------------------------------
MACHINE TOOLS-0.14%
Precision Castparts Corp. 50,000 2,337,500
- -----------------------------------------------------------------
MEDICAL (DRUGS)-0.83%
Arbor Drugs, Inc. 110,900 2,509,113
- -----------------------------------------------------------------
Cardinal Health, Inc. 45,000 3,532,500
- -----------------------------------------------------------------
Curative Technologies, Inc.(a) 75,000 1,706,250
- -----------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 50,000 1,725,000
- -----------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 40,000 1,165,000
- -----------------------------------------------------------------
Medicis Pharmaceutical Corp.(a) 75,000 3,768,750
- -----------------------------------------------------------------
14,406,613
- -----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-3.03%
ABR Information Services, Inc.(a) 35,000 2,423,750
- -----------------------------------------------------------------
American HomePatient, Inc.(a) 100,000 2,375,000
- -----------------------------------------------------------------
American Medical Response, Inc.(a) 22,100 663,000
- -----------------------------------------------------------------
Apria Healthcare Group, Inc.(a) 78,019 1,492,113
- -----------------------------------------------------------------
Arbor Health Care Co.(a) 60,100 1,314,688
- -----------------------------------------------------------------
ClinTrials Research Inc.(a) 35,900 1,332,788
- -----------------------------------------------------------------
EmCare Holdings Inc.(a) 61,500 1,537,500
- -----------------------------------------------------------------
Enterprise Systems, Inc.(a) 50,000 806,250
- -----------------------------------------------------------------
Envoy Corp.(a) 50,000 1,837,500
- -----------------------------------------------------------------
FPA Medical Management, Inc.(a) 100,000 1,862,500
- -----------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 50,900 1,164,337
- -----------------------------------------------------------------
Health Care and Retirement
Corp.(a) 115,000 2,831,875
- -----------------------------------------------------------------
HEALTHSOUTH Corp.(a) 69,000 2,587,500
- -----------------------------------------------------------------
Hologic, Inc.(a) 50,000 1,137,500
- -----------------------------------------------------------------
MedPartners, Inc.(a) 38,500 813,312
- -----------------------------------------------------------------
Multicare Co., Inc.(a) 34,350 618,300
- -----------------------------------------------------------------
Myriad Genetics, Inc.(a) 15,000 371,250
- -----------------------------------------------------------------
NCS HealthCare, Inc.-Class A(a) 60,000 1,822,500
- -----------------------------------------------------------------
OccuSystems, Inc.(a) 45,000 1,231,875
- -----------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 123,000 1,768,125
- -----------------------------------------------------------------
Oxford Health Plans, Inc.(a) 20,000 910,000
- -----------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 15,200 598,500
- -----------------------------------------------------------------
PhyCor, Inc.(a) 49,950 1,548,450
- -----------------------------------------------------------------
Physicians Resource Group, Inc.(a) 75,000 2,025,000
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Renal Care Group, Inc.(a) 90,400 $ 3,344,800
- -----------------------------------------------------------------
Renal Treatment Centers, Inc.(a) 50,000 1,337,500
- -----------------------------------------------------------------
Rotech Medical Corp.(a) 77,200 1,235,200
- -----------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 63,200 1,453,600
- -----------------------------------------------------------------
Tenet Healthcare Corp.(a) 80,000 1,670,000
- -----------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 37,600 1,466,400
- -----------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 89,800 2,245,000
- -----------------------------------------------------------------
UroCor, Inc.(a) 57,200 672,100
- -----------------------------------------------------------------
Vencor, Inc.(a) 95,100 2,817,338
- -----------------------------------------------------------------
Veterinary Centers of America,
Inc.(a) 50,000 918,750
- -----------------------------------------------------------------
52,234,301
- -----------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.81%
Advanced Technology Laboratories,
Inc.(a) 25,000 762,500
- -----------------------------------------------------------------
Capstone Pharmacy Services,
Inc.(a) 150,000 1,753,125
- -----------------------------------------------------------------
Cardiovascular Dynamics, Inc.(a) 80,000 1,040,000
- -----------------------------------------------------------------
Dentsply International, Inc. 37,400 1,575,475
- -----------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 100,300 2,206,600
- -----------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 29,300 1,150,025
- -----------------------------------------------------------------
IRIDEX Corp.(a) 70,100 560,800
- -----------------------------------------------------------------
Mentor Corp. 100,000 2,212,500
- -----------------------------------------------------------------
Meridian Diagnostics, Inc. 200,000 2,100,000
- -----------------------------------------------------------------
Omnicare, Inc. 61,400 1,673,150
- -----------------------------------------------------------------
Patterson Dental Co.(a) 146,000 4,088,000
- -----------------------------------------------------------------
Physician Sales & Services,
Inc.(a) 50,000 1,062,500
- -----------------------------------------------------------------
Quintiles Transnational Corp.(a) 35,000 2,301,250
- -----------------------------------------------------------------
ResMed, Inc.(a) 40,000 670,000
- -----------------------------------------------------------------
Spine-Tech, Inc.(a) 5,300 133,825
- -----------------------------------------------------------------
St. Jude Medical, Inc.(a) 63,300 2,500,350
- -----------------------------------------------------------------
Steris Corp.(a) 50,000 1,887,500
- -----------------------------------------------------------------
Suburban Ostomy Supply Co.,
Inc.(a) 92,800 1,131,000
- -----------------------------------------------------------------
Sybron International Corp.(a) 32,800 955,300
- -----------------------------------------------------------------
Target Therapeutics, Inc.(a) 40,000 1,480,000
- -----------------------------------------------------------------
31,243,900
- -----------------------------------------------------------------
METALS-0.17%
Oregon Metallurgical Corp.(a) 37,100 1,168,650
- -----------------------------------------------------------------
Rental Service Corp.(a) 41,400 952,200
- -----------------------------------------------------------------
Shaw Group, Inc.(a) 35,000 861,875
- -----------------------------------------------------------------
2,982,725
- -----------------------------------------------------------------
OFFICE PRODUCTS-0.21%
Daisytek International Corp.(a) 44,700 1,709,775
- -----------------------------------------------------------------
Reynolds & Reynolds Co. -- Class A 73,000 1,925,375
- -----------------------------------------------------------------
3,635,150
- -----------------------------------------------------------------
OIL & GAS (DRILLING)-0.22%
Reading & Bates Corp.(a) 90,000
- -----------------------------------------------------------------
Transocean Offshore Inc. 20,000 1,265,000
- -----------------------------------------------------------------
3,852,500
- -----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.22%
Benton Oil & Gas Co.(a) 150,000 3,675,000
- -----------------------------------------------------------------
</TABLE>
FS-58
<PAGE> 199
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (SERVICES)-0.74%
Camco International, Inc. 80,000 $ 3,100,000
- -----------------------------------------------------------------
Energy Ventures, Inc.(a) 100,000 4,400,000
- -----------------------------------------------------------------
Global Marine, Inc.(a) 150,000 2,756,250
- -----------------------------------------------------------------
Veritas DGC, Inc.(a) 125,000 2,562,500
- -----------------------------------------------------------------
12,818,750
- -----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.78%
Diamond Offshore Drilling, Inc.(a) 55,300 3,366,388
- -----------------------------------------------------------------
ENSCO International, Inc.(a) 70,000 3,027,500
- -----------------------------------------------------------------
Marine Drilling Co., Inc.(a) 66,700 925,462
- -----------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 49,100 859,250
- -----------------------------------------------------------------
Rowan Companies, Inc.(a) 150,000 3,356,250
- -----------------------------------------------------------------
Varco International, Inc.(a) 100,000 1,975,000
- -----------------------------------------------------------------
13,509,850
- -----------------------------------------------------------------
POLLUTION CONTROL-0.43%
GTS Duratek, Inc.(a) 50,000 581,250
- -----------------------------------------------------------------
US Filter Corp.(a) 90,150 3,110,175
- -----------------------------------------------------------------
USA Waste Services, Inc.(a) 118,240 3,783,680
- -----------------------------------------------------------------
7,475,105
- -----------------------------------------------------------------
RESTAURANTS-0.84%
Apple South, Inc. 50,800 596,900
- -----------------------------------------------------------------
Brinker International, Inc.(a) 150,000 2,550,000
- -----------------------------------------------------------------
Foodmaker, Inc.(a) 250,000 2,437,500
- -----------------------------------------------------------------
Landry's Seafood Restaurants,
Inc.(a) 72,100 1,478,050
- -----------------------------------------------------------------
Lone Star Steakhouse & Saloon(a) 26,300 673,937
- -----------------------------------------------------------------
Outback Steakhouse, Inc.(a) 25,000 579,688
- -----------------------------------------------------------------
Papa John's International, Inc.(a) 15,000 746,250
- -----------------------------------------------------------------
Showbiz Pizza Time, Inc.(a) 96,600 1,787,100
- -----------------------------------------------------------------
Sonic Corp.(a) 75,500 1,717,625
- -----------------------------------------------------------------
Starbucks Corp.(a) 58,900 1,914,250
- -----------------------------------------------------------------
14,481,300
- -----------------------------------------------------------------
RETAIL (FOOD & DRUGS)-0.17%
Eckerd Corp. (The)(a) 10,400 288,600
- -----------------------------------------------------------------
Kroger Co.(a) 18,000 803,250
- -----------------------------------------------------------------
Quality Food Centers, Inc.(a) 50,000 1,825,000
- -----------------------------------------------------------------
2,916,850
- -----------------------------------------------------------------
RETAIL (STORES)-5.97%
AutoZone, Inc.(a) 34,400 881,500
- -----------------------------------------------------------------
Barnett, Inc.(a) 24,700 583,538
- -----------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 40,400 1,020,100
- -----------------------------------------------------------------
Blyth Industries, Inc.(a) 108,300 4,210,162
- -----------------------------------------------------------------
Boise Cascade Office Products
Corp.(a) 20,400 387,600
- -----------------------------------------------------------------
CDW Computer Centers, Inc.(a) 40,300 2,536,382
- -----------------------------------------------------------------
Claire's Stores, Inc. 100,350 1,705,950
- -----------------------------------------------------------------
Compucom Systems, Inc.(a) 200,000 1,950,000
- -----------------------------------------------------------------
CompUSA, Inc.(a) 61,200 2,830,500
- -----------------------------------------------------------------
Corporate Express, Inc.(a) 60,400 1,970,550
- -----------------------------------------------------------------
Dayton-Hudson Corp. 75,000 2,596,875
- -----------------------------------------------------------------
Dollar General Corp. 45,250 1,255,688
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Duty Free International, Inc. 19,900 $ 318,400
- -----------------------------------------------------------------
Eagle Hardware & Garden, Inc.(a) 84,000 2,404,500
- -----------------------------------------------------------------
Gadzooks, Inc.(a) 50,050 1,451,450
- -----------------------------------------------------------------
Gap, Inc. (The) 58,400 1,693,600
- -----------------------------------------------------------------
Global DirectMail Corp.(a) 50,200 2,472,350
- -----------------------------------------------------------------
Gymboree Corp.(a) 94,800 2,962,500
- -----------------------------------------------------------------
Inacom Corp.(a) 50,000 1,581,250
- -----------------------------------------------------------------
Jones Apparel Group, Inc.(a) 90,000 2,812,500
- -----------------------------------------------------------------
Just for Feet, Inc.(a) 137,500 3,557,812
- -----------------------------------------------------------------
Loehmann's Holdings, Inc.(a) 159,500 4,286,563
- -----------------------------------------------------------------
Marks Bros. Jewelers, Inc.(a) 152,400 3,543,300
- -----------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 19,500 402,187
- -----------------------------------------------------------------
Meyer (Fred), Inc.(a) 41,100 1,443,637
- -----------------------------------------------------------------
Micro Warehouse, Inc.(a) 104,700 2,408,100
- -----------------------------------------------------------------
MSC Industrial Direct Co.,
Inc.-Class A(a) 40,000 1,480,000
- -----------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 86,600 3,063,475
- -----------------------------------------------------------------
Oakley, Inc.(a) 250,000 3,718,750
- -----------------------------------------------------------------
Performance Food Group Co.(a) 87,750 1,349,156
- -----------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 57,000 1,339,500
- -----------------------------------------------------------------
PETsMART, Inc.(a) 92,200 2,489,400
- -----------------------------------------------------------------
Pier 1 Imports, Inc. 265,000 3,710,000
- -----------------------------------------------------------------
Rexall Sundown, Inc.(a) 60,500 1,641,063
- -----------------------------------------------------------------
Ross Stores, Inc. 40,600 1,684,900
- -----------------------------------------------------------------
Sports Authority, Inc. (The)(a) 110,400 2,677,200
- -----------------------------------------------------------------
Staples, Inc.(a) 200,000 3,725,000
- -----------------------------------------------------------------
Sunglass Hut International,
Inc.(a) 50,000 443,750
- -----------------------------------------------------------------
Tech Data Corp.(a) 85,700 2,206,775
- -----------------------------------------------------------------
Tiffany & Co. 42,500 1,572,500
- -----------------------------------------------------------------
TJX Companies, Inc. 64,600 2,584,000
- -----------------------------------------------------------------
Toys "R" Us, Inc.(a) 133,500 4,522,313
- -----------------------------------------------------------------
Viking Office Products, Inc.(a) 150,500 4,383,312
- -----------------------------------------------------------------
Wet Seal, Inc.-Class A(a) 55,000 1,732,500
- -----------------------------------------------------------------
Williams-Sonoma, Inc.(a) 75,000 2,062,500
- -----------------------------------------------------------------
Zale Corp.(a) 175,000 3,390,625
- -----------------------------------------------------------------
103,043,713
- -----------------------------------------------------------------
SCHOOLS-0.04%
Children's Comprehensive Services,
Inc.(a) 50,000 737,500
- -----------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.17%
Dynatech Corp.(a) 35,700 1,764,918
- -----------------------------------------------------------------
Input/Output, Inc.(a) 40,000 1,190,000
- -----------------------------------------------------------------
2,954,918
- -----------------------------------------------------------------
SEMICONDUCTORS-1.74%
Actel Corp.(a) 83,300 1,488,987
- -----------------------------------------------------------------
Altera Corp.(a) 76,400 4,736,800
- -----------------------------------------------------------------
Chips & Technologies, Inc.(a) 175,000 3,478,125
- -----------------------------------------------------------------
Computer Products, Inc.(a) 200,000 3,950,000
- -----------------------------------------------------------------
HADCO Corp.(a) 76,700 2,329,762
- -----------------------------------------------------------------
Intel Corp. 43,000 4,724,625
- -----------------------------------------------------------------
Sanmina Corp.(a) 61,000 2,790,750
- -----------------------------------------------------------------
</TABLE>
FS-59
<PAGE> 200
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS-(CONTINUED)
Solectron Corp.(a) 25,500 $ 1,364,250
- -----------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 25,000 796,875
- -----------------------------------------------------------------
VLSI Technology, Inc.(a) 250,000 4,312,500
- -----------------------------------------------------------------
29,972,674
- -----------------------------------------------------------------
SHOES & RELATED APPAREL-0.20%
Nine West Group, Inc.(a) 31,500 1,571,062
- -----------------------------------------------------------------
Vans, Inc.(a) 68,200 1,133,825
- -----------------------------------------------------------------
Wolverine World Wide, Inc. 29,250 723,937
- -----------------------------------------------------------------
3,428,824
- -----------------------------------------------------------------
TELECOMMUNICATIONS-1.61%
ACC Corp. 59,550 2,530,875
- -----------------------------------------------------------------
ADC Telecommunications, Inc.(a) 65,000 4,444,375
- -----------------------------------------------------------------
Allen Group, Inc. 41,200 654,050
- -----------------------------------------------------------------
Andrew Corp.(a) 63,550 3,098,062
- -----------------------------------------------------------------
Billing Information Concepts(a) 69,600 1,818,300
- -----------------------------------------------------------------
Brightpoint, Inc.(a) 37,000 925,000
- -----------------------------------------------------------------
Frontier Corp. 46,000 1,334,000
- -----------------------------------------------------------------
LCI International, Inc.(a) 54,400 1,734,000
- -----------------------------------------------------------------
P-COM, Inc.(a) 50,000 1,100,000
- -----------------------------------------------------------------
PairGain Technologies, Inc.(a) 47,600 3,278,450
- -----------------------------------------------------------------
Premiere Technologies, Inc.(a) 16,000 260,000
- -----------------------------------------------------------------
Premisys Communications, Inc.(a) 18,600 930,000
- -----------------------------------------------------------------
Proxim, Inc.(a) 70,000 1,592,500
- -----------------------------------------------------------------
Tellabs, Inc.(a) 7,400 629,925
- -----------------------------------------------------------------
Teltrend, Inc.(a) 65,000 2,145,000
- -----------------------------------------------------------------
TESSCO Technologies, Inc.(a) 19,900 786,050
- -----------------------------------------------------------------
U.S. Long Distance Corp.(a) 64,200 537,675
- -----------------------------------------------------------------
27,798,262
- -----------------------------------------------------------------
TEXTILES-1.08%
Designer Holdings Ltd.(a) 200,000 3,825,000
- -----------------------------------------------------------------
Liz Claiborne, Inc. 69,000 2,915,250
- -----------------------------------------------------------------
Mohawk Industries, Inc.(a) 75,000 1,818,750
- -----------------------------------------------------------------
Nautica Enterprises, Inc.(a) 95,000 2,921,250
- -----------------------------------------------------------------
Springs Industries Inc.-Class A 31,700 1,430,463
- -----------------------------------------------------------------
St. John Knits, Inc. 50,000 2,287,500
- -----------------------------------------------------------------
Tommy Hilfiger Corp.(a) 41,700 2,168,400
- -----------------------------------------------------------------
WestPoint Stevens, Inc.(a) 50,000 1,331,250
- -----------------------------------------------------------------
18,697,863
- -----------------------------------------------------------------
TRANSPORTATION-0.21%
Hub Group, Inc.(a) 100,000 2,225,000
- -----------------------------------------------------------------
Rural/Metro Corp.(a) 25,000 912,500
- -----------------------------------------------------------------
Trico Marine Services, Inc.(a) 11,700 412,425
- -----------------------------------------------------------------
3,549,925
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TRUCKING-0.06%
USFreightways Corp. 50,000 $ 1,093,750
- -----------------------------------------------------------------
Total Domestic Common Stocks 658,020,109
- -----------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-58.63%
ARGENTINA-1.62%
Banco de Galicia y Buenos Aires
S.A. de C.V.-ADR (Banking) 354,039 6,416,957
- -----------------------------------------------------------------
Perez Companc S.A.-Class B
(Oil & Gas-Services) 1,679,000 10,662,716
- -----------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Oil & Gas-Services) 479,600 10,910,900
- -----------------------------------------------------------------
27,990,573
- -----------------------------------------------------------------
AUSTRALIA-0.41%
QBE Insurance Group, Ltd.
(Insurance-Multi-Line Property) 1,343,928 7,115,920
- -----------------------------------------------------------------
AUSTRIA-0.24%
VA Technologie A.G.
(Engineering & Construction) 30,000 4,195,410
- -----------------------------------------------------------------
BELGIUM-0.82%
Barco Industries(a)
(Electronic
Components/Miscellaneous) 41,000 6,743,508
- -----------------------------------------------------------------
Colruyt S.A. (Retail-Food & Drug) 8,800 3,794,806
- -----------------------------------------------------------------
UCB S.A. (Medical-Drugs) 1,650 3,636,983
- -----------------------------------------------------------------
14,175,297
- -----------------------------------------------------------------
BRAZIL-1.92%
Banco Bradesco S. A. (Banking) 925,000 7,886,899
- -----------------------------------------------------------------
Brasmotor S. A. (Furniture) 22,830 7,755,178
- -----------------------------------------------------------------
Companhia Brasileira a
Distribuicao Grupo Pao de Acucar
(Retail-Food & Drug) 218,300 4,260,186
- -----------------------------------------------------------------
Companhia Cervejaria Brahma
(Beverages-Alcoholic) 5,020 3,102,686
- -----------------------------------------------------------------
Telecomunicacoes Brasileiras
S/A-Telebras-ADR
(Telecommunications) 136,700 10,184,150
- -----------------------------------------------------------------
33,189,099
- -----------------------------------------------------------------
CANADA-2.50%
Agrium, Inc. (Chemicals) 138,800 1,856,450
- -----------------------------------------------------------------
Biovail Corp. International
(Medical-Drugs)(a) 45,000 1,316,250
- -----------------------------------------------------------------
Canadian Natural Resources Ltd.(a)
(Oil & Gas-Exploration &
Production) 345,000 8,572,228
- -----------------------------------------------------------------
CanWest Global Communications
Corp. (Electronic
Components/Miscellaneous) 355,998 3,918,050
- -----------------------------------------------------------------
Cognos, Inc. (Computer
Software/Services)(a) 300,000 9,412,500
- -----------------------------------------------------------------
Extendicare, Inc.-Class A(a)
(Insurance-Life & Health) 350,000 4,374,347
- -----------------------------------------------------------------
Intertape Polymer Group, Inc.
(Containers) 102,000 2,351,739
- -----------------------------------------------------------------
Leitch Technology Corp.(a)
(Electronic
Components/Miscellaneous) 131,400 2,647,217
- -----------------------------------------------------------------
Newbridge Networks Corp.(a)
(Computer Networking) 67,600 2,137,850
- -----------------------------------------------------------------
Potash Corp. of Saskatchewan Inc.
(Metals-Miscellaneous) 35,000 2,480,625
- -----------------------------------------------------------------
</TABLE>
FS-60
<PAGE> 201
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Suncor, Inc.
(Oil & Gas-Exploration &
Production) 105,000 $ 4,054,432
- -----------------------------------------------------------------
43,121,688
- -----------------------------------------------------------------
CHILE-0.78%
Cia. de Telecomunicaciones de
Chile S.A.-ADR (Telephone) 67,600 6,667,050
- -----------------------------------------------------------------
Santa Isabel S.A.-ADR
(Retail-Stores) 243,300 6,842,813
- -----------------------------------------------------------------
13,509,863
- -----------------------------------------------------------------
DENMARK-0.69%
Coloplast A/S-Class B
(Medical Instruments/Products) 25,000 2,860,313
- -----------------------------------------------------------------
Falck A/S (Security & Safety
Services) 20,000 5,402,336
- -----------------------------------------------------------------
Kobenhavns Lufthavne
(Transportation) 35,000 3,643,137
- -----------------------------------------------------------------
11,905,786
- -----------------------------------------------------------------
FINLAND-1.20%
Hartwall Oy A.B.
(Beverages-Alcoholic) 50,000 1,708,931
- -----------------------------------------------------------------
Huhtamaki Group (Conglomerates) 100,000 4,348,401
- -----------------------------------------------------------------
Orion-yhtymae Oy-Class B
(Medical-Drugs) 120,000 4,061,742
- -----------------------------------------------------------------
Raision Tehtaat Oy
(Food/Processing) 44,500 2,747,519
- -----------------------------------------------------------------
Tamro A.B. Oy (Medical-Drugs) 400,000 2,910,695
- -----------------------------------------------------------------
Tietotehdas Oy-Class B
(Computer Software/Services) 74,000 4,955,634
- -----------------------------------------------------------------
20,732,922
- -----------------------------------------------------------------
FRANCE-2.27%
BERTRAND FAURE
(Automobile/Trucks Parts &
Tires) 110,000 3,765,281
- -----------------------------------------------------------------
Christian Dalloz(a) (Textiles) 3,800 1,241,271
- -----------------------------------------------------------------
Cipe France S.A. (Security &
Safety Services) 16,000 1,962,249
- -----------------------------------------------------------------
Dassault Systemes S.A.-ADR(a)
(Computer Software/Services) 46,300 2,008,263
- -----------------------------------------------------------------
Grand Optical Photoservice
(Retail-Stores) 13,200 1,918,357
- -----------------------------------------------------------------
Guilbert S.A. (Office Products) 28,000 4,452,616
- -----------------------------------------------------------------
Mecatherm
(Machinery-Miscellaneous) 3,000 592,078
- -----------------------------------------------------------------
Pathe S.A.(a)
(Advertising/Broadcasting) 14,500 3,911,100
- -----------------------------------------------------------------
Penauille Polyservices
(Security & Safety Services) 5,300 953,741
- -----------------------------------------------------------------
Primagaz Cie (Gas Distribution) 17,765 1,834,703
- -----------------------------------------------------------------
Salomon S.A. (Leisure &
Recreation) 81,840 7,331,583
- -----------------------------------------------------------------
Scor S.A. (Insurance Multi-Line
Property) 130,000 4,996,577
- -----------------------------------------------------------------
Strafor Facom S.A. (Office
Products) 40,000 3,035,697
- -----------------------------------------------------------------
Sylea (Automobile/Trucks Parts &
Tires) 10,000 1,155,990
- -----------------------------------------------------------------
39,159,506
- -----------------------------------------------------------------
GERMANY-1.46%
Continental A.G.
