<PAGE> 1
[AIM LOGO THE AIM FAMILY OF FUNDS--Registered Trademark--
APPEARS HERE]
AIM INTERNATIONAL EQUITY FUND
(A SERIES PORTFOLIO OF AIM INTERNATIONAL FUNDS, INC.)
PROSPECTUS
FEBRUARY 20, 1998
AIM INTERNATIONAL EQUITY FUND (the "Fund") is a diversified, series
investment portfolio of AIM International Funds, Inc. (the
"Company"), an open-end, series, management investment company. The
Fund seeks to provide long-term growth of capital by investing in a
diversified portfolio of international equity securities, the issuers
of which are considered by the Fund's investment advisor to have
strong earnings momentum. There is no assurance that the Fund will
attain its investment objective.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read
and retained for future reference. A Statement of Additional
Information, dated February 20, 1998, has been filed with the United
States Securities and Exchange Commission (the "SEC") and is
incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the
Company at P.O. Box 4739, Houston, Texas 77210-4739 or by calling
(800) 347-4246. The SEC maintains a Web site at http://www.sec.gov
that contains the Statement of Additional Information, material
incorporated by reference, and other information regarding the Fund.
Additional information about the Fund may also be obtained on the Web
at http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY.................................. 2 INVESTOR'S GUIDE TO THE AIM FAMILY OF
THE FUND................................. 4 FUNDS--Registered Trademark--.......... A-1
Table of Fees and Expenses............. 4 Introduction to The AIM Family of
Financial Highlights................... 6 Funds............................... A-1
Performance............................ 8 How to Purchase Shares................. A-1
Investment Objective and Policies...... 9 Terms and Conditions of Purchase of the
Hedging Strategies and Other Investment AIM Funds........................... A-2
Techniques.......................... 10 Special Plans.......................... A-9
Risk Factors........................... 12 Exchange Privilege..................... A-11
Investment Restrictions................ 13 How to Redeem Shares................... A-13
Management............................. 13 Determination of Net Asset Value....... A-17
Organization of the Company............ 16 Dividends, Distributions and Tax
Matters............................. A-18
General Information.................... A-20
APPLICATION INSTRUCTIONS................. B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND. AIM International Funds, Inc. (the "Company") is a Maryland
corporation organized as an open-end, series, management investment company.
Currently the Company offers six separate series portfolios. This Prospectus
relates to AIM INTERNATIONAL EQUITY FUND (the "Fund"). The Company also offers
other classes of shares in five other investment portfolios, AIM ASIAN GROWTH
FUND ("ASIAN FUND"), AIM EUROPEAN DEVELOPMENT FUND ("EUROPEAN FUND"), AIM GLOBAL
AGGRESSIVE GROWTH FUND ("AGGRESSIVE GROWTH FUND"), AIM GLOBAL GROWTH FUND
("GROWTH FUND") and AIM GLOBAL INCOME FUND ("INCOME FUND"), (collectively, with
AIM INTERNATIONAL EQUITY FUND, the "Funds") each of which pursues unique
investment objectives. All such other Funds offer multiple classes of shares to
different types of investors. The shares of the other Funds of the Company have
different sales charges and expenses, which may affect performance. To obtain
information about ASIAN FUND, EUROPEAN FUND, AGGRESSIVE GROWTH FUND, GROWTH
FUND, or INCOME FUND, call (800) 347-4246. See "General Information."
The investment objective of the Fund is to provide long-term growth of capital
by investing in a diversified portfolio of international equity securities the
issuers of which are considered by the Fund's investment advisor to have strong
earnings momentum. Any income realized by the Fund will be incidental and will
not be an important criterion in the selection of portfolio securities. Under
normal market conditions, the Fund will invest at least 70% of its total assets
in marketable equity securities (including common and preferred stock,
depositary receipts for stock and other securities having the characteristics of
stock) of companies located outside the United States ("foreign companies")
which are listed on a recognized foreign securities exchange or traded in a
foreign over-the-counter market. The Fund may also invest up to 20% of its total
assets in securities exchangeable for or convertible into equity securities of
foreign companies which are listed on a recognized foreign securities exchange
or traded on a foreign over-the-counter market. Under normal market conditions,
the Fund's assets will be invested in the securities of foreign companies
located in at least four countries outside the United States. The Fund will
emphasize investment in foreign companies in the developed countries of Western
Europe and the Pacific Basin and may also invest to a limited extent in the
securities of companies located in developing countries in various regions of
the world.
Over the past 30 years, securities of foreign companies ("foreign securities")
have offered generally higher levels of capital growth than similar investments
in the United States. The Fund's investment advisor believes that investment in
foreign securities offers significant potential for long-term capital
appreciation. Also, foreign equity markets often do not move in step with each
other or with domestic equity markets. The Fund's investment advisor believes
that a portfolio invested in a number of markets worldwide should thus achieve
better long-term results for investors than one which is subject to the
movements of a single market.
The Fund intends to achieve its investment objective by using a fully managed
investment policy providing for the selection of securities. The Fund will also
seek to spread its investments among countries or regions in accordance with the
investment advisor's assessment of prospects for relative economic growth,
political conditions, currency exchange fluctuations and other relevant factors.
For more complete information on the Fund's investment objective, policies and
strategies, see "Investment Objective and Policies" and "Hedging Strategies and
Other Investment Techniques."
RISK FACTORS. THE FUND IS DESIGNED FOR LONG-TERM INVESTORS SEEKING
INTERNATIONAL DIVERSIFICATION AND WILLING TO BEAR THE RISKS ASSOCIATED WITH
INVESTMENT IN FOREIGN SECURITIES, INCLUDING CURRENCY RISK, POLITICAL AND
ECONOMIC RISK, REGULATORY RISK AND MARKET RISK. IT IS NOT DESIGNED AS A COMPLETE
INVESTMENT PROGRAM. FOR A DISCUSSION OF THESE RISKS, SEE "RISK FACTORS."
MANAGEMENT. A I M Advisors, Inc. ("AIM") serves as the Fund's investment
advisor pursuant to an investment advisory agreement (the "Advisory Agreement").
AIM, together with its subsidiaries, manages or advises over 50 investment
company portfolios encompassing a broad range of investment objectives. Under
the terms of the Advisory Agreement, AIM supervises all aspects of the
2
<PAGE> 3
Fund's operations and provides investment advisory services to the Fund. As
compensation for these services, AIM receives a fee based on the Fund's average
daily net assets. Under an administrative services agreement (the
"Administrative Services Agreement"), AIM is reimbursed by the Fund for its
costs of performing, or arranging for the performance of, certain accounting and
other administrative services for the Fund. Under a transfer agency and service
agreement ("the Transfer Agency and Service Agreement"), A I M Fund Services,
Inc. ("AFS"), AIM's wholly owned subsidiary and a registered transfer agent,
receives a fee for its provision of transfer agency, dividend distribution and
disbursement and shareholder services for the Fund.
MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A, Class B or Class C
shares of the Fund which are offered by this Prospectus at an offering price
that reflects differing sales charges and expense levels. See "Terms and
Conditions of Purchase of the AIM Funds -- Sales Charges and Dealer
Concessions."
Class A Shares -- Shares are offered at net asset value plus any
applicable initial sales charge.
Class B Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a maximum contingent deferred
sales charge of 5% on certain redemptions made within six years of the date
on which a purchase was made. Class B shares automatically convert to Class
A shares of the Fund eight years following the end of the calendar month in
which a purchase was made. Class B shares are subject to higher expenses
than Class A shares.
Class C Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a contingent deferred sales charge
of 1% on certain redemptions made within one year of the date such shares
were purchased. Class C shares are subject to higher expenses than Class A
shares.
SUITABILITY FOR INVESTORS. The Multiple Distribution System permits an
investor to choose the method of purchasing shares that is most beneficial given
the amount of the purchase, the length of time the shares are expected to be
held, whether dividends will be paid in cash or reinvested in additional shares
of the Fund and other circumstances. Investors should consider whether, during
the anticipated life of their investment in the Fund, the accumulated
distribution fees and any applicable contingent deferred sales charges on Class
B shares prior to conversion or Class C shares would be less than the initial
sales charge and accumulated distribution fees on Class A shares purchased at
the same time, and to what extent such differential would be offset by the
higher return on Class A shares. To assist investors in making this
determination, the table under the caption "Table of Fees and Expenses" sets
forth examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial than Class B shares or Class C shares to the
investor who qualifies for reduced initial sales charges, as described below.
