<PAGE> 1
AIM INTERNATIONAL
EQUITY FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 1997
<PAGE> 2
-------------------------------------------------
AIM INTERNATIONAL EQUITY FUND
For shareholders who seek
long-term growth of capital.
The Fund invests in
a diversified portfolio
of international equity securities
of companies with strong earnings momentum.
-------------------------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM International Equity Fund's performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed without a
sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The performance of the Fund's Class B shares and Class C shares will
differ from that of Class A shares due to differences in sales charge
structure and Fund expenses.
o Class C shares commenced sales on August 4, 1997.
o During the year ended October 31, 1997, the Fund paid distributions on
Class A and Class B shares of $0.449 and $0.432 per share, respectively.
Class C shares did not receive a distribution.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
o International investing presents certain risks not associated with investing
solely in the U.S. These include risks relating to fluctuations in the
value of the U.S. dollar relative to the value of other currencies, the
custody arrangements made for the Fund's foreign holdings, differences in
accounting, political risks, and the lesser degree of public information
required to be provided by non-U.S. companies.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Standard & Poor's Corporation (S&P) is a credit-rating agency. The Standard
& Poor's Composite Index of 500 Stocks (S&P 500) is a group of unmanaged
securities widely regarded by investors to be representative of the stock
market in general. Results shown assume the reinvestment of dividends.
o Lipper Analytical Services, Inc., is an independent mutual fund performance
monitor. The unmanaged Lipper International Fund Index represents an
average of the performance of the 30 largest international mutual funds.
o The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded primarily industrial stocks.
o The Europe, Australia, and Far East Index (EAFE) is a group of unmanaged
foreign securities tracked by Morgan Stanley Capital International.
o The NASDAQ (National Association of Securities Dealers Automated Quotation
system) Composite Index is a group of more than 4,500 unmanaged
over-the-counter securities widely regarded by investors to be
representative of the small- and medium-sized company stock universe.
o An investment cannot be made in the indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
The fiscal year ended October 31 experienced no let-up in the
[PHOTO OF volatility in equity markets, and it closed on an unsettling
Charles T. note. In late October, in the wake of a currency crisis in
Bauer, Southeast Asia, the stock market experienced its first 10%
Chairman of correction since 1991. On Monday, October 27, the New York
the Board of Stock Exchange closed to deal with market volatility for the
THE FUND first time in its history when the Dow Jones Industrial
APPEARS HERE] Average fell 554 points, the index's largest point decline
ever. It is important to note that in percentage terms, this
was a drop of 7.18%, far smaller than the 22.61% decline that
occurred October 19, 1987. Fortunately, this time the market
snapped back, and the Dow regained 337 points the next day. As
of this writing, markets continue to recover.
Many investment managers, including AIM, had cautioned that
a correction was inevitable, that the relentless rise in benchmarks like the
Dow could not continue. In less than 12 months, the Dow had climbed from 6010
on October 14, 1996, to reach its all-time high of 8259 on August 6, 1997.
When markets become overvalued, no one knows what will precipitate a
decline. No one foresaw that a currency devaluation by Thailand
beginning during the summer would lead to worldwide stock market turmoil.
Despite recent activities, the fiscal year ended October 31 brought domestic
equity investors excellent returns: The Dow was up almost 26%; the broader S&P
500, more than 32%; the NASDAQ small-cap index, 30.46%. International
investments, while positive, weren't as robust; the EAFE Index rose 4.63%. On
the following pages, your Fund managers discuss how your Fund performed in this
market context and their outlook for the future.
REALISTIC EXPECTATIONS
The 1100-point decline in the Dow between early August and late October was the
latest in a series of market breaks. Between mid-March and mid-April of this
year, for example, the Dow dropped almost 10%.
Many investors, including professional fund managers, have become accustomed
to buying on these market breaks because the market has bounced back quickly.
From its 1997 low of 6391 on April 11, the Dow took less than four months to
rise almost 2000 points to its all-time high.
However, this time could be different. Many investors have developed two
unrealistic expectations: first, a belief that stocks can rise more than 20% a
year indefinitely; and second, confidence that the market always rebounds
swiftly from a decline.
Neither notion is historically correct. History tells us that over the long
term, average annual total return for stocks is about 10%, not 20%. And those
of us who have been in this business for many years remember the bear market of
the 1970s, when the market experienced a series of declines and recovery was
very slow.
Nevertheless, there is reason for optimism, including sound fiscal policy
steadily shrinking the federal deficit, stable interest rates, and a strong
economy unharmed by inflation. Despite recent events in Asia, it is difficult
to be pessimistic about the U.S. economy and, indeed, about most of the
developed economies in the world.
We are pleased to send you this report on your Fund. Please contact our
Client Services department at 800-959-4246 if you have any questions or
comments. Don't forget that automated information about your AIM account is
available 24 hours a day on the AIM Investor Line, 800-246-5463. Or visit our
Web site, at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
------------------------------------
Despite recent activities,
the fiscal year ended October 31
brought domestic equity investors
excellent returns.
------------------------------------
<PAGE> 4
The Managers' Overview
EUROPEAN GROWTH RETURNS OFFSET "ASIAN FLU"
A roundtable discussion with the Fund management team for AIM International
Equity Fund about the fiscal year ended October 31, 1997.
Q. WORLD EQUITY MARKETS HAD A VOLATILE YEAR IN 1997. HOW DID THE FUND PERFORM
DURING THE REPORTING PERIOD?
A. The Fund posted another period of solid performance. Total return was
11.43% for Class A shares and 10.61% for Class B shares for the fiscal
year ended October 31, 1997 (Class C shares commenced sales on August 4,
1997). Comparatively, the Morgan Stanley Capital International (MSCI)
Europe, Australia and Far East Index (EAFE) of foreign stocks gained just
4.63% during the reporting period. The Fund's net assets grew $792
million to $2.27 billion at the end of the reporting period.
Q. WHAT WERE THE MAJOR INFLUENCES ON THE FUND'S PORTFOLIO DURING THE PAST 12
MONTHS?
A. We continue to see more of a global economy every year. Around the world
inflation was relatively tame and interest rates remained low, an
attractive combination during the reporting period, which provided an
excellent economic environment for equities.
European markets had an outstanding year. Six of the 10 best
performing markets in the world during the reporting period were in
Europe. Latin America also posted solid performance during the fiscal
year, although its returns were tempered by global market volatility in
the final week of the reporting period.
Unfortunately, the same cannot be said for the Far East. Japan and the
Asian Tigers had a very difficult time, which was reflected in the poor
performance of those markets during the reporting period.
Q. WHAT CAUSED THE EXCELLENT MARKET RETURNS IN EUROPE?
A. There were two major factors at work in European markets. The first was
the ongoing economic restructuring, which we have talked about for quite
some time. But during the fiscal year we saw the economic returns caused
by the restructuring gain considerable momentum. Europe remains an area
with fairly cheap valuations, especially when compared to the United
States. More importantly, earnings growth in Europe also continued to be
strong.
The second major stimulus on European markets was the introduction of
real investing for the first time to European households. Individual
investors in Europe recently have discovered the benefits of investing in
equities. Their investment represents a large pool of retirement savings.
Europeans are becoming more educated about the advantages of investing in
their stock markets, and we think demand for European equities will
continue to grow.
Eight of the Fund's 10 largest holdings are in continental Europe or
the United Kingdom. Two of the portfolio's top three holdings specialize
in household furnishings and appliances: Philips Electronics, a Dutch
company that is the Fund's largest holding, and Electrolux B-F, a Swedish
company that is the Fund's third-largest holding. The European oil and
gas refining sector is represented by two large holdings: the French
company Elf Aquitaine, the portfolio's fifth-largest holding, and British
Petroleum, the Fund's ninth- largest holding.