(Automoblie/Trucks Parts &
Tires) 185,000 3,237,256
- -----------------------------------------------------------------
Fresenius A.G.-Preferred
(Medical Instruments/Products) 26,000 5,622,689
- -----------------------------------------------------------------
Hugo Boss A.G.-Preferred
(Textiles) 1,750 2,112,388
- -----------------------------------------------------------------
Porsche A.G.(a)
(Automobile/Trucks Parts &
Tires) 6,300 4,264,065
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY-(CONTINUED)
Puma A.G. Rudolf Dassler Sport
Designs(a)
(Shoes & Related Apparel) 105,000 $ 3,102,714
- -----------------------------------------------------------------
SGL Carbon A.G. (Metals) 27,500 3,096,111
- -----------------------------------------------------------------
SKW Trostberg A.G. (Chemicals) 132,000 3,852,615
- -----------------------------------------------------------------
25,287,838
- -----------------------------------------------------------------
HONG KONG-6.58%
Asia Satellite Telecommunications
Holdings(a) Ltd.-ADR
(Telecommunications) 177,300 4,742,775
- -----------------------------------------------------------------
CDL Hotels International Ltd.
(Hotels/Motels) 6,559,000 3,393,083
- -----------------------------------------------------------------
China Hong Kong Photo Products
Holdings, Ltd. (Chemicals) 1,240,000 469,077
- -----------------------------------------------------------------
China Resource Enterprise Ltd.
(Real Estate) 7,664,000 8,623,264
- -----------------------------------------------------------------
Citic Pacific Ltd. (Banking) 1,648,000 8,013,864
- -----------------------------------------------------------------
Cosco Pacific Ltd.
(Transportation) 15,518,000 14,851,297
- -----------------------------------------------------------------
Esprit Asia Holdings Ltd.
(Retail-Stores) 7,220,000 3,128,088
- -----------------------------------------------------------------
First Pacific Co. Ltd.
(Conglomerates) 6,200,033 8,539,659
- -----------------------------------------------------------------
Goldlion Holdings Ltd.
(Retail-Stores) 3,738,000 3,045,627
- -----------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 1,213,400 14,398,160
- -----------------------------------------------------------------
Hong Kong & China Gas Company Ltd.
(Electric Power) 3,450,000 6,068,131
- -----------------------------------------------------------------
Hong Kong & China Gas Company
Ltd.,(a)
Expiring 1997-Warrants (Electric
Power) 211,000 77,772
- -----------------------------------------------------------------
JCG Holdings Ltd.
(Finance-Asset Management) 3,750,000 3,491,891
- -----------------------------------------------------------------
Manhattan Card Company Ltd.
(Finance-Asset Management) 6,330,000 3,131,353
- -----------------------------------------------------------------
National Mutual Asia Ltd.
(Insurance-Multi-Line Property) 2,644,000 2,222,653
- -----------------------------------------------------------------
New World Infrastructure(a)
(Building Materials) 4,281,000 10,657,930
- -----------------------------------------------------------------
Shanghai Industrial Holdings
Limited(a) (Conglomerates) 2,072,000 4,702,879
- -----------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real
Estate) 966,000 10,994,025
- -----------------------------------------------------------------
Varitronix International Ltd.
(Electronic
Components/Miscellaneous) 1,711,000 3,120,082
- -----------------------------------------------------------------
113,671,610
- -----------------------------------------------------------------
HUNGARY-0.16%
Gedeon Richter Rt (Medical-Drugs) 50,000 2,687,500
- -----------------------------------------------------------------
INDONESIA-1.62%
PT Bank International Indonesia
(Banking) 6,734,051 10,841,322
- -----------------------------------------------------------------
PT Hanjaya Mandala Sampoerna
(Tobacco) 1,290,000 11,990,083
- -----------------------------------------------------------------
PT Indosat (Telecommunications) 808,000 2,445,542
- -----------------------------------------------------------------
PT Indosat-ADR
(Telecommunications) 87,500 2,635,938
- -----------------------------------------------------------------
27,912,885
- -----------------------------------------------------------------
IRELAND-0.67%
CBT Group PLC-ADR(a)
(Computer Software/Services) 7,600 418,000
- -----------------------------------------------------------------
Elan Corp. PLC-ADR(a)
(Medical-Drugs) 200,000 5,550,000
- -----------------------------------------------------------------
Greencore Group PLC
(Food/Processing) 212,000 1,235,890
- -----------------------------------------------------------------
Saville Systems Ireland PLC-ADR(a)
(Computer Software/Services) 100,000 4,312,500
- -----------------------------------------------------------------
11,516,390
- -----------------------------------------------------------------
</TABLE>
FS-61
<PAGE> 202
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ISRAEL-1.46%
Blue Square-Israel Ltd.-ADR(a)
(Retail-Stores) 550,000 $ 8,662,500
- -----------------------------------------------------------------
Koor Industries Ltd.-ADR
(Telecommunications) 115,000 1,998,125
- -----------------------------------------------------------------
Tadiran Ltd.(a)
(Telecommunications) 130,000 2,990,000
- -----------------------------------------------------------------
Tadiran Ltd.-ADR
(Telecommunications) 106,000 2,782,500
- -----------------------------------------------------------------
Tecnomatix Technologies
Ltd.-ADR(a)
(Computer Software/Services) 27,500 477,813
- -----------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 198,500 8,312,188
- -----------------------------------------------------------------
25,223,126
- -----------------------------------------------------------------
ITALY-1.15%
Bulgari S.p.A. (Retail-Stores) 263,000 4,582,303
- -----------------------------------------------------------------
Fila Holding S.p.A.-ADR
(Retail-Stores) 50,000 3,600,000
- -----------------------------------------------------------------
Parmalat Finanziaria S.p.A.
(Food/Processing) 4,550,000 6,505,570
- -----------------------------------------------------------------
Saipem S.p.A.(Oil &
Gas-Integrated) 1,000,000 5,091,628
- -----------------------------------------------------------------
19,779,501
- -----------------------------------------------------------------
JAPAN-4.95%
Aderans Co. Ltd. (Retail-Stores) 394,000 9,551,096
- -----------------------------------------------------------------
Capcom Co., Ltd.
(Computer Software/Services) 201,000 4,131,044
- -----------------------------------------------------------------
Circle K Japan Co., Ltd.
(Retail-Food & Drug) 127,000 5,298,406
- -----------------------------------------------------------------
CKD Corp. (Machinery-Heavy) 550,000 4,342,804
- -----------------------------------------------------------------
FCC Co., Ltd.
(Automobile/Trucks Parts &
Tires) 130,100 3,827,983
- -----------------------------------------------------------------
Fujitsu Denso (Electric Power) 230,000 7,575,425
- -----------------------------------------------------------------
Hokuto Corp.
(Advertising/Broadcasting) 142,500 6,207,896
- -----------------------------------------------------------------
Laox (Electronic
Components/Miscellaneous) 253,000 4,244,258
- -----------------------------------------------------------------
Nippon Thompson (Machine Tools) 710,000 5,063,634
- -----------------------------------------------------------------
Nomura Securities Co., Ltd.
(Finance-Asset Management) 501,000 8,272,627
- -----------------------------------------------------------------
Noritsu Koki Co. Ltd.
(Electronic
Components/Miscellaneous) 192,000 10,033,815
- -----------------------------------------------------------------
77 Bank (Banking) 770,000 7,236,397
- -----------------------------------------------------------------
Shohkoh Fund (Finance-Consumer
Credit) 20,600 4,324,272
- -----------------------------------------------------------------
Yamato Kogyo Co., Ltd. (Building
Materials) 537,000 5,329,674
- -----------------------------------------------------------------
85,439,331
- -----------------------------------------------------------------
MALAYSIA-3.68%
Arab Malaysian Finance Berhad
(Finance-Asset Management) 655,000 3,525,826
- -----------------------------------------------------------------
Commerce Asset Holdings Berhad
(Finance-Asset Management) 574,000 3,748,664
- -----------------------------------------------------------------
Gamuda Berhad (Engineering &
Construction) 980,000 8,029,290
- -----------------------------------------------------------------
Malayan Banking Berhad (Banking) 1,112,000 11,003,364
- -----------------------------------------------------------------
Sungei Way Holdings Berhad
(Building Materials) 2,269,000 12,932,357
- -----------------------------------------------------------------
Tan Chong Motor Holdings Berhad
(Automobile-Manufacturers) 4,840,000 8,237,483
- -----------------------------------------------------------------
UMW Holdings Berhad
(Finance-Asset Management) 2,125,000 9,756,580
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MALAYSIA-(CONTINUED)
YTL Corp. Berhad
(Engineering & Construction) 1,180,000 $ 6,351,870
- -----------------------------------------------------------------
63,585,434
- -----------------------------------------------------------------
MEXICO-1.53%
Grupo Industrial Maseca S.A. de
CV-Class B (Food/Processing) 8,547,000 10,399,958
- -----------------------------------------------------------------
Grupo Televisa S.A.-GDR(a)
(Advertising/Broadcasting) 257,000 6,746,250
- -----------------------------------------------------------------
Panamerican Beverages, Inc.-ADR
(Beverages-Soft Drinks) 213,000 9,292,125
- -----------------------------------------------------------------
26,438,333
- -----------------------------------------------------------------
NETHERLANDS-3.46%
Aalberts Industries N.V.
(Metals-Miscellaneous) 23,000 2,697,589
- -----------------------------------------------------------------
Ahrend Groep N.V. (Furniture) 105,000 5,582,012
- -----------------------------------------------------------------
Baan Co. N.V.-ADR(a)
(Computer Software/Services) 100,000 3,700,000
- -----------------------------------------------------------------
Cap Gemini N.V.
(Computer Software/Services) 160,000 4,366,122
- -----------------------------------------------------------------
Ceteco Holding N.V. (Furniture) 15,000 850,474
- -----------------------------------------------------------------
CMG PLC (Computer
Software/Services) 340,000 4,188,130
- -----------------------------------------------------------------
Getronics N.V. (Computer
Software/Services) 300,000 7,373,136
- -----------------------------------------------------------------
IHC Caland N.V. (Trucking) 114,000 6,362,822
- -----------------------------------------------------------------
International-Muller N.V.
(Conglomerates) 288,000 6,942,418
- -----------------------------------------------------------------
Koninklijke Van Ommeren N.V.
(Transportation) 122,000 5,069,252
- -----------------------------------------------------------------
Oce-Van Der Grinten N.V.-V (Office
Automation) 67,000 7,147,404
- -----------------------------------------------------------------
Ordina Beheer N.V.(a)
(Computer Software/Services) 40,768 1,782,864
- -----------------------------------------------------------------
Randstad Holdings N.V. (Business
Services) 46,400 3,752,036
- -----------------------------------------------------------------
59,814,259
- -----------------------------------------------------------------
NORWAY-0.86%
Mercantildata ASA (Computer
Software/Services) 50,000 767,929
- -----------------------------------------------------------------
Smedvig A.S.-Class A (Oil & Gas
Services) 160,000 3,598,295
- -----------------------------------------------------------------
Smedvig A.S.-Class B(a) (Oil & Gas
Services) 40,000 865,095
- -----------------------------------------------------------------
Tandberg A.S.(a)
(Telecommunications) 110,000 2,758,275
- -----------------------------------------------------------------
Tomra Systems A.S.
(Machinery-Miscellaneous) 486,000 6,893,023
- -----------------------------------------------------------------
14,882,617
- -----------------------------------------------------------------
PANAMA-0.35%
Banco Latinoamericano de
Exportaciones, S.A. (Banking) 116,000 6,061,000
- -----------------------------------------------------------------
PERU-0.13%
CPT Telefonica del Peru S.A.-Class
B (Telephone) 1,026,000 2,170,882
- -----------------------------------------------------------------
PHILIPPINES-2.54%
C & P Homes, Inc. (Homebuilding) 10,831,500 4,945,890
- -----------------------------------------------------------------
DMCI Holdings Inc.(a)
(Engineering & Construction) 7,820,000 5,653,729
- -----------------------------------------------------------------
Filinvest Land Inc.(a) (Real
Estate) 21,498,175 7,280,584
- -----------------------------------------------------------------
</TABLE>
FS-62
<PAGE> 203
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PHILIPPINES-(CONTINUED)
Ionics Circuit Inc.(a) (Electronic
Components/Miscellaneous) 4,832,000 $ 3,125,723
- -----------------------------------------------------------------
Marsman & Co., Inc.-Class B(b)
(Medical-Drugs) 6,616,000 2,039,178
- -----------------------------------------------------------------
Metro Pacific Corp.
(Conglomerates) 27,254,000 6,637,199
- -----------------------------------------------------------------
Metropolitan Bank & Trust Co.
(Banking) 313,125 6,910,674
- -----------------------------------------------------------------
Republic Glass Holdings Corp.
(Automobile/Trucks Parts &
Tires) 10,186,100 1,976,755
- -----------------------------------------------------------------
Southeast Asia Cement Holdings,
Inc.(a)
(Building Materials) 26,948,380 2,563,583
- -----------------------------------------------------------------
SM Prime Holdings (Real Estate) 12,448,200 2,652,584
- -----------------------------------------------------------------
43,785,899
- -----------------------------------------------------------------
PORTUGAL-0.82%
Cimpor Cimentos de Portugal S.A.
(Building Materials) 102,000 2,143,966
- -----------------------------------------------------------------
Estabelecimentos Jeronimo Martins
& Filho (Retail-Stores) 56,000 5,107,873
- -----------------------------------------------------------------
Portugal Telecom S.A.
(Telecommunications) 265,000 6,891,212
- -----------------------------------------------------------------
14,143,051
- -----------------------------------------------------------------
SINGAPORE-1.91%
Cerebos Pacific Ltd.
(Food/Processing) 182,000 1,408,449
- -----------------------------------------------------------------
City Developments Ltd. (Real
Estate) 789,000 6,217,891
- -----------------------------------------------------------------
DBS Land Ltd. (Real Estate) 3,030,000 9,551,438
- -----------------------------------------------------------------
Overseas Union Bank Ltd. (Banking) 1,030,000 7,020,234
- -----------------------------------------------------------------
Wing Tai Holdings Ltd. (Real
Estate) 3,600,000 8,843,450
- -----------------------------------------------------------------
33,041,462
- -----------------------------------------------------------------
SOUTH AFRICA-0.65%
De Beers Centenary A.G.
(Gold & Silver Mining) 200,000 5,903,037
- -----------------------------------------------------------------
Sasol Limited
(Oil & Gas-Exploration &
Production) 438,850 5,354,110
- -----------------------------------------------------------------
11,257,147
- -----------------------------------------------------------------
SPAIN-0.52%
Mapfre Vida (Insurance-Life &
Health) 54,000 3,470,355
- -----------------------------------------------------------------
Prosegur, CIA de Seguridad S.A.(a)
(Business Services) 400,000 3,228,967
- -----------------------------------------------------------------
Vidrala S.A. (Containers) 40,000 2,288,491
- -----------------------------------------------------------------
8,987,813
- -----------------------------------------------------------------
SWEDEN-1.78%
Allgon A.B. (Electronic
Components/Miscellaneous) 134,000 2,720,471
- -----------------------------------------------------------------
Assa Abloy A.B.
(Machinery-Miscellaneous) 115,500 1,774,032
- -----------------------------------------------------------------
Autoliv A.B.
(Automobiles/Trucks Parts &
Tires) 219,000 9,291,939
- -----------------------------------------------------------------
BT Industries A.B.
(Machinery-Miscellaneous) 72,000 1,237,283
- -----------------------------------------------------------------
Esselte A.B.-B Shares (Office
Products) 200,000 4,471,007
- -----------------------------------------------------------------
Frontec A.B.-B Shares(a)
(Computer Software/Services) 120,000 1,715,406
- -----------------------------------------------------------------
Securitas A.B. (Security & Safety
Services) 126,300 3,265,204
- -----------------------------------------------------------------
Telefonaktiebolaget L.M.
Ericsson-ADR
(Telecommunications) 73,760 2,037,620
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWEDEN-(CONTINUED)
WM-Data A.B.-Class B
(Computer Software/Services) 60,000 $ 4,288,516
- -----------------------------------------------------------------
30,801,478
- -----------------------------------------------------------------
SWITZERLAND-0.99%
Danzas Holding A.G.
(Transportation) 1,500 1,691,060
- -----------------------------------------------------------------
Disetronic Holding A.G.(a)
(Medical-Drugs) 2,000 4,351,266
- -----------------------------------------------------------------
Kouni Reisen A.G. (Leisure &
Recreation) 1,600 3,601,266
- -----------------------------------------------------------------
Saurer A.G.(a)
(Machinery-Miscellaneous) 9,500 3,990,902
- -----------------------------------------------------------------
Stratec Holding A.G.(a)
(Medical Instruments/Products) 2,600 3,383,703
- -----------------------------------------------------------------
17,018,197
- -----------------------------------------------------------------
THAILAND-1.01%
Bank of Ayudhya Ltd. (Banking) 87,475 250,468
- -----------------------------------------------------------------
Hana Microelectronics Public Co.,
Ltd.
(Electronic
Components/Miscellaneous) 646,000 3,217,964
- -----------------------------------------------------------------
Krung Thai Bank PLC (Banking) 1,687,670 4,567,532
- -----------------------------------------------------------------
Siam Commercial Bank Public Co.
Ltd. (Banking) 377,100 3,431,543
- -----------------------------------------------------------------
Thai Theparos Food Product Public
Co. Ltd. (Food/Processing) 215,500 807,227
- -----------------------------------------------------------------
Total Access Communication Public
Co. Ltd. (Telecommunications) 736,000 5,078,400
- -----------------------------------------------------------------
17,353,134
- -----------------------------------------------------------------
UNITED KINGDOM-7.90%
Aegis Group PLC
(Advertising/Broadcasting) 6,000,000 6,127,930
- -----------------------------------------------------------------
Airtours PLC (Leisure &
Recreation) 815,000 8,648,763
- -----------------------------------------------------------------
Alexon Group PLC(a)
(Retail-Stores) 555,000 1,508,545
- -----------------------------------------------------------------
Astec BSR PLC
(Electronic
Components/Miscellaneous) 1,300,000 3,247,884
- -----------------------------------------------------------------
Body Shop International PLC
(Retail-Food & Drug) 700,000 2,255,859
- -----------------------------------------------------------------
British Vita PLC (Chemicals) 1,050,000 3,913,574
- -----------------------------------------------------------------
Capital Radio PLC
(Advertising/Broadcasting) 250,000 2,360,026
- -----------------------------------------------------------------
Caradon PLC (Building Materials) 1,000,000 3,930,664
- -----------------------------------------------------------------
Carpetright PLC (Retail-Stores) 302,000 3,072,103
- -----------------------------------------------------------------
Charles Baynes PLC
(Machinery-Heavy) 345,000 749,634
- -----------------------------------------------------------------
Compass Group PLC (Restaurants) 335,000 3,320,557
- -----------------------------------------------------------------
Corporate Services Group PLC
(Business Services) 500,000 1,432,292
- -----------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 99,700 3,950,613
- -----------------------------------------------------------------
Dewhirst Group PLC (Textiles) 404,000 1,236,198
- -----------------------------------------------------------------
D.F.S. Furniture Co. PLC
(Retail-Stores) 660,000 5,859,863
- -----------------------------------------------------------------
Eurotherm PLC (Electronic
Components/Miscellaneous) 150,000 1,484,375
- -----------------------------------------------------------------
FKI PLC (Conglomerates) 1,125,000 3,845,215
- -----------------------------------------------------------------
Games Workshop Group PLC
(Leisure & Recreation) 165,000 1,407,227
- -----------------------------------------------------------------
Goode Durrant PLC (Business
Services) 214,000 1,221,688
- -----------------------------------------------------------------
Hogg Robinson PLC (Conglomerates) 800,000 3,483,073
- -----------------------------------------------------------------
Holliday Chemical Holdings PLC
(Chemicals) 675,000 1,378,784
- -----------------------------------------------------------------
</TABLE>
FS-63
<PAGE> 204
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
JBA Holdings PLC
(Computer Software/Services) 150,000 $ 1,257,324
- -----------------------------------------------------------------
Laura Ashley Holdings PLC
(Retail-Stores) 721,000 2,335,270
- -----------------------------------------------------------------
Logica PLC (Computer
Software/Services) 300,000 3,906,250
- -----------------------------------------------------------------
London Forfaiting Co. PLC
(Finance-Asset Management) 340,000 1,596,517
- -----------------------------------------------------------------
London International Group PLC
(Cosmetics & Toiletries) 2,000,000 5,078,125
- -----------------------------------------------------------------
Medeva PLC (Medical-Drugs) 325,000 1,396,484
- -----------------------------------------------------------------
MFI Furniture Group PLC
(Retail-Stores) 1,320,000 4,296,875
- -----------------------------------------------------------------
Michael Page Group PLC
(Miscellaneous) 230,000 1,576,009
- -----------------------------------------------------------------
Misys PLC (Computer
Software/Services) 500,000 7,385,254
- -----------------------------------------------------------------
Oxford Instruments PLC (Electronic
Components/Miscellaneous) 108,000 861,328
- -----------------------------------------------------------------
P & P PLC (MINI/PCs) 471,000 1,096,240
- -----------------------------------------------------------------
Parity PLC (Computer
Software/Services) 350,000 1,891,276
- -----------------------------------------------------------------
PizzaExpress PLC (Restaurants) 200,000 1,669,922
- -----------------------------------------------------------------
Powerscreen International PLC
(Machinery-Heavy) 515,000 5,096,354
- -----------------------------------------------------------------
Provident Financial PLC
(Finance-Consumer Credit) 1,000,000 7,495,117
- -----------------------------------------------------------------
Psion PLC (Computer
Software/Services) 210,000 1,449,219
- -----------------------------------------------------------------
Sage Group PLC (The)
(Computer Software/Services) 300,000 2,338,867
- -----------------------------------------------------------------
Scholl PLC (Cosmetics &
Toiletries) 200,000 883,789
- -----------------------------------------------------------------
SEMA Group PLC
(Computer Software/Services) 500,000 7,250,977
- -----------------------------------------------------------------
Spirax Sarco Engineering PLC
(Machinery-Miscellaneous) 130,000 1,544,596
- -----------------------------------------------------------------
St. Ives Group PLC (Containers) 201,000 1,586,670
- -----------------------------------------------------------------
Stagecoach Holdings PLC
(Transportation) 390,000 3,605,469
- -----------------------------------------------------------------
Taylor Woodrow PLC
(Engineering & Construction) 1,450,000 3,658,040
- -----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
TBI PLC (Real Estate) 500,000 $ 630,697
- -----------------------------------------------------------------
Wetherspoon (J.D.) PLC
(Restaurants) 105,000 2,026,855
- -----------------------------------------------------------------
136,348,391
- -----------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 1,012,303,342
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE
CORPORATE BONDS-0.29%
Cityscape Financial Corp.,
Conv. Deb., 6.00%, 05/01/06
(Finance-Consumer Credit)
(Acquired 08/06/96; cost
$718,588)(c) $ 520,000 $ 549,095
- -----------------------------------------------------------------
Eagle Hardware & Garden, Inc.,
Conv. Deb., 6.25%, 03/15/01
(Building Materials) 335,000 542,700
- -----------------------------------------------------------------
RAC Financial Group, Inc.,
Conv. Deb., 7.25%, 08/15/03
(Finance-Consumer Credit)
(Acquired 09/06/96 - 09/30/96;
cost $2,643,049)(b) 2,154,000 3,834,120
- -----------------------------------------------------------------
Total Domestic Convertible
Corporate Bonds 4,925,915
- -----------------------------------------------------------------
REPURCHASE AGREEMENTS-3.16%(d)
Daiwa Securities America, Inc.,
5.53%, 11/01/96(e) 631,659 631,659
- -----------------------------------------------------------------
Dresdner Securities, Inc.,
5.54%, 11/01/96(f) 54,000,000 54,000,000
- -----------------------------------------------------------------
Total Repurchase Agreements 54,631,659
- -----------------------------------------------------------------
TOTAL INVESTMENTS-100.19% 1,729,881,025
- -----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(0.19)% (3,347,049)
- -----------------------------------------------------------------
NET ASSETS-100.00% $ 1,726,533,976
=================================================================
</TABLE>
Abbreviations:
ADR - American Depository Receipts
Conv. - Convertible
Deb. - Debentures
GDR - Global Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has never owned enough of the outstanding voting securities of any
issuer to have control (as defined in the Investment Company Act of 1940) of
that issuer. The market value of this security as of October 31, 1996 was
$2,039,178 which represented 0.12% of the Fund's net assets.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the securities Act of
1933, as ammended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at October 31, 1996 was
$4,383,215, which represented 0.25% of net assets.