Therefore, A I M Distributors, Inc. ("AIM Distributors") intends to reject any
order for purchase of more than $250,000 for Class B shares.
PURCHASING SHARES. Initial investments in any class of shares must be at least
$500 and additional investments must be at least $50. The minimum initial
investment is modified for investments through tax-qualified retirement plans
and accounts initially established with an Automatic Investment Plan. The
distributor of the Fund's shares is A I M Distributors, Inc., P.O. Box 4739,
Houston, Texas 77210-4739. See "How to Purchase Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Fund is one of several mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Fund may be exchanged for shares of other funds in The AIM
Family of Funds in the manner and subject to the policies and charges set forth
herein. See "Exchange Privilege."
REDEEMING SHARES. Holders of Class A shares may redeem all or a portion of
their shares at net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1% may apply to certain redemptions of Class
A shares, where purchases of $1 million or more are made at net asset value. See
"How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Holders of Class B shares may redeem all or a portion of their shares at net
asset value on any business day, less a contingent deferred sales charge for
redemptions made within six years following the date on which a purchase was
made. Class B shares redeemed after six years following the date of purchase
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Holders of Class C shares of the Fund may redeem all or a portion of their
shares at net asset value on any business day, less a 1% contingent deferred
sales charge for redemptions made within one year from the date such shares were
purchased. Class C shares redeemed after one year from the date such shares were
purchased will not be subject to any contingent deferred sales charge. See "How
to Redeem Shares -- Multiple Distribution System."
DISTRIBUTIONS. The Fund declares and pays dividends from net investment
income, if any, and makes distributions of realized capital gains, if any, on an
annual basis. Dividends and distributions of the Fund may be reinvested at net
asset value without payment of a sales charge in the Fund's shares or may be
invested in shares of the other funds in The AIM Family of Funds. See
"Dividends, Distributions and Tax Matters" and "Special Plans."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE> 4
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Fund understand the
various costs that an investor will bear, both directly and indirectly. The fees
and expenses for Class A and Class B shares set forth in the table are based on
the average net assets of the respective classes of the Fund for the year ended
October 31, 1997. The fees and expenses for Class C shares set forth in the
table are based on the estimated average net assets of Class C shares of the
Fund for the period August 4 (date sales commenced) to October 31, 1997. The
rules of the SEC require that the maximum sales charge be reflected in the
table, even though certain investors may qualify for reduced sales charges. See
"How to Purchase Shares."
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchase of shares (as a %
of offering price)...................................... 5.50% None None
Maximum sales load on reinvested dividends and
distributions........................................... None None None
Deferred sales load (as a % of original purchase price or
redemption proceeds, whichever is lower)................ None* 5.00% 1.00%
Redemption fee............................................ None None None
Exchange fee.............................................. None None None
Annual Fund Operating Expenses (as a % of average net
assets)
Management fees** (after fee waivers)..................... 0.89% 0.89% 0.89%
Rule 12b-1 distribution plan payments..................... 0.30% 1.00% 1.00%
Other expenses............................................ 0.28% 0.36% 0.36%
----- ----- -----
Total fund operating expenses**....................... 1.47% 2.25% 2.25%
===== ===== =====
</TABLE>
- ------------
* Purchases of $1 million or more are not subject to an initial sales charge.
HOWEVER, A CONTINGENT DEFERRED SALES CHARGE OF 1% APPLIES TO CERTAIN
REDEMPTIONS MADE WITHIN 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED.
See the Investor's Guide, under the caption "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases."
** If management fees had not been waived, the management fees would have been
0.93% and total fund operating expenses would have been 1.51%, 2.28% and
2.28% for the Class A shares, Class B shares and Class C shares,
respectively.
EXAMPLES. An investor in the Fund would pay the following expenses on a $1,000
investment in Class A shares of the Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 year.................................................... $ 69
3 years................................................... $ 99
5 years................................................... $131
10 years.................................................. $221
</TABLE>
THE EXAMPLES ABOVE ASSUME PAYMENT OF A SALES CHARGE AT THE TIME OF PURCHASE;
ACTUAL EXPENSES MAY VARY FOR PURCHASES OF $1 MILLION OR MORE, WHICH ARE MADE AT
NET ASSET VALUE AND ARE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE FOR 18
MONTHS FOLLOWING THE DATE SUCH SHARES WERE PURCHASED.
An investor in the Fund would pay the following expenses on a $1,000
investment in Class B shares of the Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 year................................................... $ 73
3 years.................................................. $100
5 years.................................................. $140
10 years.................................................. $239*
</TABLE>
An investor in the Fund would pay the following expenses on the same $1,000
investment in Class B shares, assuming no redemption at the end of each time
period.
<TABLE>
<S> <C>
1 year................................................... $ 23
3 years.................................................. $ 70
5 years.................................................. $120
10 years.................................................. $239*
</TABLE>
- ------------
* Reflects the conversion to Class A shares eight years following the end of the
calendar month in which a purchase was made; therefore years nine and ten
reflect Class A expenses.
4
<PAGE> 5
An investor would pay the following expenses on a $1,000 investment in Class C
shares of the Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<S> <C>
1 year.................................................... $33
3 years................................................... $70
</TABLE>
An investor would pay the following expenses on the same $1,000 investment in
Class C shares of the Fund, assuming no redemption at the end of each time
period.
<TABLE>
<S> <C>
1 year.................................................... $23
3 years................................................... $70
</TABLE>
As a result of 12b-1 fees, a long-term shareholder in the Fund may pay more
than the economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. Given the maximum
front-end sales charge applicable to Class A shares and the Rule 12b-1 fees
applicable to Class A shares, Class B shares and Class C shares, it is estimated
that it would require a substantial number of years to exceed the maximum
permissible front-end sales charges.
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF THE FUND'S
ACTUAL OR FUTURE EXPENSES, WHICH MAY BE GREATER OR LESS THAN THOSE SHOWN. In
addition, while the examples assume a 5% annual return, the Fund's actual
performance will vary and may result in an actual return that is greater or less
than 5%. The examples assume reinvestment of all dividends and distributions and
that the percentage amounts for total fund operating expenses remain the same
for each year.
5
<PAGE> 6
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Shown below are per share income and capital changes for a Class A share of
the Fund outstanding during each of the years in the five-year period ended
October 31, 1997, and the period April 7, 1992 (effective date of registration
statement) through October 31, 1992, and for a Class B share of the Fund
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 of the Fund outstanding during the period
August 4, 1997 (date sales commenced) through October 31, 1997. The information
has been audited by KPMG Peat Marwick LLP, independent auditors, whose
unqualified report on the Fund's financial statements and the related notes
appears in the Statement of Additional Information.
<TABLE>
<CAPTION>
PERIOD
APRIL 7, 1992
YEAR ENDED OCTOBER 31, THROUGH
----------------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993 1992
---------- ---------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARE
Net asset value, beginning of period....... $ 15.37 $ 13.65 $ 13.50 $ 12.18 $ 8.88 $ 8.74(h)
Income from investment operations:
Net investment income.................... 0.04(a) 0.04(a) 0.01 0.02 0.02 0.01
Net gains on securities (both realized
and unrealized)........................ 1.68 2.07 0.62 1.31 3.29 0.13
---------- ---------- -------- -------- -------- --------
Total from investment operations......... 1.72 2.11 0.63 1.33 3.31 0.14
---------- ---------- -------- -------- -------- --------
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 $ 8.88
========== ========== ======== ======== ======== ========
Total return(b)............................ 11.43% 15.79% 5.24% 10.94% 37.36% 1.65%
========== ========== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................... $1,577,390 $1,108,395 $654,764 $708,159 $372,282 $122,663
========== ========== ======== ======== ======== ========
Ratio of expenses to average net
assets(c).............................. 1.47%(d)(e) 1.58% 1.67% 1.64% 1.78% 1.85%(i)
========== ========== ======== ======== ======== ========
Ratio of net investment income to average
net assets(f).......................... 0.24%(d) 0.25% 0.10% 0.22% 0.28% 0.27%(i)
========== ========== ======== ======== ======== ========
Portfolio turnover rate.................. 50% 66% 68% 67% 62% 23%
========== ========== ======== ======== ======== ========
Average brokerage commission rate(g)..... $ 0.0168 $ 0.0192 N/A N/A N/A N/A
========== ========== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than 1 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
1.51%, 1.60%, 1.68 and 1.89% (annualized), respectively for 1997-1995 and
1992.