Q. WHAT CAUSED THE ECONOMIC TURBULENCE IN THE PACIFIC RIM?
A. Simply put, the emerging markets in countries like Thailand, Malaysia,
Indonesia, and the Philippines grew too quickly for their size. New
construction of office buildings and factories far outstripped demand,
and the debt used to finance the construction burgeoned. When cash flow
became a problem, the markets in that region went into a tailspin. The
markets in these countries are very small, and it doesn't take much to
move those markets either up or down.
The first warning sign came when Thailand devalued its currency in
July. Everything came to a head on October 23 when the Hong Kong market
plunged 10.4%. The so-called "Asian Flu"--which was how market analysts
termed the economic turmoil in the Far East--caused severe drops all over
the world during the last five
================================================================================
MORNINGSTAR RATINGS (CLASS A SHARES)
As of 11/30/97
- --------------------------------------------------------------------------------
Funds in
International
Period Rating Category
Overall **** N/A
5 Years **** 266
3 Years **** 659
================================================================================
*Morningstar proprietary ratings reflect risk-adjusted performance through
November 30, 1997. The ratings are subject to change every month. Ratings are
calculated from the funds' three-, five-, and 10-year returns (with fee
adjustments) in excess of 90-day Treasury bill returns, and a risk factor that
reflects performance below 90-day T-bills. The top 10% of the funds in a rating
category receive five stars, the next 22.5% receive four stars, the middle 35%
receive three stars, the next 22.5% receive two stars, and the bottom 10%
receive one star.
--------------------------------
Around the world
inflation was relatively tame
and interest rates
remained low, an attractive
combination for equities.
--------------------------------
2 See important fund and index disclosures inside front cover.
<PAGE> 5
PORTFOLIO COMPOSITION
As of October 31, 1997, based on net assets
<TABLE>
<CAPTION>
======================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 COUNTRIES
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Philips Electronics N.V. (Netherlands) 1.20% 1. United Kingdom 15.19%
2. Societe Generale (France) 1.04 2. Japan 14.52
3. Electrolux B-F (Sweden) 1.03 3. France 11.74
4. Railtrack Group PLC (UK) 0.99 4. Netherlands 6.57
5. Elf Aquitaine S.A. (France) 0.96 5. Germany 5.81
6. NTT Data Communications Systems Co. (Japan) 0.92 6. Switzerland 4.23
7. Novartis A.G. (Switzerland) 0.92 7. Hong Kong 4.14
8. Portugal Telecom S.A. (Portugal) 0.90 8. Mexico 4.13
9. British Petroleum Co. PLC (UK) 0.89 9. Italy 3.92
10. Rohm Co., Ltd. (Japan) 0.89 10. Canada 2.86
<CAPTION>
======================================================================================
TOP 10 INDUSTRIES
- --------------------------------------------------------------------------------------
<S> <C>
1. Banks - Major Regional 7.64%
2. Telephone 5.05
3. Electronics - Component Distribution 4.43
4. Oil & Gas - Refining & Marketing 4.25
5. Manufacturing - Diversified 3.46
6. Services - Commercial & Consultation 3.39
7. Computers Software/Services 3.01
8. Healthcare - Drugs 2.82
9. Retail - Food Chains 2.66
10. Office Equipment & Supplies 2.64
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
======================================================================================
</TABLE>
days of the reporting period, including the 554-point drop in the Dow
Jones Industrial Average on October 27.
Q. HOW DID THE TURMOIL IN THOSE MARKETS AFFECT THE FUND?
A. Fortunately, we had lowered the portfolio's weightings in Asia prior to
October's troubles. We began 1997 with 17% of the portfolio in Asia, and
that figure was around 6% at the end of the reporting period. We got
completely out of the Thai market six months ago, Malaysia two months
ago, and had extremely small percentages in Indonesia and the Philippines
at the end of the fiscal year. We also have reduced the Fund's holdings
in Hong Kong from about 10% at the start of the fiscal year to about 4%
at the end of the reporting period.
Our earnings discipline was very helpful in our exit from those
markets in the Pacific Rim. The earnings in most of the companies in that
region were on a downward trend prior to the October market drop, and our
discipline dictated that it was time to sell those holdings.
Q. WHAT WAS THE ECONOMIC SITUATION IN JAPAN?
A. Unfortunately, the second-largest economy in the world was still in the
grips of a major recession during the reporting period. Japan also was
affected by the "Asian Flu" because a number of Japanese banks had
investments and outstanding loans to their Asian neighbors. However,
because of the size and maturity of the Japanese market, many Japanese
companies are global, rather than regional, players.
Q. YOU MENTIONED THAT YOU HAVE REDUCED THE FUND'S EXPOSURE IN THE FAR EAST.
WHERE HAVE YOU PUT THAT MONEY TO WORK?
A. The portfolio's holdings in Latin America increased dramatically so that
9% of the Fund was invested there at the end of the reporting period. The
markets in Brazil, Colombia, Mexico, and other countries in the region
were enjoying an excellent year until they, too, caught the "Asian Flu"
in the last week of the reporting period. Still, in U.S. dollars Brazil
was up over 18%, Colombia up 45%, and Mexico up 37% during the reporting
period. The Mexican market and economy continue to progress quite nicely,
and we've been increasing the portfolio's weighting there in companies
such as Coca-Cola FEMSA.
We also raised our holdings of European securities as we reduced
holdings in Asia; 68% of the Fund's holdings were in European securities
at the end of the reporting period. This was the portfolio's largest
weighting in Europe in the Fund's five-year existence.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND IN THE NEAR TERM?
A. We are still very positive on Europe, and very hesitant on the Pacific
Rim. Conditions worldwide remain very good for equities, although it is
unrealistic to expect continued equity returns of 20% or more. Things may
continue to worsen in Asia before those markets experience a recovery, so
we do not anticipate our Asian weightings increasing any time soon. In
Europe, though, we believe there will be faster earnings growth with
better valuations than in the United States, because Europe's
cash-to-price earnings, price-to-book, price-to-dividend, and P/E ratios
all are lower than in the U.S. The economic outlook in Latin America
seems positive as well.
It is important to remember that what happened in October in Asia
should have little bearing on U.S. markets. The economic indicators in
the U.S. remain positive, and that is good for markets around the world
because they often take their lead from the U.S. As long as we continue
to see the combination of low inflation and low interest rates around the
globe, the short-term outlook for global equities will remain promising.
See important fund and index disclosures inside front cover. 3
<PAGE> 6
Long-Term Performance
AIM International Equity Fund vs. Benchmark Indexes
The chart below compares your Fund to benchmark indexes. It is intended to give
you a general idea of how your Fund performed compared to the stock market over
the period 4/7/92 to 10/31/97. It is important to understand the difference
between your Fund and an index. Your Fund's total return is shown with a sales
charge and includes fund expenses and management fees. An index measures the
performance of hypothetical portfolios, in this case the Europe, Australia, and
Far East Index and the Lipper International Fund Index. Unlike your Fund, these
indexes are not managed; therefore, there are no sales charges, expenses, or
fees. You cannot invest in an index. But if you could buy all the securities
that make up a particular index, you would incur expenses that would affect the
return on your investment.
GROWTH OF A $10,000 INVESTMENT
================================================================================
AVERAGE ANNUAL TOTAL RETURN
As of 10/31/97. Including sales charges.