(d) 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% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collaterized by $733,115,000 U.S. Treasury obligations, 0% to
10.375% due 11/15/96 to 08/15/23.
(f) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$200,030,778. Collaterized by $198,651,000 U.S. Treasury obligations, 4.75%
to 9.25% due 11/30/97 to 06/30/99.
See Notes to Financial Statements.
FS-64
<PAGE> 205
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,528,249,227) $1,729,881,025
- ---------------------------------------------------------
Foreign currencies, at market value
(cost $9,212,688) 9,270,386
- ---------------------------------------------------------
Receivables for:
Investments sold 5,519,599
- ---------------------------------------------------------
Capital stock sold 15,022,002
- ---------------------------------------------------------
Dividends and interest 1,180,039
- ---------------------------------------------------------
Investment for deferred compensation
plan 8,260
- ---------------------------------------------------------
Other assets 120,698
- ---------------------------------------------------------
Total assets 1,761,002,009
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 27,020,437
- ---------------------------------------------------------
Capital stock reacquired 2,538,633
- ---------------------------------------------------------
Amount due to custodian bank 1,534,176
- ---------------------------------------------------------
Deferred compensation 8,260
- ---------------------------------------------------------
Accrued advisory fees 1,298,791
- ---------------------------------------------------------
Accrued administrative services fees 8,068
- ---------------------------------------------------------
Accrued directors' fees 1,041
- ---------------------------------------------------------
Accrued distribution fees 1,115,692
- ---------------------------------------------------------
Accrued transfer agent fees 425,715
- ---------------------------------------------------------
Accrued operating expenses 517,220
- ---------------------------------------------------------
Total liabilities 34,468,033
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $1,726,533,976
=========================================================
NET ASSETS:
Class A $ 919,318,683
=========================================================
Class B $ 807,215,293
=========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
CLASS A:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 58,347,321
=========================================================
CLASS B:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 51,810,099
=========================================================
CLASS A:
Net asset value and redemption price
per share $ 15.76
=========================================================
Offering price per share:
(Net asset value divided by 95.25%) $ 16.55
=========================================================
CLASS B:
Net asset value and offering price per
share $ 15.58
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,229,205 foreign
withholding tax) $ 8,040,717
- --------------------------------------------------------
Interest 3,459,264
- --------------------------------------------------------
Total investment income 11,499,981
- --------------------------------------------------------
EXPENSES:
Advisory fees 8,571,918
- --------------------------------------------------------
Administrative services fees 86,330
- --------------------------------------------------------
Directors' fees 10,321
- --------------------------------------------------------
Distribution fees-Class A 2,653,374
- --------------------------------------------------------
Distribution fees-Class B 4,217,606
- --------------------------------------------------------
Custodian fees 965,443
- --------------------------------------------------------
Transfer agent fees-Class A 1,433,553
- --------------------------------------------------------
Transfer agent fees-Class B 1,374,718
- --------------------------------------------------------
Other 422,711
- --------------------------------------------------------
Total expenses 19,735,974
- --------------------------------------------------------
Less: Expenses paid indirectly (14,962)
- --------------------------------------------------------
Net expenses 19,721,012
- --------------------------------------------------------
Net investment income (loss) (8,221,031)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) on sales of:
Investment securities (32,146,548)
- --------------------------------------------------------
Foreign currencies (261,859)
- --------------------------------------------------------
(32,408,407)
- --------------------------------------------------------
Net unrealized appreciation of:
Investment securities 171,415,041
- --------------------------------------------------------
Foreign currencies 19,161
- --------------------------------------------------------
171,434,202
- --------------------------------------------------------
Net gain on investment securities and
foreign currencies 139,025,795
- --------------------------------------------------------
Net increase in net assets resulting from
operations $130,804,764
========================================================
</TABLE>
See Notes to Financial Statements.
FS-65
<PAGE> 206
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (8,221,031) $ (1,185,880)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities and foreign currencies (32,408,407) 2,414,201
- -------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and foreign currencies 171,434,202 29,786,715
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 130,804,764 31,015,036
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized capital gains:
Class A (766,625) --
- -------------------------------------------------------------------------------------------------------------------------------
Class B (520,242) --
- -------------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 657,118,189 146,731,096
- -------------------------------------------------------------------------------------------------------------------------------
Class B 635,669,948 101,870,873
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 1,422,306,034 279,617,005
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 304,227,942 24,610,937
- -------------------------------------------------------------------------------------------------------------------------------
End of period $1,726,533,976 $304,227,942
===============================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,557,038,579 $272,738,461
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (14,054) --
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of investment securities and
foreign currencies (32,181,471) 1,232,761
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and foreign currencies 201,690,922 30,256,720
- -------------------------------------------------------------------------------------------------------------------------------
$1,726,533,976 $304,227,942
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Aggressive Growth 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 Global Aggressive Growth Fund, AIM Global Growth Fund,
AIM Global Income Fund and AIM International Equity Fund. The Fund currently
offers two different classes of shares: Class A shares and 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 Fund's investment objective is to provide above-average long-term growth of
capital appreciation. The Fund seeks to achieve its objective by investing in a
portfolio of global equity securities including securities of selected companies
with relatively small market capitalization.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- Except as provided in the next sentence, a security
listed or traded on an exchange is valued at the last sales price on the
exchange where the security is principally traded or, lacking any sales, at
the mean between the closing bid and asked prices on the day of valuation.
Exchange listed convertible bonds are valued at the mean between the closing
bid and asked prices obtained from a broker-dealer. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Securities traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) are valued at the mean between the closing bid and asked prices on
FS-66
<PAGE> 207
valuation date. Securities reported on the NASDAQ National Market System are
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Securities for which
market quotations are either not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Company's 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 would not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at 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 currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses 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. On October 31, 1996,
undistributed net investment income was increased by $8,206,977, paid-in
capital reduced by $8,488,019 and undistributed net realized gains increased
by $281,042 in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassifications discussed above.
E. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $32,147,412 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2004.
F. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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 advisory agreement, the
Fund pays an advisory fee to AIM at the annual rate of 0.90% of the first $1
billion of the Fund's average daily net assets, plus 0.85% of the Fund's average
daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1996, AIM was
reimbursed $86,330 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1996, AFS was paid
$1,474,675 for such services.
The Fund received reductions in transfer agency fees of $13,093 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $1,869 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $14,962 during the year ended October
31, 1996.
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
distribution 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, pays AIM Distributors an annual rate of 0.50% 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. Of the total compensation payable, the Fund pays a service fee of
0.25% 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 Fund, pursuant to the Class B Plan, will pay AIM
Distributors an annual rate of 1.00% of the average daily net assets
attributable to the Class B
FS-67
<PAGE> 208
shares. Of this amount, the Fund pays 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. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more designees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the year ended October 31, 1996, the Class A shares and
the Class B shares paid AIM Distributors $2,653,374 and $4,217,606,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $3,270,278 from the sales of the
Class A shares of the Fund during the year ended October 31, 1996. 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 year ended
October 31, 1996, AIM Distributors received commissions of $84,130 in contingent
deferred sales charges imposed on redemptions of Fund shares. Certain officers
and directors of the Company are officers and directors of AIM, AFS and AIM
Distributors.
During the year ended October 31, 1996, the Fund incurred legal fees of $4,726
for services rendered by the law firm of Kramer, Levin, Naftalis & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-AFFILIATED COMPANY TRANSACTIONS
Affiliated issuers, as defined in the 1940 Act, are issuers in which the Fund
held 5% or more of the outstanding voting securities. A summary of transactions
for each issuer who is or was an affiliate at or during the year ended October
31, 1996, were as follows:
<TABLE>
<CAPTION>
SHARE SHARE MARKET
BALANCE BALANCE VALUE
OCTOBER 31, OCTOBER 31, OCTOBER 31,
NAME OF ISSUER: 1995 1996 1996
------------------------------------------
<S> <C> <C> <C>
Marsman & Co., Inc. -- 6,616,000 $2,039,178
------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
REALIZED
PURCHASES SALES GAIN DIVIDEND
COST COST LOSS INCOME
-----------------------------------------------------
<S> <C> <C> <C> <C>
Marsman & Co., Inc. $3,605,878 $ -- $ -- $15,243
-----------------------------------------------------
</TABLE>
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $1,900,000. During the year ended October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 6-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, 1996, on a tax
basis, was $1,650,395,817 and $388,356,218, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1996, on a tax basis, is as follows.
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $264,209,277
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (62,611,540)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $201,597,737
- ----------------------------------------------------------
Cost of investments for tax purposes is $1,528,283,288.
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 50,205,954 $748,519,743 13,970,703 $165,030,476
- --------------- ---------- -------------- ---------- ------------
Class B 45,280,451 673,914,740 8,888,670 106,907,530
- --------------- ---------- -------------- ---------- ------------
Issued as
reinvestment
of dividends:
Class A 56,549 727,221 -- --
- --------------- ---------- -------------- ---------- ------------
Class B 38,442 491,285 -- --
- --------------- ---------- -------------- ---------- ------------
Reacquired:
Class A (6,124,044) (92,128,775) (1,563,927) (18,299,380)
- --------------- ---------- -------------- ---------- ------------
Class B (2,588,161) (38,736,077) (416,562) (5,036,657)
- --------------- ---------- -------------- ---------- ------------
86,869,191 $1,292,788,137 20,878,884 $248,601,969
========== ============== ========== ============
</TABLE>
FS-68
<PAGE> 209
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's Advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM Funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share and Class B share
outstanding during each of the years in the two-year period ended October 31,
1996 and the period September 15, 1994 (date operations commenced) through
October 31, 1994.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 13.09 $ 10.22 $ 10.00
- ------------------------------------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.09)(a) --
- ------------------------------------------------------------------------- -------- -------- --------
Net gains on securities (both realized and unrealized) 2.81 2.96 0.22
- ------------------------------------------------------------------------- -------- -------- --------
Total from investment operations 2.72 2.87 0.22
- ------------------------------------------------------------------------- -------- -------- --------
Less distributions:
Distributions from net realized capital gains (0.05) -- --
- ------------------------------------------------------------------------- -------- -------- --------
Net asset value, end of period $ 15.76 $ 13.09 $ 10.22
========================================================================= ======== ======== ========
Total return(b) 20.83% 28.08% 2.20%
========================================================================= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $919,319 $186,029 $ 18,410
========================================================================= ======== ======== ========
Ratio of expenses to average net assets 1.83%(c)(d) 2.11% 2.02%(e)(f)
========================================================================= ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.62)%(c) (0.68)% 0.27%(f)(g)
========================================================================= ======== ======== ========
Portfolio turnover rate 44% 64% 2%
========================================================================= ======== ======== ========
Average brokerage commission rate(h) $ 0.0155 N/A N/A
========================================================================= ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are based on average net assets of $530,674,844.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) After fee waivers and expense reimbursements. Ratio of expenses to average
net assets before fee waivers and expense reimbursements is 4.03%
(annualized) for 1994.
(f) Annualized.
(g) After fee waivers and expense reimbursements. Ratio of net investment income
(loss) to average net assets before fee waivers and expense reimbursements
is (1.74)% (annualized) for 1994.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 13.02 $ 10.21 $ 10.00
- ------------------------------------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.14)(a) --
- ------------------------------------------------------------------------- -------- -------- --------
Net gains on securities (both realized and unrealized) 2.78 2.95 0.21
- ------------------------------------------------------------------------- -------- -------- --------
Total from investment operations 2.61 2.81 0.21
- ------------------------------------------------------------------------- -------- -------- --------
Less distributions:
Distributions net realized capital gains (0.05) -- --
- ------------------------------------------------------------------------- -------- -------- --------
Net asset value, end of period $ 15.58 $ 13.02 $ 10.21
========================================================================= ======== ======== ========
Total return(b) 20.09% 27.52% 2.10%
========================================================================= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $807,215 $118,199 $ 6,201
========================================================================= ======== ======== ========
Ratio of expenses to average net assets 2.37%(c)(d) 2.62% 2.54%(e)(f)
========================================================================= ======== ======== ========
Ratio of net investment income (loss) to average net assets (1.16)%(c) (1.19)% (0.25)%(f)(g)
========================================================================= ======== ======== ========
Portfolio turnover rate 44% 64% 2%
========================================================================= ======== ======== ========
Average brokerage commission rate(h) $ 0.0155 N/A N/A
========================================================================= ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are based on average net assets of $421,760,605.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average assets would have been the same.
(e) After fee waivers and expense reimbursements. Ratio of expenses to average
net assets before fee waivers and expense reimbursements is 4.43%
(annualized) for 1994.
(f) Annualized.
(g) After fee waivers and expense reimbursements. Ratio of net investment income
(loss) to average net assets before fee waivers and expense reimbursements
is (2.14)% (annualized) for 1994.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
FS-69
<PAGE> 210
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 Global Growth Fund (a portfolio of AIM
International Funds, Inc.), including the schedule of
investments, as of October 31, 1996, and the related
statement of operations for the year then ended, the
statement of changes in net assets for the two-year period
then ended and financial highlights for the two-year
period then ended and the period September 15, 1994 (date
operations commenced) through October 31, 1994. 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, 1996, 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 Global
Growth Fund as of October 31, 1996, the results of its
operations for the year then ended, and changes in its net
assets for the two-year period then ended and the
financial highlights for the two-year period then ended
and the period September 15, 1994 (date operations
commenced) through October 31, 1994, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-70
<PAGE> 211
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-31.96%
ADVERTISING/BROADCASTING-0.22%
Interpublic Group of Companies, Inc. 11,000 $ 533,500
- ----------------------------------------------------------------
AEROSPACE/DEFENSE-0.36%
Boeing Co. (The) 4,000 381,500
- ----------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 20,000 472,500
- ----------------------------------------------------------------
854,000
- ----------------------------------------------------------------
AIRLINES-0.08%
Sabre Group Holdings Inc.(a) 6,100 186,050
- ----------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.10%
Chrysler Corp. 7,200 242,100
- ----------------------------------------------------------------
BANKING-0.26%
Citicorp 6,300 623,700
- ----------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.25%
PepsiCo Inc. 20,000 592,500
- ----------------------------------------------------------------
BIOTECHNOLOGY-0.44%
AMGEN, Inc.(a) 7,000 429,187
- ----------------------------------------------------------------
Guidant Corp. 13,500 622,688
- ----------------------------------------------------------------
1,051,875
- ----------------------------------------------------------------
BUILDING MATERIALS-0.10%
Georgia-Pacific Corp. 3,000 225,000
- ----------------------------------------------------------------
BUSINESS SERVICES-0.96%
CUC International, Inc.(a) 18,000 441,000
- ----------------------------------------------------------------
Diebold, Inc. 8,700 500,250
- ----------------------------------------------------------------
Equifax, Inc. 32,200 957,950
- ----------------------------------------------------------------
Healthcare COMPARE Corp.(a) 6,000 264,000
- ----------------------------------------------------------------
Interim Services Inc.(a) 1,000 40,000
- ----------------------------------------------------------------
Olsten Corp. 3,000 60,000
- ----------------------------------------------------------------
2,263,200
- ----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.33%
Morton International, Inc. 20,000 787,500
- ----------------------------------------------------------------
COMPUTER MINI/PCS-1.79%
COMPAQ Computer Corp.(a) 24,000 1,671,000
- ----------------------------------------------------------------
Dell Computer Corp.(a) 11,500 935,812
- ----------------------------------------------------------------
Gateway 2000, Inc.(a) 17,000 800,062
- ----------------------------------------------------------------
Sun Microsystems, Inc.(a) 13,700 835,700
- ----------------------------------------------------------------
4,242,574
- ----------------------------------------------------------------
COMPUTER NETWORKING-1.04%
Ascend Communications, Inc.(a) 14,000 915,250
- ----------------------------------------------------------------
Cabletron Systems, Inc.(a) 8,000 499,000
- ----------------------------------------------------------------
Cisco Systems, Inc.(a) 4,000 247,500
- ----------------------------------------------------------------
3Com Corp.(a) 12,000 811,500
- ----------------------------------------------------------------
2,473,250
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER PERIPHERALS-0.18%
Storage Technology Corp.(a) 9,800 $ 417,725
- ----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-3.51%
BMC Software, Inc.(a) 6,700 556,100
- ----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 11,300 412,450
- ----------------------------------------------------------------
Ceridian Corp.(a) 12,000 595,500
- ----------------------------------------------------------------
Computer Associates International, Inc. 14,000 827,750
- ----------------------------------------------------------------
Computer Sciences Corp.(a) 5,200 386,100
- ----------------------------------------------------------------
Compuware Corp.(a) 15,900 838,725
- ----------------------------------------------------------------
Electronic Data Systems Corp. 15,400 693,000
- ----------------------------------------------------------------
Electronics for Imaging, Inc.(a) 700 50,400
- ----------------------------------------------------------------
First Data Corp. 5,000 398,750
- ----------------------------------------------------------------
Fiserv, Inc.(a) 11,500 441,312
- ----------------------------------------------------------------
Mechanical Dynamics, Inc.(a) 27,100 389,562
- ----------------------------------------------------------------
Microsoft Corp.(a) 3,000 411,750
- ----------------------------------------------------------------
Oracle Systems Corp.(a) 6,000 253,875
- ----------------------------------------------------------------
Parametric Technology Co.(a) 9,300 454,538
- ----------------------------------------------------------------
Sterling Commerce, Inc.(a) 32,500 914,062
- ----------------------------------------------------------------
Synopsys, Inc.(a) 5,700 256,500
- ----------------------------------------------------------------
Wallace Computer Services, Inc. 15,000 440,625
- ----------------------------------------------------------------
8,320,999
- ----------------------------------------------------------------
CONGLOMERATES-1.19%
AlliedSignal Inc. 13,000 851,500
- ----------------------------------------------------------------
Loews Corp. 5,400 446,175
- ----------------------------------------------------------------
Textron Inc. 4,200 372,750
- ----------------------------------------------------------------
Tyco International Ltd. 16,400 813,850
- ----------------------------------------------------------------
U.S. Industries, Inc.(a) 12,700 342,900
- ----------------------------------------------------------------
2,827,175
- ----------------------------------------------------------------
CONTAINERS-0.15%
Sealed Air Corp.(a) 9,000 349,875
- ----------------------------------------------------------------
COSMETICS & TOILETRIES-0.46%
Avon Products, Inc. 11,000 596,750
- ----------------------------------------------------------------
Gillette Co. (The) 6,600 493,350
- ----------------------------------------------------------------
1,090,100
- ----------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.50%
Amphenol Corp.(a) 700 13,912
- ----------------------------------------------------------------
Checkpoint Systems, Inc.(a) 24,000 537,000
- ----------------------------------------------------------------
Photon Dynamics, Inc.(a) 9,400 61,688
- ----------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 5,200 157,300
- ----------------------------------------------------------------
Waters Corp.(a) 13,500 418,500
- ----------------------------------------------------------------
1,188,400
- ----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.19%
Bear Stearns Companies, Inc. 90 2,126
- ----------------------------------------------------------------
Franklin Resources, Inc. 5,000 352,500
- ----------------------------------------------------------------
PaineWebber Group Inc. 4,500 105,750
- ----------------------------------------------------------------
460,376
- ----------------------------------------------------------------
</TABLE>
FS-71
<PAGE> 212
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-1.54%
Beneficial Corp. 3,100 $ 181,350
- ----------------------------------------------------------------
Federal Home Loan Mortgage Corp. 9,700 979,700
- ----------------------------------------------------------------
Federal National Mortgage Association 13,500 528,188
- ----------------------------------------------------------------
Finova Group, Inc. 6,000 370,500
- ----------------------------------------------------------------
Green Tree Financial Corp. 7,000 277,375
- ----------------------------------------------------------------
Student Loan Marketing Association 9,300 769,575
- ----------------------------------------------------------------
SunAmerica, Inc. 7,200 270,000
- ----------------------------------------------------------------
T. Rowe Price Associates 7,700 262,762
- ----------------------------------------------------------------
3,639,450
- ----------------------------------------------------------------
FOOD/PROCESSING-0.40%
ConAgra, Inc. 6,900 344,138
- ----------------------------------------------------------------
Dean Foods Co. 20,500 594,500
- ----------------------------------------------------------------
938,638
- ----------------------------------------------------------------
GAMING-0.17%
International Game Technology 19,500 411,937
- ----------------------------------------------------------------
HOTELS/MOTELS-0.36%
Hilton Hotels Corp. 16,000 486,000
- ----------------------------------------------------------------
Host Marriott Corp.(a) 23,000 353,625
- ----------------------------------------------------------------
839,625
- ----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.43%
Conseco Inc. 12,000 642,000
- ----------------------------------------------------------------
Equitable Companies, Inc. 16,500 387,750
- ----------------------------------------------------------------
1,029,750
- ----------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-1.31%
American International Group, Inc. 3,900 423,638
- ----------------------------------------------------------------
CIGNA Corp. 3,000 391,500
- ----------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 8,100 206,550
- ----------------------------------------------------------------
ITT Hartford Group, Inc. 7,000 441,000
- ----------------------------------------------------------------
MGIC Investment Corp. 6,300 432,338
- ----------------------------------------------------------------
Old Republic International Corp. 9,100 225,225
- ----------------------------------------------------------------
TIG Holdings, Inc. 4,200 121,275
- ----------------------------------------------------------------
Travelers Group, Inc. 15,800 857,150
- ----------------------------------------------------------------
3,098,676
- ----------------------------------------------------------------
LEISURE & RECREATION-0.40%
Coleman Company, Inc. (The)(a) 3,800 50,350
- ----------------------------------------------------------------
Harley-Davidson, Inc. 20,000 902,500
- ----------------------------------------------------------------
952,850
- ----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.05%
Thermo Electron Corp. (a) 3,000 109,500
- ----------------------------------------------------------------
MEDICAL (DRUGS)-1.87%
Abbott Laboratories 6,000 303,750
- ----------------------------------------------------------------
American Home Products Corp. 6,500 398,125
- ----------------------------------------------------------------
AmeriSource Health Corp.(a) 2,000 84,750
- ----------------------------------------------------------------
Bristol-Myers Squibb Co. 4,000 423,000
- ----------------------------------------------------------------
Cardinal Health, Inc. 4,500 353,250
- ----------------------------------------------------------------
ICN Pharmaceuticals, Inc. 11,400 216,600
- ----------------------------------------------------------------
Johnson & Johnson 1,000 49,250
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (DRUGS)-(CONTINUED)
Merck & Co., Inc. 8,000 $ 593,000
- ----------------------------------------------------------------
Pfizer, Inc. 2,500 206,875
- ----------------------------------------------------------------
Pharmacia & UpJohn, Inc. 11,000 396,000
- ----------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 10,300 691,387
- ----------------------------------------------------------------
Schering-Plough Corp. 7,400 473,600
- ----------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 7,400 246,975
- ----------------------------------------------------------------
4,436,562
- ----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.19%
Columbia/HCA Healthcare Corp. 13,650 487,988
- ----------------------------------------------------------------
HEALTHSOUTH Corp.(a) 22,000 825,000
- ----------------------------------------------------------------
Living Centers of America, Inc.(a) 5,000 116,875
- ----------------------------------------------------------------
MedPartners, Inc.(a) 23,310 492,424
- ----------------------------------------------------------------
Quorum Health Group, Inc.(a) 20,100 542,700
- ----------------------------------------------------------------
Tenet Healthcare Corp.(a) 16,900 352,788
- ----------------------------------------------------------------
2,817,775
- ----------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.08%
Baxter International Inc. 4,100 170,662
- ----------------------------------------------------------------
Becton, Dickinson & Co. 9,200 400,200
- ----------------------------------------------------------------
Innovasive Devices, Inc.(a) 24,200 223,850
- ----------------------------------------------------------------
Medtronic, Inc. 5,000 321,875
- ----------------------------------------------------------------
Stryker Corp. 22,000 654,500
- ----------------------------------------------------------------
Sybron International Corp.(a) 14,000 407,750
- ----------------------------------------------------------------
U.S. Surgical Corp. 8,500 355,938
- ----------------------------------------------------------------
2,534,775
- ----------------------------------------------------------------
NATURAL GAS PIPELINE-0.48%
Columbia Gas System, Inc. 14,000 850,500
- ----------------------------------------------------------------
Williams Companies, Inc. (The) 5,500 287,375
- ----------------------------------------------------------------
1,137,875
- ----------------------------------------------------------------
OFFICE AUTOMATION-0.02%
Xerox Corp. 1,200 55,650
- ----------------------------------------------------------------
OFFICE PRODUCTS-0.09%
Reynolds & Reynolds Co.-Class A 8,000 211,000
- ----------------------------------------------------------------
OIL & GAS (DRILLING)-0.30%
Reading & Bates Corp.(a) 17,000 488,750
- ----------------------------------------------------------------
Transocean Offshore Inc. 3,500 221,375
- ----------------------------------------------------------------
710,125
- ----------------------------------------------------------------
OIL & GAS (SERVICES)-0.40%
Louisiana Land & Exploration Co. 3,400 193,375
- ----------------------------------------------------------------
NorAm Energy Corp. 47,600 731,850
- ----------------------------------------------------------------
925,225
- ----------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.47%
Baker Hughes, Inc. 23,000 819,375
- ----------------------------------------------------------------
Coastal Corp. 8,400 361,200
- ----------------------------------------------------------------
Cooper Cameron Corp.(a) 2,500 159,688
- ----------------------------------------------------------------
Dresser Industries, Inc. 10,000 328,750
- ----------------------------------------------------------------
Halliburton Co. 7,000 396,375
- ----------------------------------------------------------------
Rowan Companies., Inc.(a) 25,000 559,375
- ----------------------------------------------------------------
</TABLE>
FS-72
<PAGE> 213
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-(CONTINUED)
Schlumberger Ltd. 4,300 $ 426,238
- ----------------------------------------------------------------
Tidewater, Inc. 10,000 437,500
- ----------------------------------------------------------------
3,488,501
- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.20%
Kimberly-Clark Corp. 5,000 466,250
- ----------------------------------------------------------------
PUBLISHING-0.23%
New York Times Co. 11,000 397,375
- ----------------------------------------------------------------
Times Mirror Co. (The) 3,200 148,000
- ----------------------------------------------------------------
545,375
- ----------------------------------------------------------------
RETAIL (FOOD & DRUGS)-0.50%
American Stores Co. 13,000 537,875
- ----------------------------------------------------------------
Kroger Co. (The)(a) 9,800 437,325
- ----------------------------------------------------------------
Safeway, Inc.(a) 4,600 197,225
- ----------------------------------------------------------------
1,172,425
- ----------------------------------------------------------------
RETAIL (STORES)-2.72%
Consolidated Stores Corp.(a) 4,500 173,812
- ----------------------------------------------------------------
Dayton-Hudson Corp. 12,000 415,500
- ----------------------------------------------------------------
Federated Department Stores, Inc.(a) 15,000 495,000
- ----------------------------------------------------------------
Gap, Inc. (The) 12,000 348,000
- ----------------------------------------------------------------
Home Depot, Inc. 16,800 919,800
- ----------------------------------------------------------------
Lowe's Companies, Inc. 20,800 839,800
- ----------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 22,500 787,500
- ----------------------------------------------------------------
Price/Costco Inc.(a) 5,200 103,350
- ----------------------------------------------------------------
Saks Holdings, Inc.(a) 12,400 434,000
- ----------------------------------------------------------------
Staples, Inc.(a) 25,575 476,335
- ----------------------------------------------------------------
Sysco Corp. 12,500 425,000
- ----------------------------------------------------------------
Toys "R" Us, Inc.(a) 26,000 880,750
- ----------------------------------------------------------------
Viking Office Products Inc.(a) 5,000 145,625
- ----------------------------------------------------------------
6,444,472
- ----------------------------------------------------------------
SEMICONDUCTORS-0.99%
Altera Corp.(a) 10,000 620,000
- ----------------------------------------------------------------
Intel Corp. 12,000 1,318,500
- ----------------------------------------------------------------
Texas Instruments, Inc. 8,500 409,062
- ----------------------------------------------------------------
2,347,562
- ----------------------------------------------------------------
SHOES & RELATED APPAREL-0.38%
Nike Inc. -Class B 14,400 847,800
- ----------------------------------------------------------------
Nine West Group, Inc.(a) 1,200 59,850
- ----------------------------------------------------------------
907,650
- ----------------------------------------------------------------
TELECOMMUNICATIONS-1.76%
ADC Telecommunications, Inc.(a) 15,100 1,032,462
- ----------------------------------------------------------------
Andrew Corp.(a) 12,000 585,000
- ----------------------------------------------------------------
Frontier Corp. 8,200 237,800
- ----------------------------------------------------------------
Lucent Technologies Inc. 14,000 658,000
- ----------------------------------------------------------------
MFS Communications Co., Inc.(a) 11,300 566,413
- ----------------------------------------------------------------
Tellabs, Inc.(a) 3,000 255,375
- ----------------------------------------------------------------
360 Communications Co.(a) 1,500 33,938
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
Western Wireless Corp.-Class A(a) 13,000 $ 214,500
- ----------------------------------------------------------------
WorldCom, Inc.(a) 23,600 575,250
- ----------------------------------------------------------------
4,158,738
- ----------------------------------------------------------------
TELEPHONE-0.22%
Cincinnati Bell, Inc. 10,500 518,437
- ----------------------------------------------------------------
TEXTILES-0.36%
Fruit of the Loom, Inc.-Class A(a) 13,300 483,787
- ----------------------------------------------------------------
Liz Claiborne, Inc. 8,500 359,125
- ----------------------------------------------------------------
842,912
- ----------------------------------------------------------------
TOBACCO-0.93%
Philip Morris Companies, Inc. 7,000 648,375
- ----------------------------------------------------------------
RJR Nabisco Holdings Corp. 28,800 831,600
- ----------------------------------------------------------------
Universal Corp. 6,800 185,300
- ----------------------------------------------------------------
UST, Inc. 19,000 548,625
- ----------------------------------------------------------------
2,213,900
- ----------------------------------------------------------------
Total Domestic Common Stocks 75,685,534
- ----------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-64.12%
ARGENTINA-1.10%
Banco de Galicia y Buenos Aires S.A.