(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%, 0.09% and 0.22% (annualized), respectively
for 1997-1995 and 1992.
(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.
(h)Net asset value at beginning of the period has been restated to reflect a
1.1619 for 1 stock split, effected in the form of a dividend, on May 21,
1992.
(i)Annualized.
6
<PAGE> 7
<TABLE>
<CAPTION>
PERIOD
SEPTEMBER 15,
YEAR ENDED OCTOBER 31, THROUGH
----------------------------------- OCTOBER 31,
1997 1996 1995 1994
-------- -------- ------- -------------
<S> <C> <C> <C> <C>
CLASS B SHARE
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.
7
<PAGE> 8
<TABLE>
<CAPTION>
PERIOD
AUGUST 4,
THROUGH
OCTOBER 31,
1997
-----------
<S> <C>
CLASS C SHARES
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.
- --------------------------------------------------------------------------------
PERFORMANCE
The Fund's performance may be quoted in advertising in terms of total return.
All advertisements of the Fund will disclose the maximum sales charge (including
deferred sales charge) to which investments in the Fund's shares may be subject.
If any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
Standardized total return for Class A shares reflects the deduction of the
maximum initial sales charge at the time of purchase. Standardized total return
for Class B shares reflects the deduction of the maximum applicable contingent
deferred sales charge on a redemption of shares held for the period.
Standardized total return for Class C shares reflects the deduction of a 1%
contingent deferred sales charge, if applicable, on a redemption of shares held
for the period.
The Fund's total return shows its overall change in value, including changes
in share price assuming that all the Fund's dividends and capital gain
distributions are reinvested and that all charges and expenses are deducted. A
cumulative total return reflects the Fund's performance over a stated period of
time. An average annual total return reflects the hypothetical compounded annual
rate of return that would have produced the same cumulative total return if the
Fund's performance had been constant over the entire period. BECAUSE AVERAGE
ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN, INVESTORS
SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR
RESULTS. To illustrate the components of overall performance, the Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses. The stated period for quotations of
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<PAGE> 9
average annual total return will be for periods of one year and the life of the
Fund (commencing as of the effective date of its registration statement).
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such a practice will
have the effect of increasing the Fund's total return.
The performance of the Fund will vary from time to time, and past results are
not necessarily representative of future results. The Fund's performance is a
function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund as well
as by general market conditions. A shareholder's investment in the Fund is not
insured or guaranteed. These factors should be carefully considered by the
investor before making an investment in the Fund.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund, which is a fundamental policy that may
be changed only with the approval of the Fund's shareholders, is to provide
long-term growth of capital by investing in a diversified portfolio of
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum. Any income realized by the Fund will be
incidental and will not be an important criterion in the selection of portfolio
securities. There can be no assurance that the Fund will achieve its objective.
The Board of Directors of the Company reserves the right to change any of the
investment policies, strategies or practices of the Fund, as described below and
elsewhere in this Prospectus and in the Statement of Additional Information,
without approval of the Fund's shareholders, except in those instances in which
shareholder approval is expressly required.
Under normal market conditions the Fund will invest at least 70% of its total
assets in marketable equity securities, including common stock, preferred stock,
depositary receipts for stock and other securities having the characteristics of
stock (such as an equity or ownership interest in a company) of foreign
companies which are listed on a recognized foreign securities exchange or traded
in a foreign over-the-counter-market. The Fund may satisfy the foregoing
requirement in part by investing in the securities of foreign issuers which are
in the form of American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs"), or other securities representing underlying securities of
foreign issuers. The Fund may also invest up to 20% of its total assets in
securities exchangeable for or convertible into equity securities of foreign
companies which are listed on a recognized foreign securities exchange or traded
in a foreign over-the-counter market.
In managing the Fund, AIM seeks to apply to a diversified portfolio of
international equity securities substantially the same investment strategy which
it applies to several of its other managed portfolios which have similar
investment objectives but which invest primarily in United States equities
markets. The Fund will utilize to the extent practicable a fully managed
investment policy providing for the selection of securities which meet certain
quantitative standards determined by AIM. AIM reviews carefully the earnings
history and prospects for growth of each company considered for investment by
the Fund. It is expected that the Fund's portfolio, when fully invested, will
generally be comprised of two basic categories of foreign companies: (1) "core"
companies, which AIM considers to have experienced consistent long-term growth
in earnings and to have strong prospects for outstanding future growth, and (2)
companies that AIM believes are currently experiencing a greater than
anticipated increase in earnings.
If a particular foreign company meets the quantitative standards determined by
AIM, its securities may be acquired by the Fund regardless of the location of
the company or the percentage of the Fund's investments in the company's country
or region. However, AIM will also consider other factors in making investment
decisions for the Fund, including such factors as the prospects for relative
economic growth among countries or regions, economic and political conditions,
currency exchange fluctuations, tax considerations and the liquidity of a
particular security.
AIM recognizes that often there is less public information about foreign
companies than is available in reports supplied by domestic companies, that
foreign companies are not subject to uniform accounting and financial reporting
standards, and that there may be greater delays experienced by the Fund in
receiving financial information supplied by foreign companies than comparable
information supplied by domestic companies. For these and other reasons, AIM
from time to time may encounter greater difficulty applying its disciplined
stock selection strategy to an international equity investment portfolio than to
a portfolio of domestic equity securities.
AIM may invest a portion of the Fund's assets in (i) cash or high-grade
short-term securities, including repurchase agreements, commercial paper, time
deposits and master notes, denominated either in U.S. dollars or foreign
currencies, (ii) U.S. government obligations or investment grade (high quality)
corporate bonds or other debt securities, and (iii) taxable municipal
securities, when such positions are deemed advisable in light of economic or
market conditions or for daily cash management purposes. In addition, AIM may
invest, for temporary defensive purposes, all or substantially all of the Fund's
assets in the securities described above. To the extent that the Fund is
invested to a significant degree in cash, high-grade short-term securities, U.S.
government obligations, investment grade (high quality) corporate bonds or other
debt securities, or taxable municipal securities, its ability to achieve its
investment objective of growth of capital may be adversely affected. Under
normal circumstances, the Fund will invest no more than 20% of the value of its
total assets in high-grade short-term securities. A repurchase agreement is an
instrument under which the Fund acquires ownership of a debt security and the
seller agrees, at the time of the sale, to repurchase the obligation at a
mutually agreed upon time and price, thereby determining the yield during the
Fund's holding period. In the event of a bankruptcy or other default of a seller
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<PAGE> 10
of a repurchase agreement, the Fund could experience both delays in liquidating
the underlying securities and losses, including (a) a possible decline in the
value of the underlying security during the period while the Fund seeks to
enforce its rights thereto, (b) possible reduced levels of income and lack of
access to income during this period and (c) expenses of enforcing its rights.
The Fund intends to enter into repurchase agreements with sellers believed by
AIM to present minimal credit risk. See "Investment Restrictions."
Under normal market conditions, the Fund intends to invest in the securities
of foreign companies located in at least four countries outside the United
States. The Fund will emphasize investment in foreign companies in the developed
countries of Western Europe (such as Germany, France, Switzerland, the
Netherlands and the United Kingdom) and the Pacific Basin (such as Japan, Hong
Kong and Australia), and the Fund may also invest in the securities of companies
located in developing countries (such as Turkey, Malaysia and Mexico) in various
regions of the world. A "developing country" is a country in the initial stages
of its industrial cycle.
Investment in the equity markets of developing countries involves exposure to
securities exchanges that may have substantially less trading volume and greater
price volatility, economic structures that are less diverse and mature, and
political systems that may be less stable than the equity markets of developed
countries. At the present time, AIM does not intend to invest more than 20% of
the Fund's total assets in foreign companies located in developing countries.