CLASS A SHARES
Inception (4/7/92) 13.12%
5 Years 14.34
3 Years 8.65
1 Year 5.33*
*11.43% excluding sales charge.
CLASS B SHARES
Inception (9/15/94) 8.83%
3 Years 9.03
1 Year 5.61*
*10.61% excluding sales charge.
CLASS C SHARES
Inception (8/4/97) -8.69%*
*-7.77% excluding sales charge.
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AIM INTERNATIONAL EQUITY FUND, LIPPER INTERNATIONAL EUROPE, AUSTRALIA, AND
CLASS A SHARES FUND INDEX FAR EAST INDEX
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
4/7/92 $ 9,454 $10,000 $10,000
10/92 9,610 9,600 9,843
10/93 13,200 12,870 13,572
10/94 14,644 14,351 14,981
10/95 15,411 14,284 14,970
10/96 17,844 16,090 16,587
10/97 19,884 18,238 17,403
======================================================================================
</TABLE>
Past performance is no guarantee of comparable future results.
Your Fund's total return includes sales charges, expenses, and management fees.
For Fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover. Source: Towers Data Systems
HYPO--Registered Trademark--.
<PAGE> 7
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-91.55%
ARGENTINA-2.07%
Banco de Galicia y Buenos Aires
S.A. de C.V.-ADR
(Banks-Regional) 354,880 $ 8,600,295
- ---------------------------------------------------------------
Banco Rio de La Plata S.A.
(Banks-Money Center)(a) 415,000 4,357,500
- ---------------------------------------------------------------
Perez Companc S.A.-Class B (Oil
& Gas-Refining & Marketing) 1,763,181 11,044,194
- ---------------------------------------------------------------
Telefonica de Argentina S.A.-ADR
(Telephone) 240,600 6,766,875
- ---------------------------------------------------------------
YPF Sociedad Anonima-ADR (Oil-
International Integrated) 508,200 16,262,400
- ---------------------------------------------------------------
47,031,264
- ---------------------------------------------------------------
AUSTRALIA-1.22%
Boral Ltd. (Engineering &
Construction) 4,080,000 10,731,032
- ---------------------------------------------------------------
Coca-Cola Amatil Ltd.
(Beverages-Non-Alcoholic) 813,536 6,121,675
- ---------------------------------------------------------------
QBE Insurance Group Ltd.
(Insurance-Property-Casualty) 1,870,277 8,746,561
- ---------------------------------------------------------------
QBE Insurance Group Ltd.-Bonus
Shares
(Insurance-Property-Casualty) 467,569 2,130,741
- ---------------------------------------------------------------
27,730,009
- ---------------------------------------------------------------
AUSTRIA-0.77%
OMV A.G. (Oil & Gas-Refining &
Marketing) 66,000 9,383,113
- ---------------------------------------------------------------
VA Technologie A.G. (Engineering
& Construction) 45,700 8,109,128
- ---------------------------------------------------------------
17,492,241
- ---------------------------------------------------------------
BELGIUM-1.17%
Barco Industries (Manufacturing-
Diversified) 41,000 7,909,040
- ---------------------------------------------------------------
Colruyt S.A. (Retail-Food
Chains) 14,600 7,832,442
- ---------------------------------------------------------------
UCB S.A.
(Manufacturing-Diversified) 3,100 10,711,631
- ---------------------------------------------------------------
26,453,113
- ---------------------------------------------------------------
BRAZIL-1.97%
Companhia Energetica de Minas
Gerais (Electric Companies) 173,000 6,904,622
- ---------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras - Preferred
(Oil & Gas-Exploration &
Production) 30,271 5,628,951
- ---------------------------------------------------------------
Telecomunicacoes Brasileiras
S.A.-Telebras-ADR (Telephone) 124,500 12,636,750
- ---------------------------------------------------------------
Telecomunicacoes de Sao Paulo
S.A.-TELESP-Preferred
(Telephone) 39,000 10,188,217
- ---------------------------------------------------------------
Uniao de Bancos Brasileiros
S.A.-GDR (Banks-Regional)(a) 343,000 9,346,750
- ---------------------------------------------------------------
44,705,290
- ---------------------------------------------------------------
CANADA-2.86%
Bank of Montreal (Banks-Money
Center) 118,000 5,094,760
- ---------------------------------------------------------------
Canadian National Railway Co.
(Railroads) 170,000 9,169,375
- ---------------------------------------------------------------
Canadian Natural Resources Ltd.
(Oil & Gas-Exploration &
Production)(a) 335,000 9,745,627
- ---------------------------------------------------------------
Canadian Pacific, Ltd.
(Railroads) 307,000 9,152,438
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Magna International, Inc.-Class
A (Machinery-Diversified) 101,900 $ 6,716,933
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Communications Equipment) 124,700 11,184,031
- ---------------------------------------------------------------
Suncor, Inc. (Oil-International
Integrated) 380,000 13,683,613
- ---------------------------------------------------------------
64,746,777
- ---------------------------------------------------------------
CHILE-0.65%
Cia. de Telecomunicaciones de
Chile S.A.-ADR (Telephone) 263,925 7,323,919
- ---------------------------------------------------------------
Quinenco S.A.-ADR (Financial-
Diversified)(a) 513,900 7,515,788
- ---------------------------------------------------------------
14,839,707
- ---------------------------------------------------------------
DENMARK-0.84%
Novo Nordisk A/S-Class B (Health
Care/Drugs-Generic & Other) 176,600 19,113,428
- ---------------------------------------------------------------
FINLAND-0.78%
Enso Oy (Paper & Forest
Products) 560,000 5,315,034
- ---------------------------------------------------------------
Nokia Oy A.B.-Class A
(Telecommunications-
Cellular/Wireless) 141,000 12,319,528
- ---------------------------------------------------------------
17,634,562
- ---------------------------------------------------------------
FRANCE-11.74%
Accor S.A. (Lodging-Hotels) 63,200 11,767,312
- ---------------------------------------------------------------
Alcatel Alsthom
(Manufacturing-Diversified) 160,000 19,305,681
- ---------------------------------------------------------------
AXA S.A. (Insurance-Multi-Line) 132,000 9,039,137
- ---------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 250,000 11,051,879
- ---------------------------------------------------------------
Cap Gemini Sogeti S.A.
(Computers-Software &
Services) 162,000 12,862,827
- ---------------------------------------------------------------
Carrefour Supermarche S.A.
(Retail-Food Chains) 7,500 3,913,665
- ---------------------------------------------------------------
Compagnie Francaise d'Etudes et
de Construction Technip (Oil &
Gas-Refining & Marketing) 86,000 9,109,522
- ---------------------------------------------------------------
Elf Aquitaine S.A. (Oil &
Gas-Refining & Marketing) 180,500 22,342,477
- ---------------------------------------------------------------
Essilor International
(Manufacturing-Specialized) 24,940 6,658,449
- ---------------------------------------------------------------
Etablissements Economiques du
Casino Guichard-Perrachon
(Retail-Food Chains) 195,000 10,817,839
- ---------------------------------------------------------------
Lafarge S.A. (Engineering &
Construction) 138,500 8,653,474
- ---------------------------------------------------------------
Legrand S.A. (Housewares) 30,500 5,678,845
- ---------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 34,800 15,915,122
- ---------------------------------------------------------------
Promodes (Retail-Food Chains) 28,000 9,116,110
- ---------------------------------------------------------------
Renault S.A. (Automobiles)(a) 465,000 12,938,500
- ---------------------------------------------------------------
Renault S.A. (Automobiles)
(Acquired 07/31/97; cost
$5,810,539)(a)(b) 210,000 5,843,193
- ---------------------------------------------------------------
Rexel S.A. (Distributors-Food &
Health) 23,200 6,153,686
- ---------------------------------------------------------------
Rhone-Poulenc-Class A
(Chemicals-Diversified) 270,000 11,772,201
- ---------------------------------------------------------------
Schneider S.A. (Housewares) 160,000 8,543,319
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Societe BIC S.A. (Office
Equipment & Supplies) 222,000 $ 15,186,790
- ---------------------------------------------------------------
Societe Generale (Banks-Major
Regional) 177,000 24,241,321
- ---------------------------------------------------------------
Sodexho S.A.