de C.V. (Banking) 28,409 514,913
- ----------------------------------------------------------------
Perez Companc S.A.-Class B
(Oil & Gas-Services) 93,000 590,609
- ----------------------------------------------------------------
YPF Socidad Anonima-ADR
(Oil & Gas-Services) 65,600 1,492,400
- ----------------------------------------------------------------
2,597,922
- ----------------------------------------------------------------
AUSTRALIA-2.38%
National Mutual Holdings Ltd.(a)
(Insurance-Multi-Line Property) 600,000 856,056
- ----------------------------------------------------------------
News Corp. Ltd. (The)-ADR
(Publishing) 48,000 852,000
- ----------------------------------------------------------------
QBE Insurance Group Ltd.
(Insurance-Multi-Line Property) 181,125 959,032
- ----------------------------------------------------------------
QNI Ltd.
(Metals-Miscellaneous) 761,700 1,533,543
- ----------------------------------------------------------------
Western Mining Corp. Holdings Ltd.
(Metals-Miscellaneous) 228,200 1,434,390
- ----------------------------------------------------------------
5,635,021
- ----------------------------------------------------------------
AUSTRIA-0.63%
OMV AG
(Oil & Gas-Services) 9,400 920,193
- ----------------------------------------------------------------
VA Technologie AG
(Engineering & Construction) 4,100 573,373
- ----------------------------------------------------------------
1,493,566
- ----------------------------------------------------------------
BELGIUM-1.52%
Barco Industries(a)
(Electronic Components/Miscellaneous) 5,700 937,512
- ----------------------------------------------------------------
Colruyt S.A.
(Retail-Food & Drug) 1,100 474,351
- ----------------------------------------------------------------
Delhaize-Le Lion S.A.
(Retail-Food & Drug) 18,500 1,035,027
- ----------------------------------------------------------------
</TABLE>
FS-73
<PAGE> 214
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BELGIUM-(CONTINUED)
UCB S.A.
(Medical-Drugs) 520 $ 1,146,201
- ----------------------------------------------------------------
3,593,091
- ----------------------------------------------------------------
BRAZIL-0.61%
Telecommuicacoes Brasileiras
S.A.-Telebras-ADR
(Telecommunications) 19,400 1,445,300
- ----------------------------------------------------------------
CANADA-2.57%
Canadian National Railway Co.
(Railroads) 21,000 577,500
- ----------------------------------------------------------------
Canadian Natural Resources Ltd.(a)
(Oil & Gas-Exploration &
Production) 48,000 1,192,658
- ----------------------------------------------------------------
Canadian Pacific Ltd.
(Transportation-Miscellaneous) 43,000 1,085,750
- ----------------------------------------------------------------
Newbridge Networks Corp.(a)
(Computer Networking) 26,000 822,250
- ----------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 7,500 488,437
- ----------------------------------------------------------------
Suncor, Inc.
(Oil & Gas-Exploration & Production) 28,000 1,081,182
- ----------------------------------------------------------------
TELUS Corp.
(Telecommunications) 54,000 848,157
- ----------------------------------------------------------------
6,095,934
- ----------------------------------------------------------------
CHILE-0.30%
Compania de Telecomunicaciones de
Chile S.A.-ADR (Telephone) 7,200 710,100
- ----------------------------------------------------------------
DENMARK-0.29%
Danisco A/S
(Food/Processing) 5,100 292,191
- ----------------------------------------------------------------
Novo-Nordisk A/S-Class B
(Medical-Drugs) 2,450 408,031
- ----------------------------------------------------------------
700,222
- ----------------------------------------------------------------
FRANCE-6.23%
AXA S.A.
(Insurance-Life & Health) 18,500 1,155,413
- ----------------------------------------------------------------
Carrefour Supermarche
(Retail-Food & Drug) 2,800 1,553,760
- ----------------------------------------------------------------
Cetelem
(Finance-Consumer Credit) 2,100 448,137
- ----------------------------------------------------------------
Compagnie Generale Des Eaux
(Water Supply) 9,700 1,159,257
- ----------------------------------------------------------------
Elf Aquitaine S.A.
(Oil & Gas-Services) 13,500 1,079,472
- ----------------------------------------------------------------
Essilor International-Compagnie
Generale d'Optique
(Medical Instruments/Products) 1,100 289,389
- ----------------------------------------------------------------
Michelin-Class B
(Automobile/Trucks Parts & Tires) 10,200 491,795
- ----------------------------------------------------------------
Pathe S.A.(a)
(Advertising/Broadcasting) 3,850 1,038,465
- ----------------------------------------------------------------
Pinault-Printemps-Redoute, S.A.
(Retail-Stores) 2,900 1,093,633
- ----------------------------------------------------------------
Rexel S.A.
(Electronic Components/Miscellaneous) 2,600 770,465
- ----------------------------------------------------------------
Rhone-Poulenc-Class A
(Chemicals) 21,000 622,298
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Roussel Uclaf
(Medical-Drugs) 2,100 $ 555,756
- ----------------------------------------------------------------
Societe BIC S.A.
(Office Products) 8,050 1,207,697
- ----------------------------------------------------------------
Societe Technip
(Engineering & Construction) 6,600 576,927
- ----------------------------------------------------------------
Sodexho S.A.
(Business Services) 1,100 531,658
- ----------------------------------------------------------------
Total S.A.-Class B
(Oil & Gas-Exploration & Production) 13,100 1,024,683
- ----------------------------------------------------------------
Valeo S.A.
(Automobile/Trucks Parts & Tires) 19,400 1,164,190
- ----------------------------------------------------------------
14,762,995
- ----------------------------------------------------------------
GERMANY-3.90%
Adidas A.G.
(Shoes & Related Apparel) 18,800 1,611,358
- ----------------------------------------------------------------
Altana A.G.
(Chemicals) 1,850 1,478,143
- ----------------------------------------------------------------
Commerzbank A.G.
(Banking) 44,000 984,945
- ----------------------------------------------------------------
Continental A.G.
(Automobile/Trucks Parts & Tires) 29,600 517,961
- ----------------------------------------------------------------
Dresdner Bank A.G.
(Banking) 36,000 962,758
- ----------------------------------------------------------------
Hoechst A.G.
(Chemicals) 40,300 1,515,508
- ----------------------------------------------------------------
SGL Carbon A.G.
(Metals-Miscellaneous) 6,000 675,515
- ----------------------------------------------------------------
SKW Trostberg A.G.
(Chemicals) 17,850 520,979
- ----------------------------------------------------------------
Veba A.G.
(Electric Power) 18,000 960,024
- ----------------------------------------------------------------
9,227,191
- ----------------------------------------------------------------
HONG KONG-5.82%
Asia Satellite Telecommunications
Holdings Ltd.-ADR
(Telecommunications)(a) 24,500 655,375
- ----------------------------------------------------------------
Cheung Kong Holdings Ltd.
(Real Estate) 267,000 2,140,917
- ----------------------------------------------------------------
Citic Pacific Ltd.
(Banking) 135,000 656,476
- ----------------------------------------------------------------
Cosco Pacific Ltd.
(Transportation-Miscellaneous) 1,560,000 1,492,977
- ----------------------------------------------------------------
First Pacific Co.
(Conglomerates) 901,000 1,240,999
- ----------------------------------------------------------------
Hang Seng Bank Ltd.
(Banking) 166,500 1,975,683
- ----------------------------------------------------------------
Hong Kong & China Gas Company Ltd.
(Electric Power) 579,000 1,018,391
- ----------------------------------------------------------------
Hong Kong & China Gas Company
Ltd.-Warrants(a)
Expiring 1997 (Electric Power) 36,000 13,269
- ----------------------------------------------------------------
HSBC Holdings PLC
(Banking) 93,400 1,902,499
- ----------------------------------------------------------------
New World Infrastructure Ltd.(a)
(Building Materials) 422,000 1,050,607
- ----------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Real Estate) 105,600 1,201,831
- ----------------------------------------------------------------
</TABLE>
FS-74
<PAGE> 215
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HONG KONG-(CONTINUED)
Varitronix International Ltd.
(Electronic Components/Miscellaneous) 240,000 $ 437,650
- ----------------------------------------------------------------
13,786,674
- ----------------------------------------------------------------
INDONESIA-1.19%
PT Bank Internasional Indonesia
(Banking) 439,000 706,757
- ----------------------------------------------------------------
PT Hanjaya Mandala Sampoerna
(Tobacco) 172,000 1,598,678
- ----------------------------------------------------------------
PT Indosat
(Telecommunications) 84,500 255,753
- ----------------------------------------------------------------
PT Indosat-ADR
(Telecommunications) 9,050 272,631
- ----------------------------------------------------------------
2,833,819
- ----------------------------------------------------------------
IRELAND-0.11%
Elan Corp. PLC-ADR(a)
(Medical-Drugs) 9,200 255,300
- ----------------------------------------------------------------
ISRAEL-0.58%
ECI Telecommunications Ltd.
(Computer Networking) 14,000 280,000
- ----------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Medical-Drugs) 26,500 1,109,687
- ----------------------------------------------------------------
1,389,687
- ----------------------------------------------------------------
ITALY-2.54%
Edison S.p.A.
(Electric Power) 187,000 1,114,111
- ----------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A
(Oil & Gas-Exploration & Production) 290,000 1,387,106
- ----------------------------------------------------------------
Fila Holding S.p.A.-ADR
(Retail-Stores) 5,400 388,800
- ----------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A.
(Banking) 48,700 385,748
- ----------------------------------------------------------------
Parmalat Finanziaria S.p.A
(Food/Processing) 620,000 886,473
- ----------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications) 460,000 948,504
- ----------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 410,000 916,757
- ----------------------------------------------------------------
6,027,499
- ----------------------------------------------------------------
JAPAN-10.54%
Alpine Electronics Inc.
(Electronic Components/Miscellaneous) 57,000 901,146
- ----------------------------------------------------------------
Amada Co., Ltd.
(Building Materials-Tools) 89,000 766,062
- ----------------------------------------------------------------
Bridgestone Corp.
(Automobile/Trucks Parts & Tires) 82,000 1,382,811
- ----------------------------------------------------------------
Canon, Inc.
(Office Automation) 79,000 1,512,626
- ----------------------------------------------------------------
Daiichi Corp.
(Electronic Components/Miscellaneous) 28,300 668,631
- ----------------------------------------------------------------
DDI Corp.
(Telecommunications) 180 1,351,719
- ----------------------------------------------------------------
Honda Motor Co.
(Automobile-Manufacturers) 73,000 1,743,973
- ----------------------------------------------------------------
Ibiden Co. Ltd.
(Building Materials) 87,000 809,978
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Jusco Co.
(Retail-Stores) 45,000 $ 1,335,910
- ----------------------------------------------------------------
Komatsu Ltd.
(Machinery-Heavy) 139,000 1,137,833
- ----------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd.
(Electronic Components-Miscellaneous) 61,000 975,100
- ----------------------------------------------------------------
Nippon Television Network
(Advertising/Broadcasting) 2,050 594,177
- ----------------------------------------------------------------
Nomura Securities Co., Ltd.
(Finance-Asset Management) 68,000 1,122,832
- ----------------------------------------------------------------
NSK Ltd.
(Metals-Miscellaneous) 92,000 609,266
- ----------------------------------------------------------------
NTT Data Communications Systems Co.
(Computer Software/Services) 470 1,391,155
- ----------------------------------------------------------------
Okuma Corp.(a)
(Machine Tools) 78,000 746,739
- ----------------------------------------------------------------
Ricoh Co., Ltd.
(Office Automation) 124,000 1,230,688
- ----------------------------------------------------------------
Shizuoka Bank
(Banking) 40,000 456,721
- ----------------------------------------------------------------
SMC
(Machinery-Miscellaneous) 6,800 440,771
- ----------------------------------------------------------------
Sony Corp.
(Electronic Components/Miscellaneous) 19,900 1,193,773
- ----------------------------------------------------------------
Sumitomo Heavy Industries, Ltd.(a)
(Machinery-Heavy) 250,000 880,506
- ----------------------------------------------------------------
TDK Corp.
(Electronic Components/Miscellaneous) 22,000 1,290,765
- ----------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers) 39,000 921,435
- ----------------------------------------------------------------
Yamaha Corp.
(Electronic Components/Miscellaneous) 48,000 729,349
- ----------------------------------------------------------------
Yamatake-Honeywell
(Airlines) 45,000 754,908
- ----------------------------------------------------------------
24,948,874
- ----------------------------------------------------------------
MALAYSIA-1.17%
Commerce Asset Holdings Berhad
(Finance-Asset Management) 93,000 607,362
- ----------------------------------------------------------------
Edaran Otomobil Nasional Berhad
(Automobile-Manufacturers) 70,000 653,869
- ----------------------------------------------------------------
Malayan Banking Berhad
(Banking) 109,000 1,078,567
- ----------------------------------------------------------------
YTL Corp. Berhad
(Engineering & Construction) 82,000 441,401
- ----------------------------------------------------------------
2,781,199
- ----------------------------------------------------------------
MEXICO-1.26%
Grupo Industrial Maseca, S.A. de
C.V.-Class B
(Food/Processing) 1,181,000 1,437,036
- ----------------------------------------------------------------
Grupo Televisa S.A.-GDR(a)
(Advertising/Broadcasting) 22,000 577,500
- ----------------------------------------------------------------
Panamerican Beverages, Inc.
(Beverages-Soft Drinks) 22,400 977,200
- ----------------------------------------------------------------
2,991,736
- ----------------------------------------------------------------
NETHERLANDS-3.32%
Akzo Nobel
(Conglomerates) 5,900 743,455
- ----------------------------------------------------------------
</TABLE>
FS-75
<PAGE> 216
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Elsevier N.V.
(Publishing) 23,000 $ 382,271
- ----------------------------------------------------------------
Getronics N.V.
(Computer Software/Services) 41,000 1,007,662
- ----------------------------------------------------------------
Gucci Group N.V.-New York Shares-ADR
(Textiles) 12,000 828,000
- ----------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food & Drug) 10,200 595,155
- ----------------------------------------------------------------
Nutricia Verenigde Bedrijven N.V.
(Food/Processing) 13,000 1,823,540
- ----------------------------------------------------------------
Oce-Van Der Grinten N.V.
(Office Automation) 7,000 746,744
- ----------------------------------------------------------------
Royal Dutch Petroleum Co.
(Oil & Gas-Services) 6,600 1,089,951
- ----------------------------------------------------------------
Ver Ned Uitgevuer Bezit N.V.
(Publishing) 15,500 281,370
- ----------------------------------------------------------------
Wolters Kluwer N.V.
(Publishing) 2,850 366,349
- ----------------------------------------------------------------
7,864,497
- ----------------------------------------------------------------
NORWAY-0.09%
UNI Storebrand A.S.(a)
(Insurance-Multi-Line Property) 35,000 205,147
- ----------------------------------------------------------------
PHILIPPINES-0.92%
C & P Homes, Inc.
(Homebuilding) 954,000 435,616
- ----------------------------------------------------------------
Filinvest Land Inc.(a)
(Real Estate) 1,031,700 349,396
- ----------------------------------------------------------------
Metro Pacific Corp.
(Conglomerates) 2,309,000 562,314
- ----------------------------------------------------------------
Metropolitan Bank & Trust Co.
(Banking) 14,375 317,256
- ----------------------------------------------------------------
Southeast Asia Cement Holdings, Inc.(a)
(Building Materials) 5,300,000 504,186
- ----------------------------------------------------------------
2,168,768
- ----------------------------------------------------------------
PORTUGAL-0.19%
Portugal Telecom S.A.(a)
(Telecommunications) 17,000 442,078
- ----------------------------------------------------------------
SINGAPORE-1.61%
Cerebos Pacific Ltd.
(Food/Processing) 82,000 634,576
- ----------------------------------------------------------------
City Developments Ltd.
(Real Estate) 129,000 1,016,613
- ----------------------------------------------------------------
DBS Land Ltd.
(Real Estate) 416,000 1,311,353
- ----------------------------------------------------------------
Overseas Union Bank Ltd.
(Banking) 125,000 851,970
- ----------------------------------------------------------------
3,814,512
- ----------------------------------------------------------------
SOUTH AFRICA-0.76%
De Beers Centenary A.G.
(Gold & Silver Mining) 28,000 826,425
- ----------------------------------------------------------------
Sasol Ltd.
(Oil & Gas-Exploration &
Production) 80,100 977,246
- ----------------------------------------------------------------
1,803,671
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN-1.52%
Empresa Nacional de Electricidad, S.A.
(Electric Power) 23,100 $ 1,413,935
- ----------------------------------------------------------------
Iberdrola S.A.
(Electric Power) 77,000 817,704
- ----------------------------------------------------------------
Repsol S.A.
(Oil & Gas-Services) 8,300 270,931
- ----------------------------------------------------------------
Telefonica De Espana
(Telecommunications) 54,400 1,091,453
- ----------------------------------------------------------------
3,594,023
- ----------------------------------------------------------------
SWEDEN-1.78%
Astra AB-Class A
(Medical-Drugs) 7,550 346,746
- ----------------------------------------------------------------
Astra AB-B Shares
(Medical-Drugs) 2,500 114,056
- ----------------------------------------------------------------
Autoliv AB
(Automobile/Trucks Parts & Tires) 30,600 1,298,326
- ----------------------------------------------------------------
Hennes & Mauritz AB-B Shares
(Retail-Stores) 10,300 1,364,311
- ----------------------------------------------------------------
Securitas AB
(Security & Safety Services) 18,300 473,106
- ----------------------------------------------------------------
Telefonaktiebolaget L.M. Ericsson-ADR
(Telecommunications) 22,000 607,750
- ----------------------------------------------------------------
4,204,295
- ----------------------------------------------------------------
SWITZERLAND-0.88%
Ciba-Geigy A.G.
(Chemicals) 650 800,672
- ----------------------------------------------------------------
Sandoz A.G.
(Chemicals) 700 809,098
- ----------------------------------------------------------------
Swissair A.G.(a)
(Airlines) 600 467,563
- ----------------------------------------------------------------
2,077,333
- ----------------------------------------------------------------
THAILAND-0.56%
Bank of Ayudhya Ltd.