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HEDGING STRATEGIES AND OTHER INVESTMENT TECHNIQUES
The Fund may, at such times as AIM deems appropriate and consistent with the
investment objective of the Fund, write (sell) covered put or call options and
may purchase put or call options on its portfolio securities. The Fund may also
purchase and sell (i) options on domestic and foreign securities and currencies,
(ii) stock index options, (iii) stock, currency and interest rate futures, (iv)
options on stock, currency, stock index and interest rate futures and (v)
foreign forward currency exchange contracts. The purpose of such transactions is
to hedge against changes in the market value of the Fund's portfolio securities
caused by fluctuating interest rates, fluctuating currency exchange rates and
changing market conditions, and to close out or offset existing positions in
such options or futures contracts as described below. The Fund will not engage
in such transactions for speculative purposes. The Fund does not intend to hedge
against currency, investment and interest rate risks during the coming year. Any
change to such policy must be submitted by AIM to the Company's Board of
Directors prior to the effectiveness of such change.
To a limited extent the Fund may employ certain investment techniques intended
to provide liquidity for temporary or emergency purposes, provide flexibility in
the purchase of new issues of securities, protect the Fund from a decline in the
market value of its securities and permit the Fund to invest all of its assets.
Those techniques include entering into reverse repurchase agreements, lending
portfolio securities, purchasing securities on a "when-issued" basis, short
sales "against the box" and investing in closed-end investment companies.
OPTIONS. The Fund may purchase put or call options. Such options give the Fund
the right for a fixed period of time to sell (in the case of purchase of a put
option) or to buy (in the case of purchase of a call option) the number of units
of the underlying security or obligation covered by the option at a fixed or
determinable exercise price. Buying a put option hedges against the risk of a
market decline. Buying a call option hedges against a market advance. Prior to
its expiration, a put or call option may be sold in a closing sale transaction.
Gain or loss from such a sale will depend on whether the amount received is more
or less than the premium paid for the option plus the related transaction costs.
The Fund also may write (sell) put or call options, but only if such options
are covered and remain covered as long as the Fund is obligated as a writer of
the option (seller). A call option is "covered" if the Fund owns the underlying
security covered by the call. A put option is "covered" if the Fund's custodian
segregates liquid assets with a value equal to the exercise price of the put
option. If a "covered" call or put option expires unexercised, the writer
realizes a gain in the amount of the premium received. If the covered call
option is exercised, the writer realizes either a gain or loss from the sale or
purchase of the underlying security with the proceeds to the writer being
increased by the amount of the premium. If the covered put option is exercised,
the writer's cost of purchasing the underlying security is reduced by the amount
of the premium received from the initial sale of the put option. Prior to its
expiration, a put or call option may be closed out by means of a purchase of an
identical option. Any gain or loss from such transaction will depend on whether
the amount paid is more or less than the premium received for the option plus
related transaction costs.
The Fund may also purchase and write options in combination with each other to
adjust the risk and return characteristics of certain portfolio security
positions. This technique is commonly referred to as a "collar."
Options are subject to certain risks, including the risk of imperfect
correlation between the option and the Fund's portfolio securities and the risk
that there might not be a liquid secondary market for the option when the Fund
seeks to hedge against adverse market movements. In general, options whose
strike prices are close to their underlying securities' current values will have
the highest trading value, while options whose strike prices are further away
may be less liquid. The liquidity of options may also be affected if options
exchanges impose trading halts, particularly when markets are volatile.
The Fund will not write options if, immediately after such sale, the aggregate
value of the securities or obligations underlying the outstanding options
exceeds 25% of the Fund's total assets. The Fund will not purchase put options
(including options on securities
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<PAGE> 11
indices and futures contracts) if, at the time of investment, the aggregate
premiums paid for such options will exceed 5% of its total assets.
FUTURES AND FORWARD CONTRACTS. Since substantially all of the securities held
by the Fund may be denominated in foreign currencies, the value of the Fund's
portfolio will be affected by changes in exchange rates between currencies
(including the U.S. dollar), as well as by changes in the market value of the
securities themselves. The Fund may enter into interest rate, exchange rate and
currency futures contracts and related options, or it may purchase or sell stock
index futures contracts and related options in order to hedge the value of its
portfolio against changes in market conditions or in exchange rates between
currencies (including the U.S. dollar). Futures contracts obligate the seller to
deliver a specific type of security called for in the contract, at a specified
future time and for a specified price. Futures contracts are traded on U.S. and
foreign exchanges and generally contain standardized strike prices and
expiration dates. Certain futures contracts may be satisfied by actual delivery
of the securities or, more typically, by entering into an offsetting
transaction. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract. In
addition to purchasing or selling futures contracts on currencies and specific
securities, interest rates and exchange rates, the Fund may purchase or sell
stock index futures contracts. A stock index futures contract is an agreement to
take or make delivery of an amount of cash based on the difference between the
value of a stock index at the beginning and at the end of the contract period.
No more than 5% of the Fund's total assets will be committed to initial margin
deposits required pursuant to futures contracts. Percentage investment
limitations on the Fund's investment in options on futures contracts and asset
coverage requirements are set forth above under "Options." Although the Fund is
authorized to invest in futures contracts and related options with respect to
foreign securities, stock indices, interest rates and currencies, it will limit
such investments to those which have been approved by the Commodity Futures
Trading Commission for investment by United States investors.
In attempting to manage its currency exposure, the Fund may buy and sell
currencies, either in the spot (cash) market or in the forward market (through
forward contracts generally expiring within one year). The Fund may also enter
into forward contracts with respect to a specific purchase or sale of a
security, or with respect to its portfolio positions generally. When the Fund
purchases a security for settlement in the near future, it may immediately
purchase in the forward market the currency needed to pay for and settle the
purchase. By entering into a forward contract with respect to the specific
purchase or sale of a security denominated in a foreign currency, the Fund can
secure an exchange rate between the trade and settlement dates for that purchase
or sale transaction. This practice is sometimes referred to as "transaction
hedging." Unlike futures contracts, forward contracts are generally individually
negotiated and privately traded. A forward contract obligates the seller to sell
a specific security or currency at a specified price on a future date, which may
be any fixed number of days from the date of the contract. The Fund may enter
into transaction hedging forward contracts with respect to all or a substantial
portion of its trades. The Fund will not enter into a position hedging
commitment if, as a result thereof, the Fund would have more than 10% of the
value of its total assets committed to such contracts. The Fund will not enter
into a forward contract with a term of more than one year.
There are risks associated with the use of futures and forward contracts and
options thereon for hedging purposes. During certain market conditions, sales of
futures contracts may not completely offset a decline or rise in the value of
the Fund's portfolio securities or currency against which the futures or forward
contract or options thereon are being sold. In the futures and options on
futures markets, it may not always be possible to execute a buy or sell order at
the desired price, or to close out an open position due to market conditions,
limits on open positions and/or daily price fluctuations. Risks in the use of
futures contracts and options thereon also result from the possibility that
changes in the market value of securities or currency may differ substantially
from the changes anticipated by the Fund when hedged positions were established.
Successful use of futures and forward contracts and options thereon is dependent
upon AIM's ability to predict correctly movements in the direction of the
applicable markets. No assurance can be given that AIM's judgment in this
respect will be correct. Accordingly, the Fund may lose the expected benefit of
futures and forward transactions and options thereon if markets move in an
unanticipated manner.