(Services-Commercial &
Consumer) 9,200 4,588,636
- ---------------------------------------------------------------
Total S.A.-Class B (Oil &
Gas-Refining & Marketing) 111,000 12,315,694
- ---------------------------------------------------------------
Valeo S.A. (Automobile Parts &
Equipment) 128,500 8,570,008
- ---------------------------------------------------------------
266,385,687
- ---------------------------------------------------------------
GERMANY-5.81%
Adidas A.G. (Footwear) 42,000 6,084,129
- ---------------------------------------------------------------
Adidas A.G. (Footwear) (Acquired
04/11/97; cost $8,533,263)(b) 81,000 11,733,678
- ---------------------------------------------------------------
Allianz A.G.
(Insurance-Multi-Line) 23,500 5,239,353
- ---------------------------------------------------------------
Bayerische Vereinsbank A.G.
(Banks-Major Regional) 187,000 10,857,259
- ---------------------------------------------------------------
Commerzbank A.G. (Banks-Major
Regional) 295,000 10,019,740
- ---------------------------------------------------------------
Continental A.G. (Automobile
Parts & Equipment) 285,000 6,800,883
- ---------------------------------------------------------------
Deutsche Bank A.G. (Banks-Major
Regional) 170,500 11,166,372
- ---------------------------------------------------------------
Dresdner Bank A.G. (Banks-Major
Regional) 240,000 9,823,787
- ---------------------------------------------------------------
Henkel KGaA
(Chemicals-Diversified) 105,000 5,456,208
- ---------------------------------------------------------------
Mannesmann A.G.
(Machinery-Diversified) 24,250 10,249,949
- ---------------------------------------------------------------
Merck KGaA (Health
Care/Drugs-Generic & Other) 290,000 10,759,137
- ---------------------------------------------------------------
SAP A.G. (Computers-Software &
Services) 27,000 7,751,909
- ---------------------------------------------------------------
SAP A.G.-Preferred
(Computers-Software &
Services) 27,000 8,049,758
- ---------------------------------------------------------------
Schering A.G. (Health
Care/Drugs-Generic & Other) 94,000 9,119,749
- ---------------------------------------------------------------
VEBA A.G.
(Manufacturing-Diversified) 155,000 8,648,358
- ---------------------------------------------------------------
131,760,269
- ---------------------------------------------------------------
HONG KONG-4.14%
Asia Satellite
Telecommunications Holdings
Ltd. (Telecommunications-
Cellular/Wireless) 1,000,000 2,405,743
- ---------------------------------------------------------------
Asia Satellite
Telecommunications Holdings
Ltd.-ADR (Telecommunications-
Cellular/Wireless) 174,500 4,078,938
- ---------------------------------------------------------------
Cheung Kong (Holdings) Ltd.
(Land Development) 904,000 6,284,680
- ---------------------------------------------------------------
China Telecom Ltd.-ADR
(Telecommunications-Cellular &
Wireless)(a) 179,700 5,817,788
- ---------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 9,772,000 11,375,283
- ---------------------------------------------------------------
First Pacific Co. Ltd.
(Distributors-Food & Health) 11,493,908 7,247,339
- ---------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
(Natural Gas) 9,280,960 17,525,967
- ---------------------------------------------------------------
HSBC Holdings PLC (Banks-Major
Regional) 490,000 11,090,991
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Retail-Food Chains) 2,552,000 17,659,186
- ---------------------------------------------------------------
New World Infrastructure Ltd.
(Services-Commercial &
Consumer)(a) 2,968,400 5,874,218
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HONG KONG-(CONTINUED)
Sun Hung Kai Properties Ltd.
(Land Development) 628,100 $ 4,630,628
- ---------------------------------------------------------------
93,990,761
- ---------------------------------------------------------------
INDONESIA-0.39%
Gulf Indonesia Resources Ltd.
(Oil-International
Integrated)(a) 250,000 5,250,000
- ---------------------------------------------------------------
PT Indosat (Telephone) 933,000 2,102,809
- ---------------------------------------------------------------
PT Indosat-ADR (Telephone) 63,500 1,504,156
- ---------------------------------------------------------------
8,856,965
- ---------------------------------------------------------------
IRELAND-0.35%
Elan Corp. PLC-ADR (Health
Care/Drugs-Generic & Other)(a) 158,800 7,920,150
- ---------------------------------------------------------------
ISRAEL-0.38%
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care/Drugs-Generic & Other) 186,800 8,732,900
- ---------------------------------------------------------------
ITALY-3.92%
Assicurazioni Generali
(Insurance-Multi-Line) 508,500 11,353,396
- ---------------------------------------------------------------
Credito Italiano S.p.A.
(Banks-Major Regional) 6,200,000 16,596,810
- ---------------------------------------------------------------
Ente Nazionale Idrocarburi
S.p.A. (Oil & Gas-Refining &
Marketing) 2,050,000 11,586,799
- ---------------------------------------------------------------
Fiat S.p.A. (Automobiles) 3,300,000 10,469,167
- ---------------------------------------------------------------
Istituto Mobiliare Italiano
S.p.A. (Banks-Major Regional) 825,000 7,467,395
- ---------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications-
Cellular/Wireless) 3,800,000 14,028,352
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 2,777,777 17,375,463
- ---------------------------------------------------------------
88,877,382
- ---------------------------------------------------------------
JAPAN-14.52%
Advantest Corp. (Electronics-
Instrumentation) 249,700 20,644,080
- ---------------------------------------------------------------
Bridgestone Corp. (Automobile
Parts & Equipment) 477,000 10,304,944
- ---------------------------------------------------------------
Canon, Inc. (Office Equipment &
Supplies) 797,000 19,337,266
- ---------------------------------------------------------------
Denso Corp. (Automobile Parts &
Equipment) 370,000 7,993,353
- ---------------------------------------------------------------
Fuji Photo Film Co. (Leisure
Time-Products) 530,000 19,200,665
- ---------------------------------------------------------------
Hitachi Cable, Ltd. (Metal
Fabricators) 1,254,000 8,335,688
- ---------------------------------------------------------------
Honda Motor Co., Ltd.
(Automobiles) 610,000 20,527,628
- ---------------------------------------------------------------
Hoya
Corp.(Manufacturing-Specialized) 236,000 8,196,759
- ---------------------------------------------------------------
Ibiden Co., Ltd.
(Electronics-Component
Distributors) 1,205,000 20,024,927
- ---------------------------------------------------------------
Kyocera
Corp.(Electronics-Component
Distributors) 71,000 4,064,728
- ---------------------------------------------------------------
Matsushita Electric Industrial
Co. Ltd. (Electrical
Equipment) 569,000 9,550,312
- ---------------------------------------------------------------
Minebea Co. Ltd.
(Electronics-Component
Distributors) 1,614,000 16,093,062
- ---------------------------------------------------------------
Murata Manufacturing Co., Ltd.