(Banking) 11,400 32,642
- ----------------------------------------------------------------
Krung Thai Bank PLC
(Banking) 230,000 622,475
- ----------------------------------------------------------------
Siam Commercial Bank PLC Co. Ltd.
(Banking) 21,900 199,286
- ----------------------------------------------------------------
Thai Farmers Bank PLC
(Banking) 40,900 312,826
- ----------------------------------------------------------------
Thai Farmers Bank PLC-Rights(a)
(Banking) 5,163 2,695
- ----------------------------------------------------------------
Total Access Communication PLC
(Telecommunications) 20,000 138,000
- ----------------------------------------------------------------
1,307,924
- ----------------------------------------------------------------
UNITED KINGDOM-9.75%
Airtours PLC
(Leisure & Recreation) 56,000 594,271
- ----------------------------------------------------------------
Argos PLC
(Retail-Stores) 22,680 284,792
- ----------------------------------------------------------------
B.A.T. Industries PLC
(Conglomerates) 182,000 1,267,839
- ----------------------------------------------------------------
Barclays PLC
(Finance-Consumer Credit) 72,000 1,129,102
- ----------------------------------------------------------------
</TABLE>
FS-76
<PAGE> 217
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Bass PLC
(Beverages-Alcoholic) 24,000 $ 307,813
- ----------------------------------------------------------------
British Aerospace PLC
(Aerospace/Defense) 32,000 606,771
- ----------------------------------------------------------------
British Petroleum Co. PLC
(Oil & Gas-Services) 31,000 333,512
- ----------------------------------------------------------------
Burton Group PLC
(Retail-Stores) 473,000 1,149,011
- ----------------------------------------------------------------
Caradon PLC
(Building & Materials) 136,000 534,570
- ----------------------------------------------------------------
Compass Group PLC
(Food Processing) 59,200 586,797
- ----------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 16,100 637,962
- ----------------------------------------------------------------
Dixons Group PLC
(Retail-Stores) 164,000 1,469,434
- ----------------------------------------------------------------
FKI PLC
(Conglomerates) 155,000 529,785
- ----------------------------------------------------------------
General Electric Co. PLC
(Electronic
Components/Miscellaneous) 160,000 988,281
- ----------------------------------------------------------------
GKN PLC
(Automobile/Trucks Parts & Tires) 39,000 733,154
- ----------------------------------------------------------------
Granada Group PLC
(Leisure & Recreation) 101,400 1,458,120
- ----------------------------------------------------------------
Kingfisher PLC
(Retail-Stores) 46,800 497,402
- ----------------------------------------------------------------
Marks & Spencer PLC
(Retail-Stores) 110,000 923,828
- ----------------------------------------------------------------
Medeva PLC
(Medical-Drugs) 67,200 288,750
- ----------------------------------------------------------------
MFI Furniture Group PLC
(Retail-Stores) 355,000 1,155,599
- ----------------------------------------------------------------
Next PLC
(Retail-Stores) 77,000 701,823
- ----------------------------------------------------------------
NFC PLC
(Transportation-Miscellaneous) 325,000 1,015,625
- ----------------------------------------------------------------
Peninsular and Oriental Steam
Navigation Co. (The)
(Transportation-Miscellaneous) 56,000 550,065
- ----------------------------------------------------------------
Provident Financial PLC
(Finance-Consumer Credit) 137,400 1,029,829
- ----------------------------------------------------------------
Rentokil Group PLC
(Business Services) 100,000 671,387
- ----------------------------------------------------------------
Siebe PLC
(Electronic
Components/Miscellaneous) 75,000 1,176,757
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
SmithKline Beecham PLC-ADR
(Medical-Drugs) 7,000 $ 438,375
- ----------------------------------------------------------------
Smiths Industries PLC
(Electronic/Defense) 30,000 400,390
- ----------------------------------------------------------------
Standard Chartered PLC
(Finance-Asset Management) 41,500 447,826
- ----------------------------------------------------------------
WPP Group PLC
(Advertising/Broadcasting) 316,000 1,172,655
- ----------------------------------------------------------------
23,081,525
- ----------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 151,839,903
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(b)
<S> <C> <C>
CONVERTIBLE BONDS-0.32%
Boston Chicken Inc.,
Conv. Liquid Yield Option Notes,
(Restaurants)(c) 8.00%, 06/01/15 $2,310,000 747,863
- ----------------------------------------------------------------
U.S. DOLLAR DENOMINATED FOREIGN BONDS
& NOTES-0.45%
BERMUDA-0.11%
MBL Intl. Finance Bermuda,
Conv. Yankee Bonds, (Banking)
3.00%, 11/30/02 230,000 257,025
- ----------------------------------------------------------------
JAPAN-0.34%
Sumitomo Bank,
Conv. American Depository Notes,
(Banking)
0.75%, 05/31/01 850,000 811,750
- ----------------------------------------------------------------
Total U.S. Dollar Denominated
Foreign Bonds & Notes 1,068,775
- ----------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES
ITALY-0.47%
Pirelli S.p.A.,
Conv. Bonds, (Automobile/Trucks
Parts & Tires)
5.00%, 12/31/98 ITL 1,591,686,200 1,114,810
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS-2.73%(d)
Daiwa Securities America Inc., 5.53%,
11/01/96(e) 490,720 490,720
- ----------------------------------------------------------------
Dresdner Securities, Inc.,
5.54%,11/01/96(f) 6,000,000 6,000,000
- ----------------------------------------------------------------
Total Repurchase Agreements 6,490,720
- ----------------------------------------------------------------
TOTAL INVESTMENTS-100.05% 236,947,605
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.05)% (128,433)
- ----------------------------------------------------------------
NET ASSETS-100.00% $236,819,172
================================================================
</TABLE>
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
GDR - Global Depository Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Principal in U.S. Dollars unless otherwise indicated.
(c) Zero coupon bond. The interest rate shown represents the rate of original
issue discount.
(d) 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% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collateralized by $733,115,000 U.S. Treasury obligations, 0%
to 10.375% due 11/15/96 to 08/15/23.
(f) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$200,030,778. Collateralized by $198,651,000 U.S. Treasury obligations,
4.75% to 9.25% due 11/30/97 to 06/30/99.
See Notes to Financial Statements.
FS-77
<PAGE> 218
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$213,861,105) $ 236,947,605
- ---------------------------------------------------------
Foreign currencies, at market value
(cost $4,942,871) 4,930,741
- ---------------------------------------------------------
Receivables for:
- ---------------------------------------------------------
Investments sold 1,868,600
- ---------------------------------------------------------
Capital stock sold 1,751,250
- ---------------------------------------------------------
Dividends and interest 313,510
- ---------------------------------------------------------
Investment for deferred compensation
plan 6,352
- ---------------------------------------------------------
Other assets 93,073
- ---------------------------------------------------------
Total assets 245,911,131
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 8,304,055
- ---------------------------------------------------------
Capital stock reacquired 286,359
- ---------------------------------------------------------
Deferred compensation 6,352
- ---------------------------------------------------------
Accrued advisory fees 166,733
- ---------------------------------------------------------
Accrued administrative services fees 6,070
- ---------------------------------------------------------
Accrued distribution fees 158,740
- ---------------------------------------------------------
Accrued transfer agent fees 61,830
- ---------------------------------------------------------
Accrued operating expenses 101,820
- ---------------------------------------------------------
Total liabilities 9,091,959
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 236,819,172
=========================================================
NET ASSETS:
Class A $ 114,971,030
=========================================================
Class B $ 121,848,142
=========================================================
CAPITAL STOCK, $.001 PAR VALUE PER
SHARE:
Class A:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 8,098,028
=========================================================
Class B:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 8,673,120
=========================================================
Class A:
Net asset value and redemption price
per share $ 14.20
=========================================================
Offering price per share:
(Net asset value divided by 95.25%) $ 14.91
=========================================================
Class B:
Net asset value and offering price per
share $ 14.05
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $205,662 foreign
withholding tax) $ 1,943,751
- --------------------------------------------------------
Interest 511,628
- --------------------------------------------------------
Total investment income 2,455,379
- --------------------------------------------------------
EXPENSES:
Advisory fees 1,163,814
- --------------------------------------------------------
Administrative services fees 78,151
- --------------------------------------------------------
Directors' fees 6,855
- --------------------------------------------------------
Distribution fees -- Class A 352,082
- --------------------------------------------------------
Distribution fees -- Class B 663,802
- --------------------------------------------------------
Custodian fees 229,188
- --------------------------------------------------------
Transfer agent fees -- Class A 178,789
- --------------------------------------------------------
Transfer agent fees -- Class B 217,959
- --------------------------------------------------------
Other 127,009
- --------------------------------------------------------
Total expenses 3,017,649
- --------------------------------------------------------
Less: Expenses assumed by advisor (11,719)
- --------------------------------------------------------
Expenses paid indirectly (2,151)
- --------------------------------------------------------
Net expenses 3,003,779
- --------------------------------------------------------
Net investment income (loss) (548,400)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities (348,630)
- --------------------------------------------------------
Foreign currencies 7,538
- --------------------------------------------------------
Futures contracts (262,996)
- --------------------------------------------------------
(604,088)
- --------------------------------------------------------
Net unrealized appreciation
(depreciation) of:
Investment securities 20,104,008
- --------------------------------------------------------
Foreign currencies (71,876)
- --------------------------------------------------------
20,032,132
- --------------------------------------------------------
Net gain on investment securities, foreign
currencies and futures contracts 19,428,044
- --------------------------------------------------------
Net increase in net assets resulting from
operations $18,879,644
========================================================
</TABLE>
See Notes to Financial Statements.
FS-78
<PAGE> 219
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1995 and 1996
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (548,400) $ (83,769)
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities, foreign currencies and
futures contracts (604,088) 945,395
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and foreign currencies 20,032,132 2,866,448
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 18,879,644 3,728,074
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income -- Class A -- (2,116)
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (516,173) --
- -------------------------------------------------------------------------------------------------------------------------
Class B (413,018) --
- -------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 81,693,730 18,511,217
- -------------------------------------------------------------------------------------------------------------------------
Class B 96,263,897 14,304,173
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 195,908,080 36,541,348
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 40,911,092 4,369,744
- -------------------------------------------------------------------------------------------------------------------------
End of period $236,819,172 $ 40,911,092
=========================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $214,452,461 $ 37,047,643
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) 7,538 --
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of investment securities, foreign
currencies and futures contracts (662,207) 874,201
- -------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and foreign currencies 23,021,380 2,989,248
- -------------------------------------------------------------------------------------------------------------------------
$236,819,172 $ 40,911,092
=========================================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Growth Fund (the "Fund") is an investment 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 Global Growth Fund, AIM Global Aggressive Growth Fund,
AIM Global Income Fund and AIM International Equity Fund. The Fund currently
offers two different classes of shares: Class A shares and 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 Fund's investment objective is to provide long-term growth of capital. The
Fund seeks to achieve its objectives by investing in a portfolio of global
equity securities of selected companies which are considered by AIM to have
strong earnings momentum.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--Except as provided in the next sentence, a security
listed or traded on an exchange is valued at the last sales price on the
exchange where the security is principally traded or, lacking any sales, at
the mean between the closing bid and asked prices on the day of valuation.
Exchange listed convertible bonds are valued at the mean between the closing
bid and asked prices obtained from a broker-dealer. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Securities traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) are
FS-79
<PAGE> 220
valued at the mean between the closing bid and asked prices on valuation
date. Securities reported on the NASDAQ National Market System are valued at
the last sales price on the valuation date or absent a last sales price, at
the mean of the closing bid and asked prices. Securities for which market
quotations are either not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's 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 currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses 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. On October 31, 1996,
undistributed net investment income was increased by $555,938, paid-in
capital reduced by $552,809 and undistributed net realized gains reduced by
$3,129 in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassifications discussed above.
E. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward of
$630,387 (which may be carried forward to offset future taxable capital
gains, if any) which expires, if not previously utilized, through the year
2004.
F. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
G. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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 0.85% of
the first $1 billion of the Fund's average daily net assets, plus 0.80% of the
Fund's average daily net assets in excess of $1 billion. During the year ended
October 31, 1996, AIM assumed expenses of the Fund in the amount of $11,719.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1996, AIM was
reimbursed $78,151 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1996, AFS was paid
$216,804 for such services.
The Fund received reductions in transfer agency fees of $1,895 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $256 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
FS-80
<PAGE> 221
reduction in the Fund's total expenses of $2,151 during the year ended October
31, 1996.
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
distribution 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, pays AIM Distributors an annual rate of 0.50% 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. Of the total compensation payable, a service fee of 0.25% is paid
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 Fund, pursuant to the Class B Plan, pays 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 pays 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. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more designees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the year ended October 31, 1996, the Class A shares and
the Class B shares paid AIM Distributors $352,082 and $663,802, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $388,799 from the sales of the Class
A shares of the Fund during the year ended October 31, 1996. 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 year ended October 31,
1996, AIM Distributors received commissions of $14,106 in contingent deferred
sales charges imposed on redemptions of Fund shares. Certain officers and
directors of the Company are officers and directors of AIM, AFS and AIM
Distributors.
During the year ended October 31, 1996, the Fund incurred legal fees of $3,146
for services rendered by the law firm of Kramer, Levin, Naftalis & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $300,000. During the year ended October 31, 1996, the Fund
did not borrow under the line of credit agreement. The funds which are party to
the line of credit are charged a commitment fee of 0.08% on the unused balance
of the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1996 was
$279,290,655 and $103,514,524, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of October 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $27,999,861
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (4,954,987)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $23,044,874
=========================================================
</TABLE>
Cost of investments for tax purposes is $213,902,731.
FS-81
<PAGE> 222
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 7,117,057 $ 94,636,553 1,836,306 $20,814,602
- ------------------------------------------------------------------ ---------- ------------ --------- -----------
Class B 7,683,810 101,786,913 1,403,515 15,741,389
- ------------------------------------------------------------------ ---------- ------------ --------- -----------
Issued as reinvestment of distributions:
Class A 36,930 453,130 171 1,642
- ------------------------------------------------------------------ ---------- ------------ --------- -----------
Class B 31,124 379,711 -- --
- ------------------------------------------------------------------ ---------- ------------ --------- -----------
Reacquired:
Class A (983,830) (13,395,953) (210,976) (2,305,027)
- ------------------------------------------------------------------ ---------- ------------ --------- -----------
Class B (441,521) (5,902,727) (128,718) (1,437,216)
- ------------------------------------------------------------------ ---------- ------------ --------- -----------
13,443,570 $177,957,627 2,900,298 $32,815,390
================================================================== ========== ============ ========= ===========
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share and a Class B share
outstanding during each of the years in the two-year period ended October 31,
1996 and the period September 15, 1994 (date operations commenced) through
October 31, 1994.
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 12.32 $ 10.23 $ 10.00
- ----------------------------------------------------------------------------- --------- -------- --------
Income from investment operations:
Net investment income (loss) (0.01) (0.02) -
- ----------------------------------------------------------------------------- --------- -------- --------
Net gains on securities (both realized and unrealized) 2.11 2.11 0.23
- ----------------------------------------------------------------------------- --------- -------- --------
Total from investment operations 2.10 2.09 0.23
- ----------------------------------------------------------------------------- --------- -------- --------
Less distributions:
Dividends from net investment income - (0.004) -
- ----------------------------------------------------------------------------- --------- -------- --------
Distributions from net realized capital gains (0.22) - -
- ----------------------------------------------------------------------------- --------- -------- --------
Total distributions (0.22) (0.004) -
- ----------------------------------------------------------------------------- --------- -------- --------
Net asset value, end of period $ 14.20 $ 12.32 $ 10.23
============================================================================= ========= ======== ========
Total return(a) 17.26% 20.48% 2.30%
============================================================================= ========= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 114,971 $ 23,754 $ 3,093
============================================================================= ========= ======== ========
Ratio of expenses to average net assets(b) 1.93%(c)(d) 2.12% 1.95%(e)
============================================================================= ========= ======== ========
Ratio of net investment income (loss) to average net assets(f) (0.13)%(c) (0.28)% 0.10%(e)
============================================================================= ========= ======== ========
Portfolio turnover rate 82% 79% 6%
============================================================================= ========= ======== ========
Average brokerage commission rate(g) $ 0.0234 N/A N/A
============================================================================= ========= ======== ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets before fee waivers and expense reimbursements are 1.94%, 2.98%
and 5.67% (annualized), respectively for 1996, 1995 and 1994.
(c) Ratios are based on average net assets of $70,416,375.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) After fee waivers and expense reimbursements. Ratios of net investment
income (loss) to average net assets before fee waivers and expense
reimbursements are (0.14)%, (1.14)% and (3.63)% (annualized), respectively
for 1996, 1995 and 1994.
(g) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
F-82
<PAGE> 223
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 12.26 $ 10.22 $ 10.00
- ----------------------------------------------------------------------------- --------- -------- --------
Income from investment operations:
Net investment income (loss) (0.05) (0.04) -
- ----------------------------------------------------------------------------- --------- -------- --------
Net gains on securities (both realized and unrealized) 2.06 2.08 0.22
- ----------------------------------------------------------------------------- --------- -------- --------
Total from investment operations 2.01 2.04 0.22
- ----------------------------------------------------------------------------- --------- -------- --------
Less distributions:
Distributions from net realized capital gains (0.22) - -
- ----------------------------------------------------------------------------- --------- -------- --------
Total distributions (0.22) - -
- ----------------------------------------------------------------------------- --------- -------- --------
Net asset value, end of period $ 14.05 $ 12.26 $ 10.22
============================================================================= ========= ======== ========
Total return(a) 16.60% 19.96% 2.20%
============================================================================= ========= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 121,848 $ 17,157 $ 1,277
============================================================================= ========= ======== ========
Ratio of expenses to average net assets(b) 2.48%(c)(d) 2.64% 2.51%(e)
============================================================================= ========= ======== ========
Ratio of net investment income (loss) to average net assets(f) (0.69)%(c) (0.79)% (0.47)%(e)
============================================================================= ========= ======== ========
Portfolio turnover rate 82% 79% 6%
============================================================================= ========= ======== ========
Average brokerage commission rate(g) $ 0.0234 N/A N/A
============================================================================= ========= ======== ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets before fee waivers and expense reimbursements are 2.49%, 3.38%
and 6.20% (annualized), respectively for 1996, 1995 and 1994.
(c) Ratios are based on average net assets of $66,380,227.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) After fee waivers and expense reimbursements. Ratios of net investment
income (loss) to average net assets before fee waivers and expense
reimbursements are (0.69)%, (1.54)% and (4.16)% (annualized), respectively
for 1996, 1995 and 1994.
(g) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-83
<PAGE> 224
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Global Income Fund (a portfolio of AIM
International Funds, Inc.), including the schedule of
investments, as of October 31, 1996, and the related
statement of operations for the year then ended, the
statement 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 for the period September 15, 1994 (date operations
commenced) through October 31, 1994. 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, 1996, 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 Global
Income Fund as of October 31, 1996, 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 for the period September
15, 1994 (date operations commenced) through October 31,
1994, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-84
<PAGE> 225
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-37.45%
ADVERTISING/BROADCASTING-1.63%
SFX Broadcasting, Inc.