OTHER HEDGING TECHNIQUES. For hedging purposes, the Fund may also purchase
foreign currencies in the form of bank deposits as well as other foreign money
market instruments, including, but not limited to, bankers' acceptances,
certificates of deposit, commercial paper, short-term government and corporate
obligations and repurchase agreements.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
institutions believed by the Company's Board of Directors to present minimal
credit risk. A repurchase agreement is an instrument under which the Fund
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement (such as the
sellers' failure to repurchase the obligation in accordance with the terms of
the agreement), a Fund could experience both delays in liquidating the
underlying securities and losses, including: (a) a possible decline in the value
of the underlying security during the period while the Fund seeks to enforce its
rights thereto; (b) possible reduced levels of income and lack of access to
income during this period; and (d) expenses of enforcing its rights. Repurchase
agreements are considered to be loans by the Fund under the Investment Company
Act of 1940, as amended (the "1940 Act"). Repurchase agreements will be secured
by U.S. Treasury securities, U.S. Government agency securities (including, but
not limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper. For additional information on
the use of repurchase agreements, see the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS. The Fund may invest in reverse repurchase
agreements, which involve the sale of securities held by the Fund, with an
agreement that the Fund will repurchase the securities at an agreed upon price
and date. The Fund may em-
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<PAGE> 12
ploy reverse repurchase agreements (i) for temporary emergency purposes, such as
to meet unanticipated net redemptions so as to avoid liquidating other portfolio
securities during unfavorable market conditions; (ii) to cover short-term cash
requirements resulting from the timing of trade settlements; or (iii) to take
advantage of market situations where the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. At the time it enters into a reverse repurchase
agreement, the Fund will segregate liquid assets having a dollar value equal to
the repurchase price. Reverse repurchase agreements are considered borrowings by
the Fund under the 1940 Act. The Fund may enter into reverse repurchase
agreements in amounts not exceeding 33 1/3% of the value of its total assets.
Reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund in lieu of liquidation may decline below the
repurchase price of the securities sold by the Fund which it is obligated to
repurchase. This risk, if encountered, could cause a reduction in the net asset
value of the Fund's shares.
LENDING OF PORTFOLIO SECURITIES. The Fund may from time to time lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions, and receive in
return collateral in the form of cash or securities issued or guaranteed by the
U.S. Government which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. During the
period of the loan, the Fund receives the income on both the loaned securities
and the collateral and thereby increases its yield. In the event that the
borrower defaults on its obligation to return loaned securities because of
insolvency or otherwise, the Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent that the value of
the collateral falls below the market value of the loaned securities.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may
purchase securities on a "when-issued" basis, that is, delivery of and payment
of the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within forty-five days after the date of the
transaction). The Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. The Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. If the Fund purchases a when-issued
security or enters into a delayed delivery agreement, the Fund's custodian bank
will segregate liquid assets in an amount at least equal to the when-issued
commitment or delayed delivery agreement commitment.
SHORT SALES. The Fund may make short sales "against the box." A short sale is
a transaction in which a party sells a security it does not own in anticipation
of a decline in the market value of that security. A short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain securities identical to those sold short without payment of any further
consideration. The Fund will enter into such transactions only to the extent the
aggregate value of all securities sold short does not represent more than 10% of
the Fund's assets at any given time.
ILLIQUID SECURITIES AND RULE 144A SECURITIES. The Fund may invest up to 15% of
its net assets in securities that are illiquid. Illiquid securities include
securities that have no readily available market quotations and cannot be
disposed of promptly (within seven days) in the normal course of business at a
price at which they are valued. Illiquid securities may include securities that
are subject to restrictions on resale because they have not been registered
under the Securities Act of 1933. Unregistered securities may, in certain
circumstances, be resold pursuant to Rule 144A, and thus may or may not
constitute illiquid securities. Limitations on the resale of unregistered
securities may have an adverse effect on their marketability, which may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale, and the risk of
substantial delays in effecting such registrations. The Company's Board of
Directors is responsible for developing and establishing guidelines and
procedures for determining the liquidity of Rule 144A securities on behalf of
the Fund and monitoring AIM's implementation of the guidelines and procedures.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund may invest in other
investment companies to the extent permitted by the 1940 Act, and rules and
regulations thereunder, and, if applicable, exemptive orders granted by the SEC.
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RISK FACTORS
There can be no assurance that the Fund's investment objective will be
attained. The Fund is designed for investors seeking international
diversification, and is not intended as a complete investment program. In
addition, investing in securities of foreign companies generally involves
greater risks than investing in securities of domestic companies. Investors
should consider carefully the following special factors before investing in the
Fund.
CURRENCY RISK. The value of the Fund's foreign investments may be affected by
changes in currency exchange rates. The U.S. dollar value of a foreign security
generally decreases when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and tends to increase when the
value of the U.S. dollar falls against such currency.
POLITICAL AND ECONOMIC RISK. The economies of many of the countries in which
the Fund may invest are not as developed as the United States economy and may be
subject to significantly different forces. Political or social instability,
expropriation or confiscatory taxation, and limitations on the removal of funds
or other assets could also adversely affect the value of the Fund's investments.
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<PAGE> 13
REGULATORY RISK. Foreign companies are generally not subject to the regulatory
controls imposed on United States issuers and, as a consequence, there is
generally less publicly available information about foreign securities than is
available about domestic securities. Foreign companies are not subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the Fund may be reduced by withholding tax at the
source which would reduce dividend income payable to the Fund's shareholders.
MARKET RISK. The securities markets in many of the countries in which the Fund
invests will have substantially less trading volume than the major United States
markets. As a result, the securities of some foreign companies may be less
liquid and experience more price volatility than comparable domestic securities.
There is generally less government regulation and supervision of foreign stock
exchanges, brokers and issuers which may make it difficult to enforce
contractual obligations. In addition, transaction costs in foreign securities
markets are likely to be higher, since brokerage commission rates in foreign
countries are likely to be higher than in the United States. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets. These considerations generally are more of a concern
in developing countries. For example, the possibility of revolution and the
dependence on foreign economic assistance may be greater in these countries than
in developed countries. The management of the Funds seeks to mitigate the risks
associated with these considerations through diversification and active
professional management.
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INVESTMENT RESTRICTIONS
The following restrictions may not be changed without approval of the Fund's
shareholders. The Fund may not:
1. Purchase a security if, as a result, with respect to 75% of the
value of the Fund's total assets, taken at market value, more than 5% of
the value of the Fund's total assets, taken at market value, would be
invested in securities of any one issuer (including repurchase agreements
with any one entity), except securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities and except that the
Fund may purchase securities of other investment companies to the extent
permitted by applicable law or exemptive order.
2. Purchase a security if, as a result, more than 10% of the
outstanding voting securities of any issuer would be held by the Fund,
except that the Fund may purchase securities of other investment companies
to the extent permitted by applicable law or exemptive order.
3. Purchase a security if, as a result, 25% or more of the value of
the Fund's total assets, taken at market value, would be invested in the
securities of issuers having their principal business activities in the
same industry. This restriction does not apply to obligations issued or
guaranteed by the U.S. Government or by any of its agencies or
instrumentalities but will apply to foreign government obligations unless
the SEC permits their exclusion.
4. Borrow money, except that the Fund may borrow from banks (including
the Fund's custodian bank) and enter into reverse repurchase agreements as
a temporary defensive measure for extraordinary or emergency purposes, and
then only in amounts not exceeding 10% of its total assets, taken at market
value, and may pledge amounts of up to 20% of its total assets, taken at
market value, to secure such borrowings. For purposes of this restriction,
collateral arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral arrangements with
respect to initial and variation margin are not deemed to be a pledge of
assets and neither such arrangements nor the purchase and sale of options,
futures or related options shall be deemed to be the issuance of a senior
security. Whenever bank borrowings and the value of the Fund's reverse
repurchase agreements exceed 5% of the value of the Fund's total assets,
the Fund will not make any additional purchases of securities for
investment purposes.
A complete listing of investment restrictions applicable to the Fund, some of
which may be changed by the Board of Directors without shareholder approval, is
contained in the Statement of Additional Information.
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MANAGEMENT
The overall management of the business and affairs of the Fund is vested with
the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Fund and persons or companies furnishing
services to the Fund, including the investment advisory agreement with AIM, the
administrative services agreement with AIM, the agreement with AIM Distributors
regarding distribution of the Fund's shares, the agreement with State Street
Bank and Trust Company as custodian, and the agreement with A I M Fund Services,
Inc. as transfer agent. The day-to-day operations of the Fund are delegated to
the officers of the Company and to AIM, subject always to the objective and
policies of the Fund and to the general supervision of the Board of Directors.