(Electronics-Component
Distributors) 326,000 13,218,779
- ---------------------------------------------------------------
Nippon Telegraph & Telephone
Corp. (Telephone) 23,200 19,662,651
- ---------------------------------------------------------------
Nippon Television Network
(Broadcasting-Television,
Radio & Cable) 26,530 9,434,848
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
NTT Data Communications Systems Co.
(Computers-Software &
Services) 4,500 $ 21,499,792
- ---------------------------------------------------------------
Ricoh Corp. Ltd. (Office
Equipment & Supplies) 1,095,000 14,102,617
- ---------------------------------------------------------------
Rohm Co. (Electronics-Component
Distributors) 209,000 20,665,559
- ---------------------------------------------------------------
SMC Corp.(Machinery-Diversified) 100,000 8,641,462
- ---------------------------------------------------------------
Sony Corp.
(Electronics-Component
Distributors) 234,000 19,423,847
- ---------------------------------------------------------------
TDK Corp. (Electrical Equipment) 244,000 20,233,652
- ---------------------------------------------------------------
Tokyo Electron Ltd.
(Electronics-Semiconductors) 367,100 18,301,620
- ---------------------------------------------------------------
329,458,239
- ---------------------------------------------------------------
MEXICO-4.13%
Cifra S.A. de C.V.
(Retail-General Merchandise) 5,637,000 9,747,943
- ---------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR
(Beverages-Non-Alcoholic) 320,500 13,841,594
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-Class B
(Beverages-Alcoholic) 2,350,050 16,535,832
- ---------------------------------------------------------------
Grupo Industrial Maseca S.A. de
CV- Class B (Foods) 6,469,600 6,249,703
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 374,200 11,600,200
- ---------------------------------------------------------------
Kimberly-Clark de Mexico, S.A.
de C.V.-Class A (Paper &
Forest Products) 3,260,000 14,288,014
- ---------------------------------------------------------------
Panamerican Beverages,
Inc.-Class A
(Beverages-Non-Alcoholic) 609,200 18,885,200
- ---------------------------------------------------------------
TV Azteca, S.A. de C.V.-ADR
(Broadcasting-Television,
Radio & Cable)(a) 136,200 2,604,825
- ---------------------------------------------------------------
93,753,311
- ---------------------------------------------------------------
NETHERLANDS-6.57%
Akzo Nobel N.V.
(Chemicals-Diversified) 75,000 13,215,297
- ---------------------------------------------------------------
ASM Lithography Holding N.V.
(Machinery-Diversified)(a) 65,000 4,720,577
- ---------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 357,800 8,422,076
- ---------------------------------------------------------------
Getronics N.V.
(Computers-Software &
Services) 292,000 9,640,587
- ---------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food Chains) 426,000 10,905,073
- ---------------------------------------------------------------
Koninklijke Nutricia Verenigde
Bedrijven N.V. (Foods) 153,000 4,373,680
- ---------------------------------------------------------------
Koninklijke Pakhoed N.V.
(Shipping) 323,000 10,580,891
- ---------------------------------------------------------------
Oce-Van Der Grinten N.V. (Office
Equipment & Supplies) 60,000 6,845,223
- ---------------------------------------------------------------
Philips Electronics N.V.
(Household Furniture &
Appliances) 358,000 28,027,814
- ---------------------------------------------------------------
Randstad Holdings N.V.
(Services-Commercial &
Consumer) 257,500 10,278,779
- ---------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil-
International Integrated) 178,000 9,415,710
- ---------------------------------------------------------------
Stork N.V.
(Manufacturing-Diversified) 135,000 5,840,845
- ---------------------------------------------------------------
Vendex International N.V.
(Retail-General Merchandise) 215,000 11,738,347
- ---------------------------------------------------------------
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (Publishing) 332,000 7,866,083
- ---------------------------------------------------------------
Wolters Kluwer N.V. (Specialty
Printing) 58,000 7,121,916
- ---------------------------------------------------------------
148,992,898
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NORWAY-0.65%
Petroleum Geo-Services A.S.A.
(Oil-International
Integrated)(a) 215,000 $ 14,821,423
- ---------------------------------------------------------------
PHILIPPINES-0.44%
Metro Pacific Corp.
(Manufacturing-Diversified) 45,013,850 2,996,691
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co. (Telephone) 168,960 4,170,381
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co.- ADR (Telephone) 119,200 2,890,600
- ---------------------------------------------------------------
10,057,672
- ---------------------------------------------------------------
PORTUGAL-1.14%
Electricidade de Portugal,
S.A.-ADR (Electric
Companies)(a) 140,800 4,919,200
- ---------------------------------------------------------------
Portugal Telecom S.A.
(Telephone) 510,000 20,924,936
- ---------------------------------------------------------------
25,844,136
- ---------------------------------------------------------------
SINGAPORE-0.87%
City Developments Ltd. (Land
Development) 1,600,000 6,704,762
- ---------------------------------------------------------------
DBS Land Ltd. (Land Development) 4,096,000 6,969,702
- ---------------------------------------------------------------
Overseas Union Bank Ltd.
(Banks-Major Regional) 1,846,800 6,156,000
- ---------------------------------------------------------------
19,830,464
- ---------------------------------------------------------------
SPAIN-2.00%
Banco Bilbao Vizcaya, S.A.
(Banks-Major Regional) 432,000 11,552,073
- ---------------------------------------------------------------
Endesa S.A. (Electric Companies) 501,000 9,436,585
- ---------------------------------------------------------------
Iberdrola S.A. (Electric
Companies) 745,000 8,911,116
- ---------------------------------------------------------------
Telefonica de Espana (Telephone) 565,000 15,419,330
- ---------------------------------------------------------------
45,319,104
- ---------------------------------------------------------------
SWEDEN-2.75%
Electrolux A.B. (Household
Furniture & Appliances) 290,900 24,080,161
- ---------------------------------------------------------------
Hennes & Mauritz A.B.-Class B
(Retail/Specialty-Apparel) 370,000 15,141,057
- ---------------------------------------------------------------
Sparbanken Sverige A.B.-Class A
(Banks-Major Regional) 530,000 12,029,533
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 250,000 11,062,500
- ---------------------------------------------------------------
62,313,251
- ---------------------------------------------------------------
SWITZERLAND-4.23%
Adecco S.A. (Services-Commercial
& Consumer) 30,000 9,534,012
- ---------------------------------------------------------------
Ciba Specialty Chemicals A.G.
(Chemicals-Specialty)(a) 122,000 11,980,004
- ---------------------------------------------------------------
Clariant A.G.