Sr. Sub. Notes, 10.75%
05/15/06 $ 200,000 $ 205,000
- ----------------------------------------------------------------
Sinclair Broadcast Group,
Sr. Sub. Notes, 10.00%
09/30/05 100,000 97,000
- ----------------------------------------------------------------
Time Warner Inc.,
Deb., 6.85% 01/15/26 125,000 122,333
- ----------------------------------------------------------------
Notes, 8.18% 08/15/07 200,000 205,810
- ----------------------------------------------------------------
630,143
- ----------------------------------------------------------------
AIRLINES-0.76%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875% 03/15/19 230,000 250,987
- ----------------------------------------------------------------
Greenwich Air Services Inc.,
Sr. Notes, 10.50% 06/01/06 40,000 41,800
- ----------------------------------------------------------------
292,787
- ----------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.16%
CSK Auto Inc.,
Sr. Sub. Notes, 11.00%
11/01/06
(acquired 10/23/96; cost
$60,000)(b) 60,000 61,050
- ----------------------------------------------------------------
BANKING-1.74%
First Union Bancorp,
Sub. Deb., 7.50% 04/15/35 200,000 209,990
- ----------------------------------------------------------------
Royal Bank of Scotland,
Yankee Bond, 6.375% 02/01/11 500,000 463,710
- ----------------------------------------------------------------
673,700
- ----------------------------------------------------------------
BEVERAGES-1.55%
Coca Cola Enterprises,
Notes, 7.24% 06/20/20(c) 3,113,000 598,878
- ----------------------------------------------------------------
CABLE TELEVISION-2.45%
CAI Wireless Systems Inc.,
Sr. Notes, 12.25% 09/15/02 40,000 38,800
- ----------------------------------------------------------------
Comcast UK Cable,
Yankee Unsec. Sr. Disc. Deb.,
11.20% 11/15/07(d) 400,000 258,000
- ----------------------------------------------------------------
Fundy Cable Ltd.,
Yankee Bonds, 11.00% 11/15/05 30,000 31,350
- ----------------------------------------------------------------
Kabelmedia Holdings GMBH,
Yankee Unsec. Sr. Disc. Notes,
13.625% 08/01/06(d) 200,000 109,500
- ----------------------------------------------------------------
Rifkin Acquisition Partners
L.P.,
Sr. Sub. Notes, 11.125%
01/15/06 40,000 40,800
- ----------------------------------------------------------------
Telewest PLC,
Yankee Sr. Disc. Deb.,
11.00% 10/01/07(d) 50,000 31,876
- ----------------------------------------------------------------
United International Holdings
Inc.,
Sec. Sr. Disc. Notes, 11/15/99
12.99%(d) 200,000 138,000
- ----------------------------------------------------------------
Viacom Inc.,
Sr. Notes, 7.75% 06/01/05 100,000 97,053
- ----------------------------------------------------------------
Wireless One Inc.,
Units, 13.00% 10/15/03(e) 200,000 203,000
- ----------------------------------------------------------------
948,379
- ----------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CHEMICALS-1.38%
BPC Holding Corp.,
Sr. Notes, 12.50% 06/15/06 $ 100,000 $ 105,250
- ----------------------------------------------------------------
Crain Industries,
Sr. Sub. Notes, 13.50%
08/15/05 40,000 44,600
- ----------------------------------------------------------------
Laroche Industries,
Sr. Sub Notes, 13.00% 08/15/04 100,000 108,000
- ----------------------------------------------------------------
Polymer Group Inc.,
Sr. Notes, 12.25% 07/15/02 200,000 218,000
- ----------------------------------------------------------------
Sterling Chemicals Inc.,
Unsec. Sr. Sub. Notes, 11.75%
08/15/06 60,000 60,600
- ----------------------------------------------------------------
536,450
- ----------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.27%
Printpack Inc.,
Sr. Sub. Notes, 10.625%
08/15/06(b)
(acquired 08/15/96-09/04/96;
cost $100,500) 100,000 103,250
- ----------------------------------------------------------------
CONSUMER NON-DURABLES-0.27%
Hines Horticulture Inc.,
Sr. Sub Notes, 11.75% 10/15/05 100,000 105,500
- ----------------------------------------------------------------
CONTAINERS-0.35%
Ivex Packaging,
Sr. Sub. Notes, 12.50%
12/15/02 10,000 10,750
- ----------------------------------------------------------------
Owens-Illinois Inc.,
Sr. Sub. Notes, 10.50%
06/15/02 50,000 52,126
- ----------------------------------------------------------------
Riverwood International,
Unsec. Sr. Sub. Notes,
10.875% 04/01/08 80,000 73,200
- ----------------------------------------------------------------
136,076
- ----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.12%
Associates Corp.,
Deb., 7.95% 02/15/10 100,000 110,246
- ----------------------------------------------------------------
Household Finance Co.,
Notes, 7.125% 09/01/05 700,000 709,521
- ----------------------------------------------------------------
819,767
- ----------------------------------------------------------------
FOOD PROCESSING-0.60%
Chiquita Brands International
Inc.,
Unsec. Sr. Notes, 10.25%
11/01/06 80,000 82,400
- ----------------------------------------------------------------
International Home Foods,
Sr. Sub. Notes, 10.375%
11/01/06(b)
(acquired 10/29/96; cost
$50,000) 50,000 50,500
- ----------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%
08/01/03 100,000 99,250
- ----------------------------------------------------------------
232,150
- ----------------------------------------------------------------
FOREIGN GOVERNMENT-0.81%
Province of Manitoba,
Yankee Bonds, 7.75% 07/17/16 300,000 314,703
- ----------------------------------------------------------------
GAMING-1.57%
Aztar Corp.,
Sr. Sub. Notes, 11.00%
10/01/02 30,000 28,200
- ----------------------------------------------------------------
Casino America Inc.,
Gtd. Sr. Notes, 12.50%
08/01/03 200,000 205,500
- ----------------------------------------------------------------
Coast Hotel & Casino,
First Mortgage Notes, 13.00%
12/15/02 70,000 75,250
- ----------------------------------------------------------------
</TABLE>
FS-85
<PAGE> 226
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
GAMING-(CONTINUED)
Harvey Casinos Resorts,
Unsec. Sr. Sub. Notes,
10.625% 06/01/06 $ 100,000 $ 104,750
- ----------------------------------------------------------------
Showboat Marina,
First Mortgage Notes, 13.50%
03/15/03 100,000 107,500
- ----------------------------------------------------------------
Trump Atlantic City,
First Mortgage Notes, 11.25%
05/01/06 90,000 85,050
- ----------------------------------------------------------------
606,250
- ----------------------------------------------------------------
HOMEBUILDING-0.14%
Continental Homes Holdings,
Sr. Notes, 10.00% 04/15/06 55,000 55,550
- ----------------------------------------------------------------
HOTELS/MOTELS-0.63%
ITT Corp. (New),
Deb., 7.375% 11/15/15 150,000 144,893
- ----------------------------------------------------------------
John Q. Hammons Hotels,
Gtd. First Mortgage Notes,
9.75% 10/01/05 100,000 100,000
- ----------------------------------------------------------------
244,893
- ----------------------------------------------------------------
LEISURE & RECREATION-0.47%
Cobblestone Golf Group,
Sr. Notes, 11.50% 06/01/03(b)
(acquired 05/29/96; cost
$100,000) 100,000 103,250
- ----------------------------------------------------------------
Icon Health & Fitness Inc.,
Sr. Sub. Notes, 13.00%
07/15/02 70,000 78,574
- ----------------------------------------------------------------
181,824
- ----------------------------------------------------------------
MACHINERY (HEAVY)-0.48%
Fairfield Manufacturing,
Sr. Sub. Notes, 11.375%
07/01/01 50,000 51,750
- ----------------------------------------------------------------
Primeco Inc.,
Sr. Sub. Notes, 12.75%
03/01/05 120,000 132,600
- ----------------------------------------------------------------
184,350
- ----------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.38%
Interlake Corp.,
Sr. Notes, 12.00% 11/15/01 40,000 42,400
- ----------------------------------------------------------------
MVE Inc.,
Sr. Sec. Notes, 12.50%
02/15/02 100,000 105,250
- ----------------------------------------------------------------
147,650
- ----------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.21%
Dynacare Inc.,
Yankee Sr. Notes, 10.75%
01/15/06 80,000 81,300
- ----------------------------------------------------------------
MEDICAL
INSTRUMENTS/PRODUCTS-0.47%
Dade International Inc.,
Sr. Sub. Notes, 11.125%
05/01/06(b)
(acquired 04/30/96-07/16/96;
cost $102,700) 100,000 107,000
- ----------------------------------------------------------------
Graphic Controls Corp.,
Sr. Sub. Notes, 12.00%
09/15/05 70,000 75,950
- ----------------------------------------------------------------
182,950
- ----------------------------------------------------------------
METALS (MISCELLANEOUS)-0.33%
Rio Algom Ltd.,
Yankee Deb., 7.05% 11/01/05 130,000 127,374
- ----------------------------------------------------------------
NATURAL GAS PIPELINE-1.56%
Ferrellgas Partners L.P.,
Sr. Notes, 9.375% 06/15/06 300,000 300,750
- ----------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NATURAL GAS PIPELINE-(CONTINUED)
Plains Resources Inc.,
Sr. Sub. Notes, 10.25%
03/15/06 $ 50,000 $ 52,000
- ----------------------------------------------------------------
Talisman Energy Inc.,
Yankee Deb., 7.125% 06/01/07 250,000 249,260
- ----------------------------------------------------------------
602,010
- ----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-1.27%
Benton Oil & Gas,
Sr. Notes, 11.625% 05/01/03 50,000 55,000
- ----------------------------------------------------------------
Forest Oil Corp.,
Sr. Sub. Notes, 11.25%
09/01/03 100,000 106,500
- ----------------------------------------------------------------
Mariner Energy Corp.,
Sr. Sub. Notes, 10.50%
08/01/06(b)
(acquired 08/12/96-09/04/96;
cost $110,350) 110,000 113,987
- ----------------------------------------------------------------
Maxus Energy,
Deb., 11.50% 11/15/15 170,000 178,713
- ----------------------------------------------------------------
Petroleum Heat & Power Inc.,
Sub. Deb., 12.25% 02/01/05 33,000 36,960
- ----------------------------------------------------------------
491,160
- ----------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.53%
Wainoco Oil Corp.,
Sr. Sub. Notes, 12.00%
08/01/02 200,000 207,000
- ----------------------------------------------------------------
OIL & GAS (SERVICES)-0.05%
Falcon Drilling Co. Inc.,
Sr. Notes, 9.75% 01/15/01 20,000 20,500
- ----------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.59%
National Fiberstock Corp.,
Sr. Notes, 11.625% 06/15/02(b)
(acquired 06/21/96; cost
$100,000) 100,000 104,500
- ----------------------------------------------------------------
Rapp International Finance,
Gtd. Yankee Sec. Notes,
11.50% 12/15/00 50,000 52,000
- ----------------------------------------------------------------
Repap New Brunswick,
Yankee Bonds, 10.625% 04/15/05 70,000 70,700
- ----------------------------------------------------------------
227,200
- ----------------------------------------------------------------
POLLUTION CONTROL-2.16%
Norcal Waste Systems,
Sr. Notes, 12.75% 11/15/05 150,000 165,000
- ----------------------------------------------------------------
WMX Technologies Inc.,
Unsec. Notes, 7.10% 08/01/26 650,000 672,777
- ----------------------------------------------------------------
837,777
- ----------------------------------------------------------------
PUBLISHING-0.73%
News America Holdings,
Gtd. Sr. Deb., 9.25% 02/01/13 250,000 280,797
- ----------------------------------------------------------------
RAILROADS-0.19%
Johnstown America Industries
Inc.,
Sr. Sub. Notes, 11.75%
08/15/05 80,000 73,600
- ----------------------------------------------------------------
REAL ESTATE-1.32%
Finova Capital Corp.,
Notes, 7.40% 05/06/06 500,000 511,820
- ----------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.54%
Carr-Gottstein Foods Co.,
Sr. Sub. Notes, 12.00%
11/15/05 100,000 105,000
- ----------------------------------------------------------------
</TABLE>
FS-86
<PAGE> 227
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RETAIL (FOOD & DRUG)-(CONTINUED)
Great Atlantic & Pacific,
Yankee Bonds, 7.78%
11/01/00(b)
(acquired 10/18/95; cost
$100,000) $ 100,000 $ 102,221
- ----------------------------------------------------------------
207,221
- ----------------------------------------------------------------
RETAIL (STORES)-0.93%
Loehmann's Holdings, Inc.,
Unsec. Sr. Notes, 11.875%
05/15/03 100,000 106,750
- ----------------------------------------------------------------
Samsonite Corp.,
Sr. Sub. Notes, 11.125%
07/15/05 40,000 42,400
- ----------------------------------------------------------------
Specialty Retailers Inc.,
Sr. Sub. Notes, 11.00%
08/15/03 75,000 77,062
- ----------------------------------------------------------------
United Stationer Supply Inc.,
Sr. Sub. Notes, 12.75%
05/01/05 120,000 132,000
- ----------------------------------------------------------------
358,212
- ----------------------------------------------------------------
SCHOOLS-0.28%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00%
08/15/05 100,000 106,750
- ----------------------------------------------------------------
SEMICONDUCTORS-0.29%
Advanced Micro Devices,
Sec. Sr. Notes, 11.00%
08/01/03 110,000 113,850
- ----------------------------------------------------------------
STEEL-0.96%
Bayou Steel Corp.,
First Mortgage Notes, 10.25%
03/01/01 135,000 129,600
- ----------------------------------------------------------------
GS Technologies Inc.,
Sr. Notes, 12.00% 09/01/04 75,000 78,187
- ----------------------------------------------------------------
Gulf States Steel Corp.,
First Mortgage Notes, 13.50%
04/15/03 60,000 57,000
- ----------------------------------------------------------------
Oregon Steel Mills,
First Mortgage Notes, 11.00%
06/15/03 100,000 105,000
- ----------------------------------------------------------------
369,787
- ----------------------------------------------------------------
TELECOMMUNICATIONS-5.10%
Arch Communications Group,
Sr. Disc. Notes, 10.875%
03/15/08(d) 250,000 137,500
- ----------------------------------------------------------------
Celcaribe SA,
Sr. Notes, 13.50% 03/15/04(d) 500,000 419,376
- ----------------------------------------------------------------
Clearnet Communications,
Yankee Units, 14.75%
12/15/05(d)(f) 100,000 59,125
- ----------------------------------------------------------------
Omnipoint Corp.,
Sr. Notes, 11.625% 08/15/06(b)
(acquired 08/22/96; cost
$200,000) 200,000 202,000
- ----------------------------------------------------------------
PriCellular Wire,
Sr. Notes, 10.75% 11/01/04(b)
(acquired 10/30/96; cost
$40,000) 40,000 40,400
- ----------------------------------------------------------------
Pronet Inc.,
Sr. Sub. Notes, 11.875%
06/15/05 30,000 27,600
- ----------------------------------------------------------------
Sprint Spectrum L.P.,
Unsec. Sr. Notes, 11.00%
08/15/06 200,000 201,501
- ----------------------------------------------------------------
Sygnet Wireless Inc.,
Unsec. Sr. Notes, 11.50%
10/01/06 60,000 60,600
- ----------------------------------------------------------------
TCI Communications Inc.,
Notes, 8.00% 08/01/05 150,000 142,630
- ----------------------------------------------------------------
Teleport Communications,
Sr. Disc. Notes, 11.125%
07/01/07(d) 300,000 192,000
- ----------------------------------------------------------------
360 Communications Co.,
Sr. Notes, 7.50% 03/01/06 500,000 497,355
- ----------------------------------------------------------------
1,980,087
- ----------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TRANSPORTATION
(MISCELLANEOUS)-0.22%
Stena AB,
Yankee Sr. Notes, 10.50%
12/15/05 $ 80,000 $ 83,700
- ----------------------------------------------------------------
TRUCKING-0.76%
Ameritruck Distribution,
Sr. Sub. Notes, 12.25%
11/15/05 300,000 294,750
- ----------------------------------------------------------------
UTILITIES-0.67%
El Paso Electric Co.,
First Mortgage Notes, 8.90%
02/01/06 250,000 258,407
- ----------------------------------------------------------------
WATER SUPPLY-0.53%
Panda Funding Corp.,
Pooled Project Bonds, 11.625%
08/20/12(b)
(acquired 07/26/96; cost
$200,000) 200,000 206,250
- ----------------------------------------------------------------
Total U.S. Dollar
Denominated
Non-Convertible Bonds &
Notes 14,495,852
- ----------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES-1.99%
AIRLINES-1.32%
Continental Airlines Inc.,
Conv. Sr. Sub. Notes, 6.75%
04/15/06(b)
(acquired 02/27/96; cost
$499,825) 500,000 511,250
- ----------------------------------------------------------------
TRANSPORTATION
(MISCELLANEOUS)-0.67%
Laidlaw Inc.,
Unsec. Unsub. Conv. Deb.,
6.00% 01/15/99 200,000 260,000
- ----------------------------------------------------------------
Total U.S. Dollar
Denominated Convertible
Bonds & Notes 771,250
- ----------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-
CONVERTIBLE BONDS &
NOTES(G)-12.97%
CANADA-5.63%
Bank of Montreal
(Finance-Asset Management),
Sub. Deb., 7.92% 07/31/12 CAD 300,000 244,441
- ----------------------------------------------------------------
Bell Canada
(Telecommunications), Deb,
10.875% 10/11/04 150,000 140,880
- ----------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas),
Deb., 11.00% 10/31/00 250,000 219,650
- ----------------------------------------------------------------
Teleglobe Canada Inc.
(Telecommunications),
Deb., 8.35% 06/20/03 650,000 535,442
- ----------------------------------------------------------------
Trans-Canada Pipelines (Oil &
Gas),
Notes, 8.55% 02/01/06 500,000 418,221
- ----------------------------------------------------------------
Notes, 10.625% 10/20/09 375,000 359,694
- ----------------------------------------------------------------
Viridian Inc.
(Chemicals-Specialty), Notes,
11.00% 03/31/04 300,000 261,565
- ----------------------------------------------------------------
2,179,893
- ----------------------------------------------------------------
FRANCE-0.40%
Credit Local de France
(Finance-Consumer Credit),
Sr. Unsub. Deb., 6.00%
11/15/01 FRF 250,000 50,748
- ----------------------------------------------------------------
IBM International Finance N.V.
(Computer Mainframes),
Sr. Unsub. Deb., 10.00%
08/29/97 500,000 104,020
- ----------------------------------------------------------------
154,768
- ----------------------------------------------------------------
</TABLE>
FS-87
<PAGE> 228
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
GERMANY-3.22%
Ford Credit Europe PLC
(Finance-Consumer Credit),
Deb., 6.00% 03/30/99 DEM 200,000 $ 137,936
- ----------------------------------------------------------------
International Bank for
Reconstruction & Development
(Supranational
Organization), Unsub. Global
Bonds, 7.125% 04/12/05 475,000 329,574
- ----------------------------------------------------------------
LKB Global (Banking),
Gtd Notes, 6.00% 01/25/06 1,200,000 780,666
- ----------------------------------------------------------------
1,248,176
- ----------------------------------------------------------------
ITALY-2.33%
KFW International Finance
(Finance-Consumer Credit),
Gtd. Notes, 11.625% 11/27/98 ITL 570,000,000 402,059
- ----------------------------------------------------------------
Swedish Export Credit
(Finance-Consumer Credit)
Unsec. Unsub. Deb., 11.70%
12/04/98 700,000,000 500,867
- ----------------------------------------------------------------
902,926
- ----------------------------------------------------------------
JAPAN-0.65%
Sony Corp. (Electronic
Components/Miscellaneous),
Bonds, 1.40% 09/30/03 JPY 6,000,000 67,033
- ----------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers),
Deb., 1.20% 01/28/98 15,000,000 182,930
- ----------------------------------------------------------------
249,963
- ----------------------------------------------------------------
SWEDEN-0.29%
Credit Foncier de France
(Finance-Consumer Credit)
Sr. Unsub. Deb., 6.50%
02/22/99 SEK 750,000 113,980
- ----------------------------------------------------------------
UNITED KINGDOM-0.45%
KFW International Finance
(Finance-Consumer Credit),
Gtd. Notes, 10.625% 09/03/01 BPS 100,000 173,120
- ----------------------------------------------------------------
Total Non-U.S. Dollar
Denominated
Non-Convertible Bonds &
Notes 5,022,826
- ----------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES(g)-2.74%
Societe Generale (Banking),
Conv. Deb., 3.50% 01/01/00 FRF 231,000 49,292
- ----------------------------------------------------------------
JAPAN-1.51%
Glaxo Holdings PLC
(Medical-Drugs), Conv. Deb.,
4.30% 09/28/98 JPY 4,000,000 40,824
- ----------------------------------------------------------------
Jusco Co. Ltd. (Consumer
Non-Durables), Conv. Deb.,
1.20% 02/20/01 40,000,000 544,728
- ----------------------------------------------------------------
585,552
- ----------------------------------------------------------------
SWITZERLAND-1.10%
Aderans Co. Ltd. (Cosmetics &
Toiletries), Conv. Deb.,
0.875% 08/31/98 CHF 200,000 159,810
- ----------------------------------------------------------------
Yamada Denki Co. Ltd.
(Retail-Stores), Conv. Notes,
0.25% 03/31/00 300,000 265,822
- ----------------------------------------------------------------
425,632
- ----------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible
Bonds & Notes 1,060,476
- ----------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED GOVERNMENT
BONDS & NOTES(g)-25.00%
AUSTRALIA-4.02%
Australian Government,
Gtd. Deb., 10.00% 02/15/06 AUD 500,000 $ 465,762
- ----------------------------------------------------------------
Gtd. Deb., 10.00% 10/15/07 500,000 472,388
- ----------------------------------------------------------------
Queensland Treasury Corp.,
Gtd. Notes, 8.875% 11/08/96 180,000 142,854
- ----------------------------------------------------------------
Treasury Corp. of Victoria,
Local Government Gtd. Deb.,
12.00% 09/22/01 500,000 474,984
- ----------------------------------------------------------------
1,555,988
- ----------------------------------------------------------------
CANADA-3.30%
British Columbia (Province of),
Deb., 9.00% 06/21/04(c) CAD 150,000 68,721
- ----------------------------------------------------------------
British Columbia Municipal
Finance Authority, Deb., 7.75%
12/01/05 500,000 404,678
- ----------------------------------------------------------------
Ontario Province,
Sr. Unsub. Deb., 8.35%
03/11/03 600,000 493,583
- ----------------------------------------------------------------
Ontario Province, STRIP, 8.18%
01/10/45(c) 15,000,000 310,588
- ----------------------------------------------------------------
1,277,570
- ----------------------------------------------------------------
DENMARK-1.82%
Kingdom of Denmark,
Deb., 8.00% 11/15/01 DKK 3,750,000 706,218
- ----------------------------------------------------------------
FRANCE-1.83%
French Treasury Bill,
Notes, 5.75% 11/12/98 FRF 3,500,000 709,413
- ----------------------------------------------------------------
GERMANY-2.03%
Bundesrepublik Deutschland,
Deb., 6.75% 07/15/04 DEM 750,000 512,554
- ----------------------------------------------------------------
Deb., 6.875% 05/12/05 400,000 273,257
- ----------------------------------------------------------------
785,811
- ----------------------------------------------------------------
NEW ZEALAND-1.35%
New Zealand Government,
Gtd. Deb., 9.00% 11/15/96 NZD 305,000 215,669
- ----------------------------------------------------------------
Gtd. Deb., 10.00% 07/15/97 425,000 304,612
- ----------------------------------------------------------------
520,281
- ----------------------------------------------------------------
SWEDEN-3.78%
Swedish Government
Bonds, 13.00% 06/15/01 SEK 3,000,000 573,270
- ----------------------------------------------------------------
Bonds, 10.25% 05/05/03 5,000,000 890,019
- ----------------------------------------------------------------
1,463,289
- ----------------------------------------------------------------
UNITED KINGDOM-6.87%
Ontario Province,
Sr. Unsub. Notes, 6.875%
09/15/00 BPS 35,000 55,101
- ----------------------------------------------------------------
United Kingdom Treasury Notes
8.00% 12/07/00 350,000 587,549
- ----------------------------------------------------------------
7.00% 11/06/01 800,000 1,290,233
- ----------------------------------------------------------------
7.50% 12/07/06 450,000 726,357
- ----------------------------------------------------------------
2,659,240
- ----------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government
Bonds & Notes 9,677,810
- ----------------------------------------------------------------
</TABLE>
FS-88
<PAGE> 229
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-1.63%
ADVERTISING/BROADCASTING-0.00%
Time Warner Inc., Series K Conv.
Pfd.(b)
(acquired 06/06/96; cost $775) 1 $ 832
- ----------------------------------------------------------------
ELECTRIC POWER-0.62%
Citizens Utilities Trust, $2.50
Conv. Pfd. 5,000 240,000
- ----------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.01%
Conseco Inc., $4.28, Conv. Pfd. 4,000 390,000
- ----------------------------------------------------------------
Total Convertible Preferred
Stocks 630,832
- ----------------------------------------------------------------
WARRANTS-0.04%
CABLE TELEVISION-0.00%
Wireless One-Wt., expiring
10/19/00(h) 150 450
- ----------------------------------------------------------------
CONTAINERS-0.01%
MVE Inc.,-Wt., expiring
02/15/02(h) 100 3,000
- ----------------------------------------------------------------
LEISURE & RECREATION-0.01%
IHF Holdings-Wt., expiring
11/14/99(h) 70 2,800
- ----------------------------------------------------------------
STEEL-0.00%
Gulf States Steel-Wt., expiring
04/15/03(h) 60 300
- ----------------------------------------------------------------
TELECOMMUNICATIONS-0.02%
Clearnet Communications-Wt.,
expiring 09/15/05(h) 330 2,640
- ----------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
Intermedia-Wt., expiring
06/01/00(b)(h)
(acquired 05/25/95; cost $150) 150 $ 7,500
- ----------------------------------------------------------------
10,140
- ----------------------------------------------------------------
Total Warrants 16,690
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-11.01%
U.S. Treasury Notes
6.50% 05/31/01 $ 1,500,000 $ 1,525,230
- ----------------------------------------------------------------
6.625% 06/30/01 500,000 510,825
- ----------------------------------------------------------------
6.50% 08/15/05 1,200,000 1,213,488
- ----------------------------------------------------------------
6.75% 08/15/26 1,000,000 1,012,160
- ----------------------------------------------------------------
Total U.S. Treasury securities 4,261,703
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS(i)-3.62%
Daiwa Securities America Inc.,
5.53% 11/01/96(j) 400,640 400,640
- ----------------------------------------------------------------
Dresdner Securities Inc.,
5.54% 11/01/96(k) 1,000,000 1,000,000
- ----------------------------------------------------------------
Total Repurchase Agreements 1,400,640
- ----------------------------------------------------------------
TOTAL INVESTMENTS-96.45% 37,338,079
- ----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-3.55% 1,375,691
- ----------------------------------------------------------------
NET ASSETS-100.00% $ 38,713,770
================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (g).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at October 31, 1996 was
$1,713,990 which represented 4.43% of the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) Discounted bond at purchase. Interest rate represents coupon rate at which
the bond will accrue at a specified future date.
(e) Issued as a unit. This unit also includes 150 warrants to purchase one share
of common stock each at $11.55 per share.
(f) Issued as a unit. This unit also includes 330 warrants to purchase shares of
common stock.
(g) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(h) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(i) 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% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collateralized by $733,115,000 U.S. Treasury obligations, 0%
to 10.375% due 11/15/96 to 8/15/23.
(k) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$200,030,778. Collateralized by $198,651,000 U.S. Treasury obligations,
4.75% to 9.25% due 11/30/97 to 6/30/99.
Abbreviations:
<TABLE>
<S> <C> <C> <C> <C>
AUD Australian Dollar ITL Italian Lire
BPS British Pound Sterling JPY Japanese Yen
CAD Canadian Dollar NZD New Zealand Dollar
CHF Swiss Franc Pfd. Preferred
Conv. Convertible Sec. Secured
Deb. Debentures SEK Swedish Krona
DEM German Deutschemark Sr. Senior
Disc. Discounted Sub. Subordinated
DKK Danish Krone Unsec. Unsecured
FRF French Franc Unsub. Unsubordinated
Gtd. Guaranteed Wt. Warrant
</TABLE>
See Notes to Financial Statements.