Information concerning the Board of Directors may be found in the Statement of
Additional Information. Certain directors and officers of the Company are
affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the
parent corporation of AIM. AIM Management is a holding company engaged in the
financial services business. AIM Management is an indirect, wholly owned
subsidiary of AMVESCAP PLC, a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. For a discussion of AIM Management and its subsidiaries'
Year 2000 Compliance Project, see "General Information -- Year 2000 Compliance
Project."
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<PAGE> 14
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046, serves as the investment advisor to the Fund pursuant to a
Master Investment Advisory Agreement dated as of February 28, 1997. AIM was
organized in 1976 and, together with its subsidiaries, manages or advises over
50 investment company portfolios encompassing a broad range of investment
objectives.
Under the terms of the Advisory Agreement, AIM supervises all aspects of the
Fund's operations and provides investment advisory services to the Fund. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Fund.
ADMINISTRATOR. AIM and the Company have entered into a Master Administrative
Services Agreement, dated as of February 28, 1997, pursuant to which AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Fund. AIM is entitled to receive from the Fund
reimbursement of its costs or such reasonable compensation as may be approved by
the Board of Directors. Currently, AIM is reimbursed for the services of the
Fund's principal financial officer and his staff, and any expenses related to
such services.
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the Board of Directors,
AIM may take into account sales of shares of the Fund and other funds advised by
AIM in selecting broker-dealers to effect portfolio transactions on behalf of
the Fund.
PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Fund. AIM's investment staff consists of approximately 135
individuals. While individual members of AIM's investment staff are assigned
primary responsibility for the day-to-day management of each of AIM's accounts,
all accounts are reviewed on a regular basis by AIM's Investment Policy
Committee to ensure that they are being invested in accordance with the
accounts' and AIM's investment policies. A. Dale Griffin, III, Clas G. Olsson,
Paul A. Rogge and Barrett K. Sides are primarily responsible for the day-to-day
management of the Fund. Mr. Griffin is Vice President of A I M Capital
Management, Inc. ("AIM Capital"), a wholly owned subsidiary of AIM, and has been
responsible for the Fund since its inception in 1992. He has been associated
with AIM and/or its subsidiaries since 1989 and began working as an investment
professional in 1987. Mr. Olsson is an Investment Officer of AIM Capital and has
been responsible for the Fund since 1997. He has been associated with AIM and/or
its subsidiaries since 1994 and began working as an investment professional in
1994. Prior to 1994, Mr. Olsson was a broker assistant trainee with Merrill
Lynch, Pierce, Fenner & Smith Incorporated. Mr. Rogge is Vice President of AIM
Capital and also has been responsible for the Fund since its inception in 1992.
He has been associated with AIM and/or its subsidiaries since he began working
as an investment professional in 1991. Mr. Sides is Assistant Vice President of
AIM Capital and has been responsible for the Fund since 1995. He has been
associated with AIM and/or its subsidiaries since he began working as an
investment professional in 1990.
FEES AND EXPENSES. For the year ended October 31, 1997, the Fund paid AIM an
amount for its advisory services which represented 0.89% of the Fund's average
daily net assets. Although the fee payable to AIM under the Advisory Agreement
is higher than that paid by most mutual funds which invest in domestic
securities, it is competitive with such fees paid by mutual funds which invest
primarily in foreign securities. The Company believes such fee is justified due
to the higher costs and additional expenses associated with managing and
operating a fund holding primarily foreign equity securities. For the year ended
October 31, 1997, the Fund reimbursed AIM for administrative services costs
pursuant to the Administrative Services Agreement an amount which represented
0.01% of the Fund's average daily net assets. The Class A shares' total expenses
for such year were 1.47% of the Class A shares' average daily net assets. The
Class B shares' total expenses for such year were 2.25% of the Class B shares'
average daily net assets. The Class C shares' total expenses for the period
August 4, 1997 (date sales commenced) through October 31, 1997 were 2.25% of the
Class C shares' average daily net assets.
In addition, the Company and A I M Fund Services, Inc. P.O. Box 4739, Houston,
TX 77210-4739, a wholly owned subsidiary of AIM and registered transfer agent,
have entered into a Transfer Agency and Service Agreement, pursuant to which AFS
provides transfer agency, dividend distribution and disbursement, and
shareholder services to the Fund.
FEE WAIVERS. AIM may from time to time voluntarily waive or reduce its fees,
while retaining its ability to be reimbursed for such fees prior to the end of
each fiscal year. Fee waivers or reductions, other than those contained in the
Advisory Agreement, may be modified or terminated at any time and without notice
to investors. AIM has voluntarily agreed to waive its advisory fees under the
Advisory Agreement in order to achieve the following annual fee structure for
the Fund: 0.95% of the first $500 million of the Fund's average daily net
assets; 0.90% of the next $500 million of the Fund's average daily net assets;
and 0.85% of the Fund's average daily net assets exceeding $1 billion. For the
fiscal year ended October 31, 1997, AIM waived advisory fees for the Fund which
represented 0.04% of the Fund's average daily net assets.
DISTRIBUTOR. The Company has entered into Master Distribution Agreements on
behalf of the Fund (the "Distribution Agreements") with AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, to act as the
distributor of Class A, Class B and Class C shares of the Fund. The address of
A I M Distributors, Inc. is P.O. Box 4739, Houston, Texas 77021-4739. Certain
directors and officers of the Company are affiliated with AIM Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Fund directly and through institutions with whom AIM
Distributors has entered into selected dealer agreements. Under the Distribution
Agreement for the Class B shares, AIM Distributors sells Class B shares at net
asset value subject to a contingent deferred sales charge established by AIM
14
<PAGE> 15
Distributors. AIM Distributors is authorized to advance to institutions through
whom Class B shares are sold a sales commission under schedules established by
AIM Distributors. The Distribution Agreement for the Class B shares provides
that AIM Distributors (or its assignee or transferee) will receive 0.75% (of the
total 1.00% payable under the distribution plan applicable to Class B shares) of
the Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of AIM Distributors. In the event the Class B shares
Distribution Agreement is terminated, AIM Distributors would continue to receive
payments of asset based sales charges in respect of the outstanding Class B
shares attributable to AIM Distributors; provided, however, that a complete
termination of the Class B shares master distribution plan (as defined in the
plan) would terminate all payments to AIM Distributors. Termination of the Class
B shares distribution plan or Distribution Agreement does not affect the
obligation of Class B shareholders to pay Contingent Deferred Sales Charges.
DISTRIBUTION PLANS. Class A and C Plan. The Company has adopted a Master
Distribution Plan applicable to Class A and Class C shares of the Fund (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of the Fund.
Under the Class A and C Plan, the Company may compensate AIM Distributors an
aggregate amount of 0.30% of the average daily net assets of Class A shares of
the Fund on an annualized basis and an aggregate amount of 1.00% of the average
daily net assets of Class C shares of the Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of the Fund. Payments
can also be directed by AIM Distributors to selected institutions who have
entered into service agreements with respect to Class A and Class C shares of
the Fund and who provide continuing personal services to their customers who own
Class A and Class C shares of the Fund. The service fees payable to selected
institutions are calculated at the annual rate of 0.25% of the average daily net
asset value of those Fund shares that are held in such institution's customers'
accounts which were purchased on or after a prescribed date set forth in the
Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Company with respect to the
Fund. The Class A and C Plan does not obligate the Fund to reimburse AIM
Distributors for the actual expenses AIM Distributors may incur in fulfilling
its obligations under the Class A and C Plan on behalf of the Fund. Thus, under
the Class A and C Plan, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc.
Class B Plan. The Company has also adopted a master distribution plan
applicable to Class B shares of the Fund (the "Class B Plan"). Under the Class B
Plan, the Fund pays distribution expenses at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of such amount, the
Fund pays a service fee of 0.25% of the average daily net assets attributable to
the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset based sales charge. Amounts paid in accordance with the
Class B Plan may be used to finance any activity primarily intended to result in
the sale of Class B shares.
Activities that may be financed under the Class A and C Plan and the Class B
Plan (collectively, the "Plans") include, but are not limited to: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, overhead, preparation and distribution of advertising
material and sales literature, supplemental payments to dealers and other
institutions such as asset-based sales charges or as payments of service fees
under shareholder service arrangements and the cost of administering the Plans.