(Chemicals-Specialty) 19,200 14,767,649
- ---------------------------------------------------------------
Credit Suisse Group (Banks-Major
Regional) 82,300 11,593,412
- ---------------------------------------------------------------
Holderbank Financiere Glarus
A.G.-Class B
(Construction-Cement &
Aggregates) 12,100 9,738,761
- ---------------------------------------------------------------
Nestle S.A. (Foods) 7,800 10,990,466
- ---------------------------------------------------------------
Novartis A.G. (Health
Care-Diversified) 13,696 21,449,975
- ---------------------------------------------------------------
Zurich
Versicherungs-Gesellschaft
(Insurance-Multi-Line) 14,500 5,985,360
- ---------------------------------------------------------------
96,039,639
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-15.19%
Airtours PLC
(Services-Commercial &
Consumer) 466,450 $ 9,234,521
- -------------------------------------------------------------------
Amersham International PLC
(Health Care/Drugs-Generic &
Other) 215,000 8,269,420
- -------------------------------------------------------------------
Barclays PLC (Banks-Major
Regional) 500,000 12,524,404
- -------------------------------------------------------------------
Blue Circle Industries PLC
(Construction-Cement &
Aggregates) 1,570,000 9,219,236
- -------------------------------------------------------------------
Bodycote International PLC
(Chemicals-Specialty) 410,000 7,105,775
- -------------------------------------------------------------------
British Aerospace PLC
(Aerospace/Defense) 425,000 11,280,352
- -------------------------------------------------------------------
British Petroleum Co. PLC (Oil &
Gas-Refining & Marketing) 1,410,000 20,722,897
- -------------------------------------------------------------------
Compass Group PLC
(Services-Commercial &
Consumer) 970,000 10,342,238
- -------------------------------------------------------------------
Dixons Group PLC
(Retail-Specialty) 1,110,000 12,980,248
- -------------------------------------------------------------------
EMAP PLC (Publishing) 625,000 8,970,720
- -------------------------------------------------------------------
General Electric Co. PLC
(Manufacturing-Diversified) 1,769,800 11,305,541
- -------------------------------------------------------------------
GKN PLC
(Manufacturing-Diversified) 530,000 11,888,704
- -------------------------------------------------------------------
Granada Group PLC (Leisure Time-
Products) 435,000 5,999,130
- -------------------------------------------------------------------
Hays PLC (Services-Commercial &
Consumer) 1,050,050 12,332,050
- -------------------------------------------------------------------
Kingfisher PLC
(Retail-Department Stores) 825,000 11,875,953
- -------------------------------------------------------------------
Ladbroke Group PLC (Leisure
Time-Products) 4,325,000 19,374,238
- -------------------------------------------------------------------
Lloyds TSB Group PLC
(Banks-Major Regional) 570,000 7,124,565
- -------------------------------------------------------------------
Misys PLC (Services-Commercial &
Consumer) 250,000 6,302,048
- -------------------------------------------------------------------
Next PLC (Retail-General
Merchandise) 1,010,000 12,031,145
- -------------------------------------------------------------------
Pearson PLC (Specialty Printing) 950,000 12,432,128
- -------------------------------------------------------------------
Provident Financial PLC
(Consumer Finance) 942,400 10,909,670
- -------------------------------------------------------------------
Railtrack Group PLC (Shipping) 1,450,000 23,183,987
- -------------------------------------------------------------------
Rentokil Initial PLC
(Services-Commercial &
Consumer) 2,760,000 11,113,416
- -------------------------------------------------------------------
Royal & Sun Alliance Insurance
Group PLC
(Insurance-Multi-Line) 1,350,000 12,944,261
- -------------------------------------------------------------------
Siebe PLC (Electronics-Component
Distributors) 370,000 7,107,788
- -------------------------------------------------------------------
Smiths Industries PLC
(Machinery-Diversified) 256,000 3,715,210
- -------------------------------------------------------------------
Tarmac PLC (Engineering &
Construction) 8,709,800 16,950,926
- -------------------------------------------------------------------
Unilever PLC (Foods) 2,064,000 15,375,169
- -------------------------------------------------------------------
Vodafone Group PLC
(Telecommunications-
Cellular/Wireless) 1,865,000 10,169,262
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
WPP Group PLC (Services-
Advertising/Marketing) 2,575,000 $ 11,772,562
- ---------------------------------------------------------------
344,557,564
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 2,077,258,206
- ---------------------------------------------------------------
PRINCIPAL
AMOUNT
FOREIGN CONVERTIBLE BONDS-1.55%
FRANCE-0.40%
AXA-UAP (Insurance-Multi-Line),
Conv. Sr. Deb., 4.50%,
01/01/99(c) FRF 33,885,000 8,973,144
- -------------------------------------------------------------------
GERMANY-0.41%
Volkswagen International Finance
N.V. (Automobiles), Conv. Gtd.
Notes, 3.00%, 01/24/02 $ 7,880,000 9,278,700
- -------------------------------------------------------------------
HONG KONG-0.12%
New World Infrastructure Ltd.
(Services-Commercial &
Consumer), Conv. Bonds, 5.00%,
07/15/01 (Acquired
04/10/97-04/11/97; cost
$2,056,313)(b) $ 1,750,000 1,653,750
- -------------------------------------------------------------------
New World Infrastructure Ltd.
(Services-Commercial &
Consumer), Conv. Bonds, 5.00%,
07/15/01 $ 1,150,000 1,086,750
- -------------------------------------------------------------------
2,740,500
- -------------------------------------------------------------------
ITALY-0.43%
Pirelli S.p.A. (Electrical
Equipment), Conv. Bonds,
5.00%, 12/31/98(c) ITL 10,062,964,600 9,658,782
- -------------------------------------------------------------------
JAPAN-0.19%
Ricoh Co., Ltd. (Office
Equipment & Supplies), Conv.
Bonds, 0.35%, 03/31/03(c) JPY 395,000,000 4,348,774
- -------------------------------------------------------------------
Total Foreign Convertible
Bonds 34,999,900
- -------------------------------------------------------------------
REPURCHASE AGREEMENT-4.92%(d)
SBC Warburg Inc., 5.40%,
11/03/1997(e) 111,732,336 111,732,336
- -------------------------------------------------------------------
TOTAL INVESTMENTS-98.02% 2,223,990,442
- -------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.98% 45,037,322
- -------------------------------------------------------------------
NET ASSETS-100.00% $ 2,269,027,764
===================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debenture
FRF - French Franc
GDR - Global Depository Receipt
Gtd. - Guaranteed
ITL - Italian Lira
JPY - Japanese Yen
Sr. - Senior
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. 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 10/31/97 was $19,230,621 which represented
0.85% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(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 10/31/97 with a maturing value of
$300,135,000. Collateralized by $295,632,000 U.S. Government obligations,
5.25% to 8.875% due 12/31/97 to 08/15/02 with an aggregate market value at
10/31/97 of $306,259,515.