FS-89
<PAGE> 230
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$36,405,538) $ 37,338,079
- --------------------------------------------------------
Foreign currencies, at market value (cost
$48,394) 48,572
- --------------------------------------------------------
Receivables for:
Investments sold 519,266
- --------------------------------------------------------
Capital stock sold 271,999
- --------------------------------------------------------
Forward contracts 40,843
- --------------------------------------------------------
Dividends and interest 937,904
- --------------------------------------------------------
Other assets 18,424
- --------------------------------------------------------
Total assets 39,175,087
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 330,330
- --------------------------------------------------------
Capital stock reacquired 38,094
- --------------------------------------------------------
Dividends 44,563
- --------------------------------------------------------
Accrued administrative service fees 6,429
- --------------------------------------------------------
Accrued distribution fees 24,964
- --------------------------------------------------------
Accrued transfer agent fees 7,162
- --------------------------------------------------------
Accrued operating expenses 9,775
- --------------------------------------------------------
Total liabilities 461,317
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 38,713,770
========================================================
NET ASSETS:
Class A $ 21,926,360
- --------------------------------------------------------
Class B $ 16,787,410
========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 2,020,149
========================================================
Class B:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 1,548,110
========================================================
Class A:
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE $ 10.85
========================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.85 divided
by 95.25%) $ 11.39
========================================================
Class B:
NET ASSET VALUE AND OFFERING PRICE PER
SHARE $ 10.84
========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $2,196,445
- --------------------------------------------------------
Dividends 25,703
- --------------------------------------------------------
2,222,148
- --------------------------------------------------------
EXPENSES:
Advisory fees 182,596
- --------------------------------------------------------
Administrative service fees 74,433
- --------------------------------------------------------
Directors' fees 5,763
- --------------------------------------------------------
Distribution fees-Class A 78,792
- --------------------------------------------------------
Distribution fees-Class B 103,129
- --------------------------------------------------------
Custodian fees 12,220
- --------------------------------------------------------
Transfer agent fees-Class A 31,849
- --------------------------------------------------------
Transfer agent fees-Class B 30,603
- --------------------------------------------------------
Other 59,764
- --------------------------------------------------------
Total expenses 579,149
- --------------------------------------------------------
Less: Expenses assumed by advisor (200,896)
- --------------------------------------------------------
Expenses paid indirectly (410)
- --------------------------------------------------------
Net expenses 377,843
- --------------------------------------------------------
Net investment income 1,844,305
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain on sales of:
Investment securities 243,673
- --------------------------------------------------------
Foreign currencies 174,698
- --------------------------------------------------------
418,371
- --------------------------------------------------------
UNREALIZED APPRECIATION OF:
Investment securities 496,691
- --------------------------------------------------------
Foreign currencies 46,609
- --------------------------------------------------------
543,300
- --------------------------------------------------------
Net gain on investment securities and
foreign currencies 961,671
- --------------------------------------------------------
Net increase in net assets resulting from
operations $2,805,976
========================================================
</TABLE>
See Notes to Financial Statements.
FS-90
<PAGE> 231
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,844,305 $ 570,694
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities and foreign currencies 418,371 263,982
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and foreign currencies 543,300 430,541
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,805,976 1,265,217
- ------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (1,175,361) (461,318)
- ------------------------------------------------------------------------------------------------------------------------------
Class B (705,239) (139,421)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment securities:
Class A (122,866) --
- ------------------------------------------------------------------------------------------------------------------------------
Class B (57,565) --
- ------------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 11,543,105 6,847,734
- ------------------------------------------------------------------------------------------------------------------------------
Class B 12,214,514 3,676,004
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 24,502,564 11,188,216
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 14,211,206 3,022,990
- ------------------------------------------------------------------------------------------------------------------------------
End of period $38,713,770 $14,211,206
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $37,281,153 $13,511,536
- ------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 123,655 85,635
- ------------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities and foreign currencies 330,414 178,787
- ------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and foreign currencies 978,548 435,248
- ------------------------------------------------------------------------------------------------------------------------------
$38,713,770 $14,211,206
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Income Fund (the "Fund") is an investment 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 Global Income Fund, AIM Global Aggressive Growth Fund,
AIM Global Growth Fund and AIM International Equity Fund. The Fund currently
offers two different classes of shares: Class A shares and 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 the financial statements pertains only to the Fund. The
Fund's investment objective is to provide high current income.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations-Non-convertible bonds and notes are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted price,
and may reflect appropriate factors such as institution-size trading in
similar groups of securities, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue,
FS-91
<PAGE> 232
individual trading characteristics and other market data. Investment
securities for which prices are not provided by the pricing service and
which are listed or traded on an exchange are valued at the last sales price
on the exchange where the security is principally traded or, lacking any
sales on a particular day, at the mean between the closing bid and asked
prices on that day unless the Board of Directors, or persons designated by
the Board of Directors, determines that the over-the-counter quotations more
closely reflect the current market value of the security. Securities traded
in the over-the-counter market, except (i) securities priced by the pricing
service, (ii) securities for which representative exchange prices are
available, and (iii) securities reported in the NASDAQ National Market
System, are valued at the mean between representative last bid and asked
prices obtained from an electronic quotation reporting system, if such
prices are available, or from established market makers. Each security
reported in the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the mean
between the closing bid and asked price. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the Fund's
officers in accordance with methods which are specifically authorized by the
Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities, as well as corporate bonds and
U.S. Government 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 a 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 would not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities and exchange rates occur during such period, then
these securities and exchange rates 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 foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding contracts at October 31, 1996 were as follows:
<TABLE>
<CAPTION>
SETTLEMENT CONTRACT TO UNREALIZED
DATE DELIVER VALUE RECEIVE APPRECIATION
---------- ------------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
11/05/96 JPY 30,000,000 $ 263,495 $ 283,554 $ 20,059
12/17/96 JPY 18,000,000 158,106 165,594 7,488
12/19/96 DEM 1,400,000 927,426 929,245 1,819
01/27/97 DEM 700,000 464,874 465,735 861
01/30/97 CHF 525,000 419,153 419,161 8
02/03/97 JPY 32,000,000 281,097 291,705 10,608
---------- ---------- ----------
$2,514,151 $2,554,994 $ 40,843
========== ========== ==========
</TABLE>
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. On October 31, 1996,
undistributed net investment income was increased by $74,315, undistributed
net realized gains decreased by $86,313, and paid-in capital increased by
$11,998 in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassifications discussed above.
E. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
F. Expenses-Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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 0.70% of
the first $1 billion of the Fund's average daily net assets, plus 0.65% of the
Fund's average daily net assets in excess of $1 billion. During the year ended
October 31, 1996, AIM waived fees of $182,596 and assumed expenses of $18,300.
The Fund, pursuant to a master administrative services agreement, has agreed
to pay AIM for administrative costs incurred in providing accounting services to
the Fund. During the year ended October 31, 1996, AIM was reimbursed $74,433 for
such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
reimburse A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1996, the Fund paid AFS
$40,282 for such services.
FS-92
<PAGE> 233
The Fund received reductions in transfer agency fees of $368 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $42 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $410 during the year ended October 31,
1996.
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
Distribution 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 an annual rate of 0.50% 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, of the total compensation payable, the Fund pays a service fee of
0.25% of the average daily net assets attributable to the Class A shares to
selected 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. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more designees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the year ended October 31, 1996, the Class A shares and
the Class B shares paid AIM Distributors $78,792 and $103,129, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $57,096 from the sales of the Class A
shares of the Fund during the year ended October 31, 1996. 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 year ended October 31, 1996,
AIM Distributors received commissions of $4,924 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, AFS and AIM Distributors.
During the year ended October 31, 1996, the Fund incurred legal fees of $3,047
for services rendered by the law firm of Kramer, Levin, Naftalis, & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $100,000. During the year ended October 31, 1996, the Fund
did not borrow under the line of credit agreement. The funds which are party to
the line of credit are charged a commitment fee of 0.08% on the unused balance
of the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1996 was
$40,174,480 and $19,868,348 respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1996, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,293,370
- ------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (360,829)
- ------------------------------------------------------
Net unrealized appreciation of investment
securities $ 932,541
======================================================
Investments have the same cost for tax and financial statement purposes.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
- ----------------------------------------------------------------------
Class A 1,609,644 $17,019,341 760,598 $ 7,840,532
- ----------------------------------------------------------------------
Class B 1,313,279 13,876,204 388,091 4,010,514
- ----------------------------------------------------------------------
Issued as
reinvestment
of dividends:
Class A 92,969 985,383 23,999 250,917
- ----------------------------------------------------------------------
Class B 58,431 618,362 11,879 124,099
- ----------------------------------------------------------------------
Reacquired:
Class A (613,922) (6,461,619) (118,603) (1,243,715)
- ----------------------------------------------------------------------
Class B (215,814) (2,280,052) (43,933) (458,609)
- ----------------------------------------------------------------------
2,244,587 $23,757,619 1,022,031 $10,523,738
======================================================================
</TABLE>
FS-93
<PAGE> 234
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share and Class B share
outstanding during each of the years in the two-year period ended October 31,
1996 and the period September 15, 1994 (dates operations commenced) through
October 31, 1994.
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994
---------- ------- ------ ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.74 $10.02 $10.00 $10.73 $10.01 $10.00
- --------------------------------------------------------------------------------------- ---------------------------------
Income from investment operations:
Net investment income 0.79(a) 0.79 0.08 0.74(a) 0.74 0.07
- --------------------------------------------------------------------------------------- ---------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.25 0.75 0.01 0.24 0.75 0.01
- --------------------------------------------------------------------------------------- ---------------------------------
Total from investment operations 1.04 1.54 0.09 0.98 1.49 0.08
- --------------------------------------------------------------------------------------- ---------------------------------
Less distributions:
Dividends from investment income (0.81) (0.82) (0.07) (0.75) (0.77) (0.07)
- --------------------------------------------------------------------------------------- ---------------------------------
Distributions from net realized capital gains (0.12) -- -- (0.12) -- --
- --------------------------------------------------------------------------------------- ---------------------------------
Total distributions (0.93) (0.82) (0.07) (0.87) (0.77) (0.07)
- --------------------------------------------------------------------------------------- ---------------------------------
Net asset value, end of period $10.85 $10.74 $10.02 $10.84 $10.73 $10.01
======================================================================================= =================================
Total return(b) 10.22% 16.07% 0.93% 9.66% 15.56% 0.79%
======================================================================================= =================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $21,926 $10,004 $2,661 $16,787 $4,207 $362
======================================================================================= =================================
Ratio of expenses to average net assets(c) 1.25%(d)(e) 1.25% 1.25%(f) 1.75%(d)(e) 1.74% 1.73%(f)
======================================================================================= =================================
Ratio of net investment income to average net
assets(c) 7.27%(d) 7.38% 6.01%(f) 6.77%(d) 6.88% 3.59%(f)
======================================================================================= =================================
Portfolio turnover rate 83% 128% 6% 83% 128% 6%
======================================================================================= =================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and expense reimbursements. The ratios of expenses and net
investment income to average net assets before fee waivers and expense
reimbursements were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------- --------------------------
NET INVESTMENT NET INVESTMENT
EXPENSES INCOME EXPENSES INCOME
-------- -------------- -------- --------------
<S> <C> <C> <C> <C>
1996 2.02% 6.51% 2.53% 6.00%
--------------------------------------------------------------------------------------------------
1995 3.03% 5.59% 3.57% 5.05%
--------------------------------------------------------------------------------------------------
1994 5.61% 1.65% 22.09% (16.77)%
--------------------------------------------------------------------------------------------------
</TABLE>
(d) Ratios are based on average net assets of $15,758,345 for Class A shares and
$10,312,948 for Class B shares.
(e) Ratios include indirectly paid expenses. Excluding indirectly paid expenses,
the ratios of expenses to average net assets would have remained the same
for both Class A shares and Class B shares.
(f) Annualized.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an Agreement and Plan of Merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM Funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-94
<PAGE> 235
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, 1996, the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and financial highlights
for each of the years in the four-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, 1996, 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, 1996, 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 four-year period then ended
and the period November 5, 1991 (date operations
commenced) through October 31, 1992, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 6, 1996
FS-95
<PAGE> 236
SCHEDULE OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FOREIGN STOCKS &
OTHER EQUITY INTERESTS-90.94%
ARGENTINA-1.50%
Banco de Galicia y Buenos Aires
S.A. de C.V.- ADR (Banking) 278,280 $ 5,043,825
- -----------------------------------------------------------------
Perez Companc S.A.-Class B
(Oil & Gas-Services) 878,000 5,575,858
- -----------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Oil & Gas-Services) 508,200 11,561,550
- -----------------------------------------------------------------
22,181,233
- -----------------------------------------------------------------
AUSTRALIA-2.91%
National Mutual Holdings Ltd.(a)
(Insurance-Multi-Line Property) 3,770,000 5,378,884
- -----------------------------------------------------------------
News Corp. Ltd. (The)-ADR
(Publishing) 508,000 9,017,000
- -----------------------------------------------------------------
QBE Insurance Group, Ltd.
(Insurance-Broker) 1,540,276 8,155,553
- -----------------------------------------------------------------
QNI Ltd.
(Metals-Miscellaneous) 5,230,400 10,530,450
- -----------------------------------------------------------------
Western Mining Corp. Holding Ltd.
(Metals-Miscellaneous) 1,571,100 9,875,414
- -----------------------------------------------------------------
42,957,301
- -----------------------------------------------------------------
AUSTRIA-0.69%
OMV A.G.
(Oil & Gas-Exploration & Production) 66,000 6,460,932
- -----------------------------------------------------------------
VA Technologie A.G.
(Engineering & Construction) 27,000 3,775,869
- -----------------------------------------------------------------
10,236,801
- -----------------------------------------------------------------
BELGIUM-1.82%
Barco Industries(a)
(Electronic Components/Miscellaneous) 41,000 6,743,508
- -----------------------------------------------------------------
Colruyt S.A.
(Retail-Food & Drug) 14,600 6,295,928
- -----------------------------------------------------------------
Delhaize-Le Lion S.A.
(Retail-Food & Drug) 124,000 6,937,480
- -----------------------------------------------------------------
UCB S.A.
(Medical-Drugs) 3,100 6,833,119
- -----------------------------------------------------------------
26,810,035
- -----------------------------------------------------------------
BRAZIL-0.89%
Telecomunicacoes Brasileiras
S/A-Telebras-ADR
(Telecommunications) 177,000 13,186,500
- -----------------------------------------------------------------
CANADA-3.25%
Canadian National Railway Co.
(Railroads) 128,000 3,520,000
- -----------------------------------------------------------------
Canadian Natural Resources Ltd.(a)
(Oil & Gas-Exploration &
Production) 335,000 8,323,758
- -----------------------------------------------------------------
Canadian Pacific Ltd.
(Transportation-Miscellaneous) 307,000 7,751,750
- -----------------------------------------------------------------
Newbridge Networks Corp.(a)
(Computer Networking) 188,000 5,945,500
- -----------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 124,700 8,121,087
- -----------------------------------------------------------------
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Suncor, Inc.
(Oil & Gas-Exploration &
Production) 190,000 $ 7,336,596
- -----------------------------------------------------------------
TELUS Corp.
(Telecommunications) 445,000 6,989,442
- -----------------------------------------------------------------
47,988,133
- -----------------------------------------------------------------
CHILE-0.41%
Cia. de Telecomunicaciones de Chile
S.A.-ADR (Telephone) 62,100 6,124,612
- -----------------------------------------------------------------
DENMARK-0.77%
Danisco A/S
(Food/Processing) 79,300 4,543,279
- -----------------------------------------------------------------
Novo Nordisk A/S-Class B
(Medical-Drugs) 41,200 6,861,587
- -----------------------------------------------------------------
11,404,866
- -----------------------------------------------------------------
FRANCE-8.56%
AXA S.A.
(Insurance-Life & Health) 121,000 7,557,027
- -----------------------------------------------------------------
Carrefour Supermarche
(Retail-Stores) 18,700 10,376,900
- -----------------------------------------------------------------
Cetelem
(Finance-Consumer Credit) 22,400 4,780,127
- -----------------------------------------------------------------
Compagnie Francaise d'Etudes
et de Construction Technip
(Engineering & Construction) 59,000 5,157,379
- -----------------------------------------------------------------
Compagnie Generale des Eaux
(Water Supply) 62,000 7,409,682
- -----------------------------------------------------------------
Elf Aquitaine S.A.
(Oil & Gas-Services) 90,000 7,196,479
- -----------------------------------------------------------------
Essilor International-Compagnie
Generale d'Optique
(Medical Instruments/Products) 24,940 6,561,232
- -----------------------------------------------------------------
Michelin-Class B
(Automobile/Truck Parts & Tires) 134,000 6,460,831
- -----------------------------------------------------------------
Pathe S.A.(a)
(Advertising/Broadcasting) 25,500 6,878,142
- -----------------------------------------------------------------
Pinault-Printemps-Redoute, S.A.
(Retail-Food & Drug) 34,800 13,123,599
- -----------------------------------------------------------------
Rexel S.A.
(Transportation-Miscellaneous) 23,200 6,874,914
- -----------------------------------------------------------------
Rhone-Poulenc-Class A
(Chemicals) 130,000 3,852,323
- -----------------------------------------------------------------
Roussel-Uclaf
(Medical-Drugs) 24,000 6,351,491
- -----------------------------------------------------------------
Societe BIC S.A.
(Office Products) 51,500 7,726,259
- -----------------------------------------------------------------
Sodexho S.A.
(Business Services) 20,000 9,666,504
- -----------------------------------------------------------------
Total S.A.-Class B
(Oil & Gas-Exploration &
Production) 111,000 8,682,425
- -----------------------------------------------------------------
Valeo S.A.
(Automobile/Truck Parts & Tires) 128,500 7,711,257
- -----------------------------------------------------------------
126,366,571
- -----------------------------------------------------------------
</TABLE>
FS-96
<PAGE> 237
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
GERMANY-4.58%
Adidas A.G.
(Shoes & Related Apparel) 130,000 $ 11,142,367
- -----------------------------------------------------------------
Altana A.G.
(Chemicals) 13,350 10,666,601
- -----------------------------------------------------------------
Commerzbank A.G.
(Banking) 295,000 6,603,605
- -----------------------------------------------------------------
Continental A.G.
(Automobile/Truck Parts & Tires) 285,000 4,987,124
- -----------------------------------------------------------------
Dresdner Bank A.G.
(Banking) 240,000 6,418,383
- -----------------------------------------------------------------
Hoechst A.G.
(Chemicals) 280,500 10,548,385
- -----------------------------------------------------------------
SGL Carbon A.G.
(Metals-Miscellaneous) 50,500 5,685,585
- -----------------------------------------------------------------
SKW Trostberg A.G.
(Chemicals) 116,000 3,385,631
- -----------------------------------------------------------------
Veba A.G.
(Electric Services) 155,000 8,266,871
- -----------------------------------------------------------------
67,704,552
- -----------------------------------------------------------------
HONG KONG-7.90%
Asia Satellite Telecommunications
Holdings Ltd.-ADR(a)
(Telecommunications) 174,500 4,667,875
- -----------------------------------------------------------------
Cheung Kong Holdings Ltd.
(Real Estate) 1,795,000 14,393,058
- -----------------------------------------------------------------
Citic Pacific Ltd.
(Banking) 1,212,000 5,893,691
- -----------------------------------------------------------------
Cosco Pacific Ltd.
(Transportation-Miscellaneous) 14,908,000 14,267,505
- -----------------------------------------------------------------
First Pacific Co. Ltd.
(Conglomerates) 7,017,908 9,666,165
- -----------------------------------------------------------------
Hang Seng Bank Ltd.
(Banking) 1,151,100 13,658,910
- -----------------------------------------------------------------
Hong Kong & China Gas Company Ltd.
(Electric Power) 6,028,000 10,602,519
- -----------------------------------------------------------------
Hong Kong & China Gas Company Ltd.,
Expiring 1997-Warrants(a)
(Electric Power) 369,000 136,009
- -----------------------------------------------------------------
HSBC Holdings PLC
(Banking) 864,000 17,599,131
- -----------------------------------------------------------------
New World Infrastructure Ltd.(a)
(Building Materials) 4,126,000 10,272,044
- -----------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Real Estate) 1,118,100 12,725,072
- -----------------------------------------------------------------
Varitronix International Ltd.
(Electronic Components/
Miscellaneous) 1,529,000 2,788,197
- -----------------------------------------------------------------
116,670,176
- -----------------------------------------------------------------
INDONESIA-1.87%
PT Bank International Indonesia
(Banking) 6,284,267 10,117,203
- -----------------------------------------------------------------
PT Hanjaya Mandala Sampoerna
(Tobacco) 1,380,000 12,826,600
- -----------------------------------------------------------------
PT Indosat
(Telecommunications) 933,000 2,823,874
- -----------------------------------------------------------------
PT Indosat-ADR
(Telecommunications) 63,500 1,912,937
- -----------------------------------------------------------------
27,680,614
- -----------------------------------------------------------------
IRELAND-0.30%
Elan Corp. PLC-ADR(a)
(Medical-Drugs) 158,800 4,406,700
- -----------------------------------------------------------------
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
ISRAEL-0.53%
Teva Pharmaceutical Industries
Ltd.-ADR
(Medical-Drugs) 186,800 $ 7,822,250
- -----------------------------------------------------------------
ITALY-3.17%
Edison S.p.A.
(Electric Power) 1,210,000 7,208,952
- -----------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A.
(Oil & Gas-Exploration &
Production) 2,050,000 9,805,405
- -----------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A.
(Banking) 533,450 4,225,402
- -----------------------------------------------------------------
Parmalat Finanziaria S.p.A.
(Food/Processing) 4,550,000 6,505,570
- -----------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications) 3,800,000 7,835,465
- -----------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 5,000,000 11,179,960
- -----------------------------------------------------------------
46,760,754
- -----------------------------------------------------------------
JAPAN-16.20%
Alpine Electronics Inc.
(Electronic Components/
Miscellaneous) 472,000 7,462,123
- -----------------------------------------------------------------
Amada Co., Ltd.
(Building Materials-Tools) 876,000 7,540,117
- -----------------------------------------------------------------
Bridgestone Corp.
(Automobile/Truck Parts & Tires) 685,000 11,551,535
- -----------------------------------------------------------------
Canon, Inc.
(Office Automation) 680,000 13,020,069
- -----------------------------------------------------------------
Daiichi Corp.
(Electronic Components/
Miscellaneous) 286,900 6,778,455
- -----------------------------------------------------------------
DDI Corp.
(Telecommunications) 1,700 12,766,238
- -----------------------------------------------------------------
Honda Motor Co.
(Automobile Manufacturers) 610,000 14,572,922
- -----------------------------------------------------------------
Ibiden Co., Ltd.
(Building Materials) 710,000 6,610,162
- -----------------------------------------------------------------
Jusco Co.
(Retail-Stores) 358,000 10,627,904
- -----------------------------------------------------------------
Komatsu Ltd.
(Machinery-Heavy) 1,298,000 10,625,234
- -----------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd.
(Electronic Components/
Miscellaneous) 569,000 9,095,604
- -----------------------------------------------------------------
Nippon Television Network
(Advertising/Broadcasting) 26,530 7,689,517
- -----------------------------------------------------------------
Nomura Securities Co., Ltd.
(Finance-Asset Management) 642,000 10,600,852
- -----------------------------------------------------------------
NSK Ltd.
(Metals-Miscellaneous) 1,015,000 6,721,795
- -----------------------------------------------------------------
NTT Data Communications Systems Co.
(Computer Software/Services) 4,500 13,319,573
- -----------------------------------------------------------------
Okuma Corp.(a)
(Machine Tools) 871,000 8,338,589
- -----------------------------------------------------------------
Ricoh Co., Ltd.
(Office Automation) 1,095,000 10,867,770
- -----------------------------------------------------------------
Shizuoka Bank
(Banking) 430,000 4,909,754
- -----------------------------------------------------------------
SMC
(Machinery-Miscellaneous) 100,000 6,481,929
- -----------------------------------------------------------------
Sony Corp.
(Electronic Components/
Miscellaneous) 190,100 11,403,829
- -----------------------------------------------------------------
Sumitomo Heavy Industries, Ltd.(a)
(Machinery-Heavy) 2,355,000 8,294,366
- -----------------------------------------------------------------
TDK Corp.
(Electronic Components/
Miscellaneous) 211,000 12,379,606
- -----------------------------------------------------------------
</TABLE>
FS-97
<PAGE> 238
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Toyota Motor Corp.
(Automobile-Manufacturers) 459,000 $ 10,844,583
- -----------------------------------------------------------------
Yamaha Corp.
(Electronic Components/
Miscellaneous) 566,000 8,600,237
- -----------------------------------------------------------------
Yamatake-Honeywell
(Airlines) 481,000 8,069,123
- -----------------------------------------------------------------
239,171,886
- -----------------------------------------------------------------
MALAYSIA-1.92%
Commerce Asset Holdings Berhad
(Finance-Asset Management) 1,129,000 7,373,244
- -----------------------------------------------------------------
Edaran Otomobil Nasional Berhad
(Automobile Manufacturers) 618,000 5,772,729
- -----------------------------------------------------------------
Malayan Banking Berhad
(Banking) 1,032,000 10,211,755
- -----------------------------------------------------------------
YTL Corp. Berhad
(Engineering & Construction) 581,000 3,127,489
- -----------------------------------------------------------------
YTL Corp. Berhad, Warrants-expiring
1997(a)
(Engineering & Construction) 405,000 1,859,489
- -----------------------------------------------------------------
28,344,706
- -----------------------------------------------------------------
MEXICO-1.61%
Grupo Industrial Maseca S.A. de
CV-Class B
(Food/Processing) 9,461,000 11,512,109
- -----------------------------------------------------------------
Grupo Televisa S.A.-GDR(a)
(Advertising/Broadcasting) 138,000 3,622,500
- -----------------------------------------------------------------
Panamerican Beverages, Inc.