These amounts payable by the Fund under the Plans need not be directly related
to the expenses actually incurred by AIM Distributors on behalf of the Fund.
Thus, even if AIM Distributors' actual expenses exceed the fee payable to AIM
Distributors thereunder at any given time, the Company will not be obligated to
pay more than that fee, and, if AIM Distributors' expenses are less than the fee
it receives, AIM Distributors will retain the full amount of the fee. Payments
pursuant to the Plans are subject to any applicable limitations imposed by the
rules of the National Association of Securities Dealers, Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those directors who are not "interested persons" of the Company or by a vote of
the holders of the majority of the outstanding shares of the applicable class.
Under the Plans, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or any portion of its fee that has not been
assigned or transferred, while retaining its ability to be reimbursed for such
fee prior to the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Fund pursuant to the respective Plans. AIM
Distributors does not act as principal, but
15
<PAGE> 16
rather as agent, for the Fund in making such payments. Financial intermediaries
and any other person entitled to receive compensation for selling Fund shares
may receive different compensation for selling shares of one particular class
over another.
For additional information concerning the operation of the Plans, see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE COMPANY
The Company was organized in 1991 as a Maryland corporation, and is registered
with the SEC as an open-end series management investment company. The Company
currently consists of six investment portfolios: the Fund, AIM ASIAN GROWTH
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND and AIM GLOBAL INCOME FUND. The Board of Directors may
authorize additional portfolios in the future. Shares of the Fund are offered to
investors pursuant to this Prospectus, while shares of the Company's other
portfolios are offered to investors pursuant to separate prospectuses. The
authorized capital stock of the Company consists of 4,000,000,000 shares of
common stock with a par value of $0.001 per share, of which 200,000,000 shares
are designated Class A shares, 200,000,000 shares are designated Class B shares
and 200,000,000 shares are designated Class C shares of each investment
portfolio of the Company, and the balance of which are unclassified.
Class A shares, Class B shares and Class C shares of the Fund represent
interests in the Fund's assets and have identical voting, dividend, liquidation
and other rights on the same terms and conditions, except that each class of
shares bears differing class-specific ex-penses (such as those associated with
the shareholder servicing of their shares) and is subject to differing sales
loads (which may affect performance), conversion features and exchange
privileges, and has exclusive voting rights on matters pertaining to that class'
distribution plan.
Except as specifically noted above, shareholders of the Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the Class A shares, Class B
shares and Class C shares of the Fund. However, on matters affecting one
portfolio of the Company or one class of shares, a separate vote of shareholders
of that portfolio or class is required. Shareholders of a portfolio or class are
not entitled to vote on any matter which does not affect that portfolio or class
but which requires a separate vote of another portfolio or class. An example of
a matter which would be voted on separately by shareholders of a portfolio is
the approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan. When issued, shares of the Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect directors,
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors of the Company, and the holders of less than 50% of
the shares voting for the election of directors will not be able to elect any
directors.
Under Maryland law and the Company's By-Laws, the Company need not hold an
annual meeting of shareholders unless a meeting is otherwise required under the
1940 Act to elect directors. As of February 2, 1998, Merrill Lynch, Pierce,
Fenner & Smith Incorporated was the owner of record of 33.13%, 36.84% and 47.42%
of the outstanding Class A, Class B and Class C shares, respectively, of the
Fund. As long as Merrill Lynch, Pierce, Fenner & Smith Incorporated owns over
25% of such shares, it may be presumed to be in "control" of the Class A, Class
B and Class C shares of the Fund, as defined in the 1940 Act.
16
<PAGE> 17
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR FLEX FUND(*) AIM GLOBAL UTILITIES FUND
AIM ADVISOR INTERNATIONAL VALUE FUND(*) AIM GROWTH FUND
AIM ADVISOR LARGE CAP VALUE FUND(*) AIM HIGH INCOME MUNICIPAL FUND
AIM ADVISOR MULTIFLEX FUND(*) AIM HIGH YIELD FUND
AIM ADVISOR REAL ESTATE FUND(*) AIM INCOME FUND
AIM AGGRESSIVE GROWTH FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM ASIAN GROWTH FUND AIM INTERNATIONAL EQUITY FUND
AIM BALANCED FUND AIM LIMITED MATURITY TREASURY FUND
AIM BLUE CHIP FUND AIM MONEY MARKET FUND(**)
AIM CAPITAL DEVELOPMENT FUND AIM MUNICIPAL BOND FUND
AIM CHARTER FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CONSTELLATION FUND AIM TAX-EXEMPT CASH FUND(**)
AIM EUROPEAN DEVELOPMENT FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM VALUE FUND
AIM GLOBAL GROWTH FUND AIM WEINGARTEN FUND
AIM GLOBAL INCOME FUND
</TABLE>
(*) Class B Shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE
FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND and AIM
REAL ESTATE FUND will not be available until on or about March 3, 1998.
(**) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of
AIM MONEY MARKET FUND are offered to investors at net asset value, without
payment of a sales charge, as described below. Other funds, including the
Class A, Class B and Class C shares of AIM MONEY MARKET FUND, are sold with
an initial sales charge or subject to a contingent deferred sales charge
upon redemption, as described below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") or Roth IRA is $250.
There are no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, Simplified Employee Pension
("SEP") accounts, Salary Reduction ("SARSEP") accounts, Savings Incentive Match
Plans for Employee IRA ("SIMPLE IRA") accounts, 403(b) plans or 457 (state
deferred compensation) plans (except that the minimum initial investment for
salary deferrals for such plans is $25), or for investment of dividends and
distributions of any of the AIM Funds into any existing AIM Funds account.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
MCF-02/98
A-1
<PAGE> 18
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his dealer should call AFS' Client Services Department
at (800) 959-4246 prior to sending a wire to receive a reference number for the
wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
HOW TO PURCHASE ADDITIONAL SHARES. Additional shares may be purchased directly
through AIM Distributors or through any dealer who has entered into an agreement
with AIM Distributors. The minimum investment for subsequent purchases is $50.
The minimum employee salary deferral investment for participants in
money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or 457 plans is
$25. There are no such minimum investment requirements for investment of
dividends and distributions of any of the AIM Funds into any other existing AIM
Funds account.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION--SM--: To purchase additional shares by electronic
funds transfer, please contact the Client Services Department of AFS for detail.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE
CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM
AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND,
AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED
MATURITY TREASURY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE
FUND and AIM WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH
FUND, AIM LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE FUND), the "Multiple Class Funds," may
be purchased at their respective net asset value plus a sales charge as
indicated below, except that Class A shares of AIM TAX-EXEMPT CASH FUND and AIM
Cash Reserve Shares of AIM MONEY MARKET FUND are sold without a sales charge and
Class B shares (the "Class B shares") and Class C shares ("Class C shares") of
the Multiple Class Funds are sold at net asset value subject to a contingent
deferred sales charge payable upon certain redemptions. These contingent
deferred sales charges are described under the caption "How to Redeem
Shares -- Multiple Distribution System." Securities dealers and other persons
entitled to receive compensation for selling or servicing shares of a Multiple
Class Fund may receive different compensation for selling or servicing one
particular class of shares over another class in the same Multiple Class Fund.
Factors an investor should consider prior to purchasing Class A, Class B or
Class C shares (or, if applicable, AIM Cash Reserve Shares) of a Multiple Class
Fund are described below under "Special Information Relating to Multiple Class
Funds." For information on purchasing any of the AIM Funds and to receive a
prospectus, please call (800) 347-4246. As described below, the sales charge
otherwise applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value." The following tables show the sales charge and dealer concession
at various investment levels for the AIM Funds.