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,836,302,147) $2,223,990,442
- ------------------------------------------------------------
Foreign currencies, at market value
(cost $42,794,789) 43,045,352
- ------------------------------------------------------------
Receivables for:
Investments sold 14,136,654
- ------------------------------------------------------------
Capital stock sold 44,111,370
- ------------------------------------------------------------
Dividends and interest 4,967,585
- ------------------------------------------------------------
Investment for deferred compensation plan 26,785
- ------------------------------------------------------------
Other assets 75,088
- ------------------------------------------------------------
Total assets 2,330,353,276
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 49,044,157
- ------------------------------------------------------------
Capital stock reacquired 8,290,939
- ------------------------------------------------------------
Deferred compensation 26,785
- ------------------------------------------------------------
Accrued advisory fees 1,796,123
- ------------------------------------------------------------
Accrued administrative services fees 7,878
- ------------------------------------------------------------
Accrued directors' fees 6,184
- ------------------------------------------------------------
Accrued distribution fees 1,044,063
- ------------------------------------------------------------
Accrued transfer agent fees 367,018
- ------------------------------------------------------------
Accrued operating expenses 742,365
- ------------------------------------------------------------
Total liabilities 61,325,512
- ------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,269,027,764
============================================================
NET ASSETS:
Class A $1,577,389,921
============================================================
Class B $ 678,808,929
============================================================
Class C $ 12,828,914
============================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 94,802,921
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 41,731,824
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 788,620
============================================================
Class A:
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 16.64
============================================================
OFFERING PRICE PER SHARE:
(Net asset value of $16.64 divided
by 94.50%) $ 17.61
============================================================
Class B:
NET ASSET VALUE AND OFFERING PRICE PER
SHARE $ 16.27
============================================================
Class C:
NET ASSET VALUE AND OFFERING PRICE PER
SHARE $ 16.27
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $4,176,776 foreign
withholding tax) $ 29,139,495
- -----------------------------------------------------------
Interest 4,617,214
- -----------------------------------------------------------
Total investment income 33,756,709
- -----------------------------------------------------------
EXPENSES:
Advisory fees 18,284,107
- -----------------------------------------------------------
Administrative services fees 105,163
- -----------------------------------------------------------
Directors' fees 20,121
- -----------------------------------------------------------
Distribution fees-Class A 4,249,575
- -----------------------------------------------------------
Distribution fees-Class B 5,581,303
- -----------------------------------------------------------
Distribution fees-Class C 13,568
- -----------------------------------------------------------
Custodian fees 1,521,866
- -----------------------------------------------------------
Transfer agent fees-Class A 2,237,953
- -----------------------------------------------------------
Transfer agent fees-Class B 1,303,468
- -----------------------------------------------------------
Transfer agent fees-Class C 5,037
- -----------------------------------------------------------
Other 882,828
- -----------------------------------------------------------
Total expenses 34,204,989
- -----------------------------------------------------------
Less: Advisory fees waived (738,005)
- -----------------------------------------------------------
Expenses paid indirectly (38,529)
- -----------------------------------------------------------
Net expenses 33,428,455
- -----------------------------------------------------------
Net investment income 328,254
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) on sales of:
Investment securities (14,679,896)
- -----------------------------------------------------------
Foreign currencies (1,876,119)
- -----------------------------------------------------------
(16,556,015)
- -----------------------------------------------------------
Net unrealized appreciation of:
Investment securities 192,756,147
- -----------------------------------------------------------
Foreign currencies 438,913
- -----------------------------------------------------------
193,195,060
- -----------------------------------------------------------
Net gain on investment securities and
foreign
currencies 176,639,045
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $176,967,299
===========================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 328,254 $ 1,130,094
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities
and foreign currencies (16,556,015) 43,829,404
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 193,195,060 98,461,748
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 176,967,299 143,421,246
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (1,250,230) (295,965)
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (31,812,536) (18,468,041)
- -----------------------------------------------------------------------------------------------
Class B (11,361,858) (1,875,276)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 363,888,653 350,398,961
- -----------------------------------------------------------------------------------------------
Class B 282,384,176 296,841,074
- -----------------------------------------------------------------------------------------------
Class C 13,462,792 --
- -----------------------------------------------------------------------------------------------
Net increase in net assets 792,278,296 770,021,999
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,476,749,468 706,727,469
- -----------------------------------------------------------------------------------------------
End of period $2,269,027,764 $1,476,749,468
- -----------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,897,861,942 $1,238,126,321
- -----------------------------------------------------------------------------------------------
Undistributed net investment income 5,863,515 1,113,111
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities
and foreign currencies (22,453,519) 42,949,270
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 387,755,826 194,560,766
- -----------------------------------------------------------------------------------------------
$2,269,027,764 $1,476,749,468
===============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
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 operating
series portfolios: AIM International Equity Fund, AIM Global Aggressive Growth
Fund, AIM Global Growth Fund and AIM Global Income Fund. The Fund currently
offers three different classes of shares: Class A shares, Class B shares and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
and Class C shares are sold with a contingent deferred sales charge. Class C
shares commenced sales August 4, 1997. 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 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
10
<PAGE> 13
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. On October 31, 1997,
undistributed net investment income was increased by $5,672,380 and
undistributed net realized gains decreased by $5,672,380 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
$14,969,471 (which may be carried forward to offset future capital gains, if
any) which expires, if not previously utilized, through the year 2005.
F. Expenses--Distribution and transfer agency expenses directly attributable to
a class of shares are charged to that class' operations. All other expenses
which are attributable to more than one class are allocated between the
classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 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, 1997, AIM waived fees of $738,005.
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, 1997, AIM was
reimbursed $105,163 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, 1997,
AFS was paid $1,774,819 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the Class
A, Class B and Class C shares of the Fund. The Company has adopted distribution
plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class
A shares and Class C shares (the "Class A and Class C Plan"), and the Fund's
Class B shares (the "Class B Plan") (collectively, the "Plans"). The Fund,
pursuant to the Class A Plan and Class C Plan, pays AIM Distributors
compensation at the annual rate of 0.30% of the average daily net assets of
Class A shares and 1.00% of the average daily net assets of Class C shares. The
Class A Plan and the Class C Plan are designed to compensate AIM Distributors
for certain promotional and other sales related costs, and to
11
<PAGE> 14
implement a dealer incentive program which provides 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. 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, 1997, the Class A shares and Class B shares, and the period August 4, 1997
through October 31, 1997 the Class C shares paid AIM Distributors $4,249,575,
$5,581,303 and $13,568, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,172,508 from sales of the Class A
shares of the Fund during the year ended October 31, 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 year ended October 31, 1997,
AIM Distributors received commissions of $91,984 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, 1997, the Fund incurred legal fees of $9,514
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund. For the year ended
October 31, 1997, the Fund's expenses were reduced by $7,691. The Fund received
reductions in transfer agency fees from AFS (an affiliate of AIM) and reductions
in custodian fees of $25,598 and $5,240, respectively, under expense offset
arrangements. The effect of the above arrangements resulted in reductions of the
Fund's total expenses of $38,529 during the year ended October 31, 1997.
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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of i) $325,000,000 or ii) the limit set by
its prospectus for borrowings. During the year ended October 31, 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 0.05% on the unused balance
of the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 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, 1997 was
$1,525,690,965 and $943,814,904, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of October 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $463,067,699
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (82,747,088)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $380,320,611
=========================================================
Cost of investments for tax purposes is $1,843,669,831.
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 105,291,824 $ 1,764,668,535 41,055,911 $ 601,559,902
- -----------------------------------------------------------------------------------
Class B 21,599,075 352,871,134 21,641,528 313,690,762
- -----------------------------------------------------------------------------------
Class C* 1,372,281 23,795,456 -- --
- -----------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 2,035,986 31,231,975 1,305,811 17,576,215
- -----------------------------------------------------------------------------------
Class B 707,879 10,688,975 130,593 1,741,975
- -----------------------------------------------------------------------------------
Class C* -- -- -- --
- -----------------------------------------------------------------------------------
Reacquired:
Class A (84,633,652) (1,432,011,857) (18,205,834) (268,737,156)
- -----------------------------------------------------------------------------------
Class B (4,913,096) (81,175,933) (1,270,776) (18,591,663)
- -----------------------------------------------------------------------------------
Class C* (583,661) (10,332,664) -- --
- -----------------------------------------------------------------------------------
40,876,636 $ 659,735,621 44,657,233 $ 647,240,035
===================================================================================
</TABLE>
* Class C commenced sales on August 4, 1997.
12
<PAGE> 15
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the five-year period ended October 31, 1997, for a Class B
share outstanding during each of the years in the three-year period ended
October 31, 1997 and the period September 15, 1994 (date sales commenced)
through October 31, 1994, and for a Class C share outstanding for the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 15.37 $ 13.65 $ 13.50 $ 12.18 $ 8.88
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04(a) 0.04(a) 0.01 0.02 0.02
- --------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.68 2.07 0.62 1.31 3.29
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.72 2.11 0.63 1.33 3.31
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) (0.01) (0.04) (0.01) (0.01)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.43) (0.38) (0.44) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.45) (0.39) (0.48) (0.01) (0.01)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.64 $ 15.37 $ 13.65 $ 13.50 $ 12.18
================================================================================================================================
Total return(b) 11.43% 15.79% 5.24% 10.94% 37.36%
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,577,390 $ 1,108,395 $ 654,764 $ 708,159 $ 372,282
================================================================================================================================
Ratio of expenses to average net assets(c) 1.47%(d)(e) 1.58% 1.67% 1.64% 1.78%
================================================================================================================================
Ratio of net investment income to average net assets(f) 0.24%(d) 0.25% 0.10% 0.22% 0.28%
================================================================================================================================
Portfolio turnover rate 50% 66% 68% 67% 62%
================================================================================================================================
Average brokerage commission rate(g) $ 0.0168 $ 0.0192 N/A N/A N/A
================================================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
1.51%, 1.60% and 1.68, respectively for 1997-1995.