(Beverages-Soft Drinks) 199,100 8,685,737
- -----------------------------------------------------------------
23,820,346
- -----------------------------------------------------------------
NETHERLANDS-4.99%
Akzo Nobel
(Conglomerates) 49,500 6,237,461
- -----------------------------------------------------------------
Elsevier N.V.
(Publishing) 383,000 6,365,651
- -----------------------------------------------------------------
Getronics N.V.
(Computer Software/Services) 292,000 7,176,519
- -----------------------------------------------------------------
Gucci Group N.V.-New York Shares-ADR
(Textiles) 90,000 6,210,000
- -----------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food & Drug) 142,000 8,285,495
- -----------------------------------------------------------------
Nutricia Verenigde Bedrijven N.V.
(Food/Processing) 87,000 12,203,690
- -----------------------------------------------------------------
Oce-Van Der Grinten N.V.-V
(Office Automation) 60,000 6,400,660
- -----------------------------------------------------------------
Royal Dutch Petroleum Co.
(Oil & Gas-Services) 44,500 7,348,913
- -----------------------------------------------------------------
Ver Ned Uitgevuer Bezit N.V.
(Publishing) 332,000 6,026,758
- -----------------------------------------------------------------
Wolters Kluwer N.V.
(Publishing) 58,000 7,455,531
- -----------------------------------------------------------------
73,710,678
- -----------------------------------------------------------------
NORWAY-0.30%
UNI Storebrand A.S.(a)
(Insurance-Multi-line Property) 750,000 4,396,001
- -----------------------------------------------------------------
PHILIPPINES-2.19%
C & P Homes, Inc.
(Homebuilding) 14,560,500 6,648,630
- -----------------------------------------------------------------
Filinvest Land Inc.(a)
(Real Estate) 21,584,500 7,309,819
- -----------------------------------------------------------------
Metro Pacific Corp.
(Conglomerates) 33,845,000 8,242,314
- -----------------------------------------------------------------
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
PHILIPPINES-(CONTINUED)
Metropolitan Bank & Trust Co.
(Banking) 342,800 $ 7,565,601
- -----------------------------------------------------------------
Southeast Asia Cement Holdings,
Inc.(a)
(Building Materials) 26,967,460 2,565,398
- -----------------------------------------------------------------
32,331,762
- -----------------------------------------------------------------
PORTUGAL-0.39%
Portugal Telecom S.A.(a)
(Telecommunications) 220,000 5,721,006
- -----------------------------------------------------------------
SINGAPORE-2.20%
Cerebos Pacific Ltd.
(Food/Processing) 528,000 4,086,049
- -----------------------------------------------------------------
City Developments Ltd.
(Real Estate) 1,155,000 9,102,236
- -----------------------------------------------------------------
DBS Land Ltd.
(Real Estate) 2,810,000 8,857,934
- -----------------------------------------------------------------
Overseas Union Bank Ltd.
(Banking) 1,539,000 10,489,457
- -----------------------------------------------------------------
32,535,676
- -----------------------------------------------------------------
SOUTH AFRICA-0.88%
De Beers Centenary A.G.
(Gold & Silver Mining) 195,000 5,755,461
- -----------------------------------------------------------------
Sasol Ltd.
(Oil & Gas-Exploration & Production) 590,700 7,206,729
- -----------------------------------------------------------------
12,962,190
- -----------------------------------------------------------------
SPAIN-1.86%
Empresa Nacional de Electricidad,
S.A. (Electric Power) 163,000 9,977,115
- -----------------------------------------------------------------
Iberdrola S.A.
(Electric Power) 745,000 7,911,556
- -----------------------------------------------------------------
Repsol S.A.
(Oil & Gas-Services) 59,250 1,934,059
- -----------------------------------------------------------------
Telefonica de Espana
(Telecommunications) 380,000 7,624,123
- -----------------------------------------------------------------
27,446,853
- -----------------------------------------------------------------
SWEDEN-2.78%
Astra AB-Class A
(Medical-Drugs) 73,300 3,344,131
- -----------------------------------------------------------------
Autoliv AB
(Automobile/Truck Parts & Tires) 400,000 16,971,577
- -----------------------------------------------------------------
Hennes & Mauritz AB-B shares
(Retail-Stores) 74,000 9,801,846
- -----------------------------------------------------------------
Securitas AB
(Security & Safety Services) 267,000 6,902,687
- -----------------------------------------------------------------
Telefonaktiebolaget L.M.
Ericsson-ADR (Telecommunications) 144,280 3,985,735
- -----------------------------------------------------------------
41,005,976
- -----------------------------------------------------------------
SWITZERLAND-1.13%
Ciba-Geigy Ltd.
(Chemicals) 5,200 6,405,380
- -----------------------------------------------------------------
Sandoz A.G.
(Chemicals) 5,500 6,357,199
- -----------------------------------------------------------------
Swissair A.G.(a)
(Airlines) 5,000 3,896,361
- -----------------------------------------------------------------
16,658,940
- -----------------------------------------------------------------
THAILAND-1.26%
Bank of Ayudhya Ltd.
(Banking) 120,150 344,026
- -----------------------------------------------------------------
Krung Thai Bank PLC
(Banking) 1,502,920 4,067,522
- -----------------------------------------------------------------
</TABLE>
FS-98
<PAGE> 239
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
THAILAND-(CONTINUED)
Siam Commercial Bank Public Co. Ltd.
(Banking) 375,500 $ 3,416,984
- -----------------------------------------------------------------
Thai Farmers Bank PLC
(Banking) 573,600 4,387,213
- -----------------------------------------------------------------
Thai Farmers Bank PLC-Rights(a)
(Banking) 72,450 37,818
- -----------------------------------------------------------------
Total Access Communication Public
Co. Ltd.
(Telecommunications) 931,000 6,423,900
- -----------------------------------------------------------------
18,677,463
- -----------------------------------------------------------------
UNITED KINGDOM-14.08%
Airtours PLC
(Leisure & Recreation) 390,000 4,138,672
- -----------------------------------------------------------------
Argos PLC
(Retail-Stores) 653,333 8,203,880
- -----------------------------------------------------------------
Barclays PLC
(Finance-Consumer Credit) 500,000 7,840,983
- -----------------------------------------------------------------
Bass PLC
(Beverages-Alcoholic) 650,000 8,336,589
- -----------------------------------------------------------------
B.A.T. Industries PLC
(Conglomerates) 1,285,000 8,951,497
- -----------------------------------------------------------------
British Aerospace PLC
(Aerospace/Defense) 425,000 8,058,675
- -----------------------------------------------------------------
British Petroleum Co. PLC
(Oil & Gas-Services) 840,000 9,037,109
- -----------------------------------------------------------------
Burton Group PLC
(Retail-Stores) 3,140,000 7,627,686
- -----------------------------------------------------------------
Caradon PLC
(Building Materials) 1,800,000 7,075,195
- -----------------------------------------------------------------
Compass Group PLC
(Food/Processing) 970,000 9,614,746
- -----------------------------------------------------------------
Dixons Group PLC
(Retail-Stores) 1,370,000 12,275,147
- -----------------------------------------------------------------
FKI PLC
(Conglomerates) 1,110,000 3,793,945
- -----------------------------------------------------------------
General Electric Co. PLC
(Electronic
Components/Miscellaneous) 1,140,000 7,041,504
- -----------------------------------------------------------------
GKN PLC
(Automobile/Truck Parts & Tires) 530,000 9,963,379
- -----------------------------------------------------------------
Granada Group PLC
(Leisure & Recreation) 590,000 8,484,131
- -----------------------------------------------------------------
Kingfisher PLC
(Retail-Stores) 326,000 3,464,811
- -----------------------------------------------------------------
Marks & Spencer PLC
(Retail-Stores) 850,000 7,138,672
- -----------------------------------------------------------------
Medeva PLC
(Medical-Drugs) 1,490,000 6,402,344
- -----------------------------------------------------------------
MFI Furniture Group PLC
(Retail-Stores) 2,300,000 7,486,979
- -----------------------------------------------------------------
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Next PLC
(Retail-Stores) 1,010,000 9,205,729
- -----------------------------------------------------------------
NFC PLC
(Transportation-Miscellaneous) 2,350,000 $ 7,343,750
- -----------------------------------------------------------------
Peninsular & Oriental Steam
Navigation Co. (The)
(Transportation-Miscellaneous) 725,000 7,121,379
- -----------------------------------------------------------------
Provident Financial PLC
(Finance-Consumer Credit) 942,400 7,063,398
- -----------------------------------------------------------------
Rentokil Group PLC
(Business Services) 975,000 6,546,021
- -----------------------------------------------------------------
Siebe PLC
(Electronic Components/
Miscellaneous) 370,000 5,805,339
- -----------------------------------------------------------------
Smiths Industries PLC
(Electronics/Defense) 256,000 3,416,667
- -----------------------------------------------------------------
Standard Chartered PLC
(Finance-Asset Management) 645,000 6,960,205
- -----------------------------------------------------------------
WPP Group PLC
(Advertising/Broadcasting) 2,575,000 9,555,664
- -----------------------------------------------------------------
207,954,096
- -----------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 1,343,038,677
=================================================================
PRINCIPAL
AMOUNT(b)
FOREIGN CONVERTIBLE BONDS-1.26%
ITALY-0.48%
Pirelli S.p.A., Conv. Bonds,
5.00%, 12/31/98
(Automobile/Truck Parts & Tires) ITL 10,062,964,600 7,048,055
- ------------------------------------------------------------------
JAPAN-0.78%
MBL International Finance
Bermuda, Conv. Yankee Bonds,
3.00%, 11/30/02
(Financial Services) 4,780,000 5,341,650
- ------------------------------------------------------------------
Sumitomo Bank, Conv. American
Depository Notes,
0.75%, 05/31/01
(Banking) 6,500,000 6,207,500
- ------------------------------------------------------------------
11,549,150
- ------------------------------------------------------------------
Total Foreign Convertible
Bonds 18,597,205
- ------------------------------------------------------------------
REPURCHASE AGREEMENTS-6.38%(c)
Daiwa Securities America Inc.,
5.53%, 11/01/96(d) 121,642 121,642
- ------------------------------------------------------------------
SBC Capital Markets, Inc.,
5.55%, 11/01/96(e) 94,000,000 94,000,000
- ------------------------------------------------------------------
Total Repurchase Agreements 94,121,642
- ------------------------------------------------------------------
TOTAL INVESTMENTS-98.58% 1,455,757,524
- ------------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.42% 20,991,944
- ------------------------------------------------------------------
NET ASSETS-100.00% $ 1,476,749,468
==================================================================
</TABLE>
Abbreviations:
ADR -- American Depository Receipt
Conv. -- Convertible
GDR -- Global Depository Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Principal in U.S. Dollars unless otherwise indicated.
(c) 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% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$750,115,208. Collateralized by $733,115,000 U.S. Treasury obligations, 0%
to 10.375% due 11/15/96 to 08/15/23.
(e) Joint repurchase agreement entered into 10/31/96 with a maturing value of
$700,107,917. Collateralized by $691,506,000 U.S. Treasury obligations, 0%
to 9.125% due 11/30/96 to 10/31/01.
See Notes to Financial Statements.
FS-99
<PAGE> 240
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value
(cost $1,260,825,376) $1,455,757,524
- ---------------------------------------------------------
Foreign currencies, at market value
(cost $36,976,366) 36,821,259
- ---------------------------------------------------------
Receivables for:
Investments sold 11,444,676
- ---------------------------------------------------------
Capital stock sold 9,947,233
- ---------------------------------------------------------
Dividends and interest 2,711,321
- ---------------------------------------------------------
Investment for deferred compensation plan 17,703
- ---------------------------------------------------------
Other assets 81,081
- ---------------------------------------------------------
Total assets 1,516,780,797
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 35,604,954
- ---------------------------------------------------------
Capital stock reacquired 1,649,363
- ---------------------------------------------------------
Deferred compensation 17,703
- ---------------------------------------------------------
Accrued advisory fees 1,117,595
- ---------------------------------------------------------
Accrued administrative services fees 8,031
- ---------------------------------------------------------
Accrued directors' fees 946
- ---------------------------------------------------------
Accrued distribution fees 580,743
- ---------------------------------------------------------
Accrued transfer agent fees 322,318
- ---------------------------------------------------------
Accrued operating expenses 729,676
- ---------------------------------------------------------
Total liabilities 40,031,329
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $1,476,749,468
=========================================================
NET ASSETS:
Class A $1,108,394,906
=========================================================
Class B $ 368,354,562
=========================================================
CAPITAL STOCK, $.001 PAR VALUE PER
SHARE:
Class A:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 72,108,763
=========================================================
Class B:
Authorized 200,000,000
- ---------------------------------------------------------
Outstanding 24,337,966
=========================================================
Class A:
Net asset value and redemption price
per share $ 15.37
=========================================================
Offering price per share:
(Net asset value divided by 94.50%) $ 16.26
=========================================================
Class B:
Net asset value and offering price per
share $ 15.13
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $2,703,027 foreign
withholding tax) $ 16,488,363
- --------------------------------------------------------
Interest 3,504,142
- --------------------------------------------------------
Total investment income 19,992,505
- --------------------------------------------------------
EXPENSES:
Advisory fees 10,384,642
- --------------------------------------------------------
Administrative services fees 94,250
- --------------------------------------------------------
Directors' fees 11,727
- --------------------------------------------------------
Distribution fees-Class A 2,684,486
- --------------------------------------------------------
Distribution fees-Class B 2,034,652
- --------------------------------------------------------
Custodian fees 929,674
- --------------------------------------------------------
Transfer agent fees-Class A 1,810,548
- --------------------------------------------------------
Transfer agent fees-Class B 590,277
- --------------------------------------------------------
Other 638,489
- --------------------------------------------------------
Total expenses 19,178,745
- --------------------------------------------------------
Less: Advisory fees waived (299,147)
- --------------------------------------------------------
Expenses paid indirectly (17,187)
- --------------------------------------------------------
Net expenses 18,862,411
- --------------------------------------------------------
Net investment income 1,130,094
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain on sales of:
Investment securities 43,787,593
- --------------------------------------------------------
Foreign currencies 41,811
- --------------------------------------------------------
43,829,404
- --------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 98,797,523
- --------------------------------------------------------
Foreign currencies (335,775)
- --------------------------------------------------------
98,461,748
- --------------------------------------------------------
Net gain on investment securities and
foreign currencies 142,291,151
- --------------------------------------------------------
Net increase in net assets resulting from
operations $143,421,246
========================================================
</TABLE>
See Notes to Financial Statements.
FS-100
<PAGE> 241
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,130,094 $ 468,936
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities and foreign currencies 43,829,404 19,301,818
- -------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and foreign currencies 98,461,748 8,812,756
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 143,421,246 28,583,510
- -------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (295,965) (2,166,421)
- -------------------------------------------------------------------------------------------------------------------------------
Class B -- (19,050)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized capital gains:
Class A (18,468,041) (23,092,160)
- -------------------------------------------------------------------------------------------------------------------------------
Class B (1,875,276) (287,957)
- -------------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 350,398,961 (54,671,896)
- -------------------------------------------------------------------------------------------------------------------------------
Class B 296,841,074 45,389,211
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 770,021,999 (6,264,763)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 706,727,469 712,992,232
- -------------------------------------------------------------------------------------------------------------------------------
End of period $1,476,749,468 $706,727,469
===============================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,238,126,321 $590,886,286
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,113,111 237,171
- -------------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities
and foreign currencies 42,949,270 19,504,994
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and foreign currencies 194,560,766 96,099,018
- -------------------------------------------------------------------------------------------------------------------------------
$1,476,749,468 $706,727,469
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
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: Class A shares and 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 Fund's investment objective is to provide long-term growth of capital. The
Fund seeks to achieve its objective by investing in a diversified portfolio of
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--Except as provided in the next sentence, a security
listed or traded on an exchange is valued at the last sales price on the
exchange where the security is principally traded or, lacking any sales, at
the mean between the closing bid and asked prices on the day of valuation.
Exchange listed convertible bonds are valued at the mean between the closing
bid and asked prices obtained from a broker-dealer. If a mean is not
available, as is the case in some foreign markets, the
FS-101
<PAGE> 242
closing bid will be used absent a last sales price. Securities traded in the
over-the-counter market (but not including securities reported on the NASDAQ
National Market System) are valued at the mean between the closing bid and
asked prices on valuation date. Securities reported on the NASDAQ National
Market System are valued at the last sales price on the valuation date or
absent a last sales price, at the mean of the closing bid and asked prices.
Securities for which market quotations are either not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's 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 would not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at 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 currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses 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. On October 31, 1996,
undistributed net investment income was increased by $41,811 and
undistributed net realized gains reduced by $41,811 in order to comply with
the requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
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.
G. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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.
Under the voluntary waiver, 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 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, 1996, AIM waived fees of $299,147.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1996, AIM was
reimbursed $94,250 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency services to the Fund. During the year ended October 31, 1996,
the Fund paid AFS $1,170,699 for such services.
FS-102
<PAGE> 243
The Fund received reductions in transfer agency fees of $15,590 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $1,597 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $17,187 during the year ended October
31, 1996.
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
distribution 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, pays 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. Of the compensation payable, the Fund pays a service fee of 0.25%
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 Fund, pursuant to the Class B Plan, pays AIM Distributors 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. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more designees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the year ended October 31, 1996, the Class A shares and
the Class B shares paid AIM Distributors $2,684,486 and $2,034,652,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,489,975 from sales of the Class A
shares of the Fund during the year ended October 31, 1996. 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 year ended October 31, 1996,
AIM Distributors received commissions of $39,753 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, AFS and AIM Distributors.
During the year ended October 31, 1996, the Fund incurred legal fees of $5,247
for services rendered by the law firm of Kramer, Levin, Naftalis & Frankel as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $10,800,000. During the year ended October 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
party to the line of credit are charged a commitment fee of 0.08% on the unused
balance of the committed line. The commitment fee is allocated among the funds
based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1996 was
$1,253,564,886 and $666,195,047, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of October 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $227,690,078
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (33,057,825)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $194,632,253
==========================================================
Costs of investments for tax purposes is $1,261,125,271.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 41,055,911 $ 601,559,902 19,941,452 $ 256,345,253
- --------------- ----------- ------------- ----------- -------------
Class B 21,641,528 313,690,762 3,764,258 49,112,660
- --------------- ----------- ------------- ----------- -------------
Issued as
reinvestment
of dividends:
Class A 1,305,811 17,576,215 1,330,022 15,787,364
- --------------- ----------- ------------- ----------- -------------
Class B 130,593 1,741,975 24,816 294,807
- --------------- ----------- ------------- ----------- -------------
Reacquired:
Class A (18,205,834) (268,737,156) (25,762,596) (326,804,513)
- --------------- ----------- ------------- ----------- -------------
Class B (1,270,776) (18,591,663) (310,613) (4,018,256)
- --------------- ----------- ------------- ----------- -------------
44,657,233 $ 647,240,035 (1,012,661) $ (9,282,685)
=========== ============= =========== =============
</TABLE>
FS-103
<PAGE> 244
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the four-year period ended October 31, 1996 and the period
November 5, 1991 (date operations commenced) through October 31, 1992 and for a
Class B share outstanding during each of the years in the two-year period ended
October 31, 1996 and the period September 15, 1994 (date sales commenced)
through October 31, 1994.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 13.65 $ 13.50 $ 12.18 $ 8.88 $ 8.61(a)
- ---------------------------------------------- ----------- ---------- ---------- --------- ---------
Income from investment operations:
Net investment income 0.04(b) 0.01 0.02 0.02 0.03
- ---------------------------------------------- ----------- ---------- ---------- --------- ---------
Net gains on securities (both realized and
unrealized) 2.07 0.62 1.31 3.29 0.26
- ---------------------------------------------- ----------- ---------- ---------- --------- ---------
Total from investment operations 2.11 0.63 1.33 3.31 0.29
- ---------------------------------------------- ----------- ---------- ---------- --------- ---------
Less distributions:
Dividends from net investment income (0.01) (0.04) (0.01) (0.01) (0.02)
- ---------------------------------------------- ----------- ---------- ---------- --------- ---------
Distributions from capital gains (0.38) (0.44) -- -- --
- ---------------------------------------------- ----------- ---------- ---------- --------- ---------
Total distributions (0.39) (0.48) (0.01) (0.01) (0.02)
- ---------------------------------------------- ----------- ---------- ---------- --------- ---------
Net asset value, end of period $ 15.37 $ 13.65 $ 13.50 $ 12.18 $ 8.88
============================================== =========== ========== ========== ========= =========
Total return(c) 15.79% 5.24% 10.94% 37.36% 3.36%
============================================== =========== ========== ========== ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,108,395 $ 654,764 $ 708,159 $ 372,282 $ 122,663
============================================== =========== ========== ========== ========= =========
Ratio of expenses to average net assets(d) 1.58%(e)(f) 1.67% 1.64% 1.78% 1.80%(g)
============================================== =========== ========== ========== ========= =========
Ratio of net investment income to average net
assets(h) 0.25%(e) 0.10% 0.22% 0.28% 0.30%(g)
============================================== =========== ========== ========== ========= =========
Portfolio turnover rate 66% 68% 67% 62% 41%
============================================== =========== ========== ========== ========= =========
Average brokerage commission rate(i) $ 0.0192 N/A N/A N/A N/A
============================================== =========== ========== ========== ========= =========
</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) Calculated using average shares outstanding.
(c) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(d) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets before fee waivers and expense reimbursements are 1.60%, 1.68%
and 1.89% (annualized), respectively for 1996, 1995 and 1992.
(e) Ratios are based on average net assets of $894,828,456.
(f) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been
1.57%.
(g) Annualized.
(h) After fee waivers and expense reimbursements. Ratios of net investment
income to average net assets before fee waivers and expense reimbursements
are 0.22%, 0.09% and 0.22% (annualized), respectively for 1996, 1995 and
1992.
(i) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 13.54 $ 13.49 $ 13.42
- ----------------------------------------------------------------------------------- ---------- --------- ---------
Income from investment operations:
Net investment income (loss) (0.07) (a) (0.09) (0.01)
- ----------------------------------------------------------------------------------- ---------- --------- ---------
Net gains on securities (both realized and unrealized) 2.04 0.61 0.08
- ----------------------------------------------------------------------------------- ---------- --------- ---------
Total from investment operations 1.97 0.52 0.07
- ----------------------------------------------------------------------------------- ---------- --------- ---------
Less distributions:
Dividends from net investment income -- (0.03) --
- ----------------------------------------------------------------------------------- --------- --------- ---------
Distributions from capital gains (0.38) (0.44) --
- ----------------------------------------------------------------------------------- --------- --------- ---------
Total distributions (0.38) (0.47) --
- ----------------------------------------------------------------------------------- --------- --------- ---------
Net asset value, end of period $ 15.13 $ 13.54 $ 13.49
=================================================================================== ========= ========= =========
Total return(b) 14.88% 4.35% 0.52%
=================================================================================== ========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 368,355 $ 51,964 $ 4,833
=================================================================================== ========= ========= =========
Ratio of expenses to average net assets(c) 2.35% (d)(e) 2.55% 2.53%(f)
=================================================================================== ========= ========= =========
Ratio of net investment income (loss) to average net assets(g) (0.53)% (d) (0.78)% (0.67)%(f)
=================================================================================== ========= ========= =========
Portfolio turnover rate 66% 68% 67%
=================================================================================== ========= ========= =========
Average brokerage commission rate(h) $ 0.0192 N/A N/A
=================================================================================== ========= ========= =========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and for periods less than
one year, total returns are not annualized.
(c) After fee waivers and expense reimbursements. Ratios of expenses to average
net assets before fee waivers are 2.37% and 2.56%, respectively for 1996 and
1995.
(d) Ratios are based on average net assets of $203,465,249.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(f) Annualized.
(g) After fee waivers and expense reimbursements. Ratios of net investment
income (loss) to average net assets before fee waivers are (0.55%) and
(0.79)%, respectively for 1996 and 1995.
(h) Disclosure requirement beginning with the Fund's fiscal year ending October
31, 1996.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
FS-104