(d) Ratios are based on average net assets of $1,416,524,861.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements are 0.20%, 0.22% and 0.09%, respectively for 1997-1995.
(g) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
<TABLE>
<CAPTION>
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) (0.09)(a) (0.07)(a) (0.09) (0.01)
- --------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.66 2.04 0.61 0.08
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.57 1.97 0.52 0.07
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- -- (0.03) --
- --------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.43) (0.38) (0.44) --
- --------------------------------------------------------------------------------------------------------------------
Total distributions (0.43) (0.38) (0.47) --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.27 $ 15.13 $ 13.54 $ 13.49
====================================================================================================================
Total return(b) 10.61% 14.88% 4.35% 0.52%
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 678,809 $ 368,355 $ 51,964 $ 4,833
====================================================================================================================
Ratio of expenses to average net assets(c) 2.25%(d)(e) 2.35% 2.55% 2.53%(f)
====================================================================================================================
Ratio of net investment income (loss) to average net
assets(g) (0.53)%(d) (0.53)% (0.78)% (0.67)%(f)
====================================================================================================================
Portfolio turnover rate 50% 66% 68% 67%
====================================================================================================================
Average brokerage commission rate(h) $ 0.0168 $ 0.0192 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) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
2.28%, 2.37% and 2.56%, respectively for 1997-1995.
(d) Ratios are based on average net assets of $558,130,289.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been 2.24%.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements are (0.57)%, (0.55)% and (0.79)%, respectively for 1997-1995.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
13
<PAGE> 16
<TABLE>
<CAPTION>
1997
--------
<S> <C>
CLASS C:
Net asset value, beginning of period $ 17.64
- ----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a)
- ----------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.35)
- ----------------------------------------------------------------------
Total from investment operations (1.37)
- ----------------------------------------------------------------------
Less distributions:
Dividends from net investment income --
- ----------------------------------------------------------------------
Distributions from net realized gains --
- ----------------------------------------------------------------------
Total distributions --
- ----------------------------------------------------------------------
Net asset value, end of period $ 16.27
======================================================================
Total return(b) (7.77)%
======================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 12,829
======================================================================
Ratio of expenses to average net assets(c) 2.27%(d)(e)
======================================================================
Ratio of net investment income (loss) to average net
assets(f) (0.55)%(d)
======================================================================
Portfolio turnover rate 50%
======================================================================
Average brokerage commission rate(g) $ 0.0168
======================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
return is not annualized.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements is
2.30% (annualized).
(d) Ratio is annualized and based on average net assets of $5,564,501.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been 2.26%.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements is (0.59)% (annualized).
(g) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
14
<PAGE> 17
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 International Equity Fund (a portfolio
of AIM International Funds, Inc.), including the schedule
of investments, as of October 31, 1997, 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 and periods in the
five-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and 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 and financial highlights. Our procedures
included confirmation of securities owned as of October
31, 1997, 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, 1997, 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 and periods in the five-year period
then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
15
<PAGE> 18
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 Withheld/
Director/Matter Votes For Against Abstentions
--------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 130,433,380 N/A 3,798,959
Bruce L. Crockett........................................... 130,563,964 N/A 3,668,375
Owen Daly II................................................ 130,421,284 N/A 3,811,055
Carl Frischling............................................. 130,515,713 N/A 3,716,626
Robert H. Graham............................................ 130,587,498 N/A 3,644,841
John F. Kroeger............................................. 130,446,846 N/A 3,785,493
Lewis F. Pennock............................................ 130,506,142 N/A 3,726,197
Ian W. Robinson............................................. 130,446,093 N/A 3,786,246
Louis S. Sklar.............................................. 130,573,480 N/A 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>
16
<PAGE> 19
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President
Owen Daly II and Secretary TRANSFER AGENT
Director
Cortland Trust Inc. Gary T. Crum A I M Fund Services, Inc.
Senior Vice President P.O. Box 4739
Jack Fields Houston, TX 77210-4739
Formerly Member of the Dana R. Sutton
U.S. House of Representatives Vice President and Assistant Treasurer CUSTODIAN
Carl Frischling Robert G. Alley State Street Bank & Trust Company
Partner Vice President 225 Franklin Street
Kramer, Levin, Naftalis & Frankel Boston, MA 02110
Melville B. Cox
Robert H. Graham Vice President COUNSEL TO THE FUND
President and Chief Executive Officer
A I M Management Group Inc. Jonathan C. Schoolar Ballard Spahr
Vice President Andrews & Ingersoll
John F. Kroeger 1735 Market Street
Formerly Consultant P. Michelle Grace Philadelphia, PA 19103
Wendell & Stockel Associates, Inc. Assistant Secretary
COUNSEL TO THE DIRECTORS
Lewis F. Pennock Nancy L. Martin
Attorney Assistant Secretary Kramer, Levin, Naftalis & Frankel
919 Third Avenue
Ian W. Robinson Ofelia M. Mayo New York, NY 10022
Consultant; Formerly Executive Assistant Secretary
Vice President and DISTRIBUTOR
Chief Financial Officer Kathleen J. Pflueger
Bell Atlantic Management Assistant Secretary A I M Distributors, Inc.
Services, Inc. 11 Greenway Plaza
Samuel D. Sirko Suite 100
Louis S. Sklar Assistant Secretary Houston, TX 77046
Executive Vice President
Hines Interests Stephen I. Winer AUDITORS
Limited Partnership Assistant Secretary
KPMG Peat Marwick LLP
Mary J. Benson 700 Louisiana
Assistant Treasurer Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM International Equity Fund paid ordinary dividends in the amount of $0.017
per share to shareholders of Class A shares during its tax year ended October
31, 1997. Of this amount 0% is eligible for the dividends received deduction for
corporations. The Fund also distributed long-term capital gains of $0.432 per
share for Class A and Class B shares during its tax year ended October 31, 1997.
<PAGE> 20
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH OF CAPITAL
AIM Advisor International Value Fund
[PHOTO OF AIM Blue Chip Fund
11 GREENWAY PLAZA AIM Global Growth Fund
APPEARS HERE] AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Shares
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in the *AIM Aggressive Growth Fund was closed to new investors on
mutual fund industry since 1976 and managed approximately June 5, 1997. For more complete information about any AIM
$82 billion in assets for more than 3.6 million shareholders, Fund(s), including sales charges and expenses, ask your
including individual investors, corporate clients, and financial financial consultant or securities dealer for a free
institutions as of September 30, 1997. The AIM Family of prospectus(es). Please read the prospectus(es) carefully
Funds--Registered Trademark-- is distributed nationwide, and before you invest or send money.
AIM today ranks among the nation's top 15 mutual fund
companies in assets under management, according to Lipper INVEST WITH DISCIPLINE-SM-
Analytical Services, Inc.
[AIM LOGO APPEARS HERE] -----------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
-----------------
</TABLE>