MCF-02/98
A-2
<PAGE> 19
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM ADVISOR REAL ESTATE FUND,
AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL INCOME FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF-02/98
A-3
<PAGE> 20
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM LIMITED MATURITY TREASURY
FUND and AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than Class A shares of each of AIM LIMITED MATURITY TREASURY FUND and AIM
TAX-FREE INTERMEDIATE FUND as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases, plus 0.25% of amounts in excess of $20
million of such purchases. See "Contingent Deferred Sales Charge Program for
Large Purchases." AIM Distributors may make payments to dealers and institutions
who are dealers of record for purchases of $1 million or more of Class A shares
(or shares which normally involve payment of initial sales charges), and which
are sold at net asset value and are not subject to a contingent deferred sales
charge, in an amount up to 0.10% of such purchases of Class A shares of AIM
LIMITED MATURITY TREASURY FUND, and in an amount up to 0.25% of such purchases
of Class A shares of AIM TAX-FREE INTERMEDIATE FUND.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
are not paid on sales to investors exempt from the CDSC, including shareholders
of record on April 30, 1995 who purchase additional shares in any of the Funds
on or after May 1, 1995, and in circumstances where AIM Distributors grants an
exemption on particular transactions.
MCF-02/98
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<PAGE> 21
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES are sold subject to the initial sales charges described
above and are subject to the other fees and expenses described herein.
Class A shares of AIM MONEY MARKET FUND are designed to meet the needs of
an investor who wishes to establish a dollar cost averaging program,
pursuant to which Class A shares an investor owns may be exchanged at net
asset value for Class A shares of another Multiple Class Fund or shares of
another AIM Fund which is not a Multiple Class Fund, subject to the terms
and conditions described under the caption "Exchange Privilege -- Terms and
Conditions of Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class C shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class C shares redeemed
within one year from the date such shares were purchased are subject to a
1.00% contingent deferred sales charge. No contingent deferred sales charge
will be imposed if Class C shares are redeemed after one year from the date
such shares were purchased. Redemptions of Class C shares and associated
charges are further described under the caption "How to Redeem
Shares -- Multiple Distribution System."
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without an
initial sales charge and are not subject to a contingent deferred sales
charge; however, they are subject to the other fees and expenses described
in the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
MCF-02/98
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<PAGE> 22
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND AND AIM TAX-EXEMPT CASH
FUND (THE "MONEY MARKET FUNDS"). Because each Money Market Fund uses the
amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of such funds will remain constant at $1.00 per share.
However, there is no assurance that each Money Market Fund can maintain a $1.00
net asset value per share. In order to earn dividends with respect to AIM MONEY
MARKET FUND on the same day that a purchase is made, purchase payments in the
form of federal funds must be received by the Transfer Agent before 12:00 noon
Eastern Time on that day. Purchases made by payments in any other form, or
payments in the form of federal funds received after such time but prior to NYSE
Close, will begin to earn dividends on the next business day following the date
of purchase. The Money Market Funds generally will not issue share certificates
but will record investor holdings in noncertificate form and regularly advise
the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class
B and Class C shares of the Multiple Class Funds will not be taken into account
in determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by vir-
MCF-02/98
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<PAGE> 23
tue of the foregoing definition, to the reduced sales charge. No person or
entity may distribute shares of the AIM Funds without payment of the applicable
sales charge other than to persons or entities who qualify for a reduction in
the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) Class A shares of AIM TAX-EXEMPT CASH FUND, and AIM Cash Reserve Shares of
AIM MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) within the following 13 consecutive months. By marking the LOI section on
the account application and by signing the account application, the purchaser
indicates that he understands and agrees to the terms of the LOI and is bound by
the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND
and (ii) Class B and Class C shares of the Multiple Class Funds) at the time of
the proposed purchase. Rights of Accumulation are also available to holders of
the Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve
Shares of AIM MONEY MARKET FUND and (ii) Class B and Class C shares of the
Multiple Class Funds) owned by such purchaser, calculated at their then current
public offering price. If a purchaser so qualifies for a reduced sales charge,
the reduced sales charge applies to the total amount of money then being
invested by such purchaser and not just to the portion that exceeds the
breakpoint above which a reduced sales charge applies. For example, if a
purchaser already owns qualifying shares of any AIM Fund with a value of $20,000
and wishes to invest an additional $20,000 in a fund with a maximum initial
sales charge of 5.50%, the reduced initial sales charge of 5.25% will apply to
the full $20,000 purchase and not just to the $15,000 in excess of the $25,000
breakpoint. To qualify for obtaining the discount applicable to a particular
purchase, the purchaser or his dealer must furnish AFS with a list of the
account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends,
MCF-02/98
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<PAGE> 24
Distributions and Tax Matters"); (b) exchanges of shares of certain other funds
(see "Exchange Privilege"); (c) use of the reinstatement privilege (see "How to
Redeem Shares"); or (d) a merger, consolidation or acquisition of assets of a
fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM, or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholders Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; (h) certain broker-dealers, investment
advisers or bank trust departments that provide asset allocation, similar
specialized investment services or investment company transaction services for
their customers, that charge a minimum annual fee for such services, and that
have entered into an agreement with AIM Distributors with respect to their use
of the AIM Funds in connection with such services; and (i) employees of
Triformis Inc.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the total amount invested in the
plan is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the AIM Funds in connection
with such accounts. Section 403(b) plans sponsored by public educational
institutions will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees.
Participants in such plans will be eligible for reduced sales charges based
solely on the aggregate value of their individual investments in the applicable
AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR
SUCH PLANS. AIM Distributors may pay investment dealers or other financial
service firms for share purchases of the Load Funds (as defined on page A-10
herein) sold at net asset value to an employee benefit plan in accordance with
this paragraph as follows: 1% of the first $2 million of such purchases, plus
0.80% of the next $1 million of such purchases, plus 0.50% of the next $17
million of such purchases, plus 0.25% of amounts in excess of $20 million of
such purchases and up to 0.10% of the net asset value of any Class A shares of
AIM LIMITED MATURITY TREASURY FUND sold at net asset value to an employee
benefit plan in accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
MCF-02/98
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<PAGE> 25
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual amounts (but not less than $50) to be
drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that exceed on an annual
basis 12% of such account will be subject to a contingent deferred sales charge
on the amounts exceeding 12% of the account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the Multiple Class Funds and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND), it is disadvantageous to effect such
purchases while a Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make regular systematic
investments may establish an Automatic Investment Plan. Under this plan each
withdrawal is made from the shareholder's bank account in the amount specified
by the shareholder (minimum $50 per investment, per account) and on a day or
date(s) specified by the shareholder. The proceeds are invested in shares of the
designated AIM Fund at the applicable offering price determined on the date of
the withdrawal. An Automatic Investment Plan may be discontinued upon 10 days'
prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and
MCF-02/98
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<PAGE> 26
Tax Matters -- Dividends and Distributions" for a description of payment dates
for these options. In order to qualify to have dividends and distributions of
one AIM Fund invested in shares of another AIM Fund, the following conditions
must be satisfied: (a) the shareholder must have an account balance in the
dividend paying fund of at least $5,000; (b) the account must be held in the
name of the shareholder (i.e., the account may not be held in nominee name); and
(c) the shareholder must have requested and completed an authorization relating
to the reinvestment of dividends into another AIM Fund. An authorization may be
given on the account application or on an authorization form available from AIM
Distributors. An AIM Fund will waive the $5,000 minimum account value
requirement if the shareholder has an account in the fund selected to receive
the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the
following prototype retirement plans available to corporations, individuals and
employees of non-profit organizations and public schools: combination
money-purchase/profit-sharing plans; 403(b) plans; IRA plans; Roth IRA plans;
SARSEP plans; SEP plans; and SIMPLE IRA plans (collectively, "retirement
accounts"). Information concerning these plans, including the custodian's fees
and the forms necessary to adopt such plans, can be obtained by calling or
writing the AIM Funds or AIM Distributors. Shares of the AIM Funds are also
available for investment through existing 401(k) plans (for both individuals and
employers) adopted under the Code. The plan custodian currently imposes an
annual $10 maintenance fee with respect to each retirement account for which it
serves as the custodian. This fee is generally charged in December. Each AIM
Fund and/or the custodian reserve the right to change this maintenance fee and
to initiate an establishment fee (not to exceed its cost).
MCF-02/98
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<PAGE> 27
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, listed below
and referred to herein as the "Load Funds," are sold at a public offering price
that includes a maximum sales charge of 5.50% or 4.75% of the public offering
price of such shares; Class A shares (or shares which normally involve the
payment of initial sales charges) of certain of the AIM Funds, listed below and
referred to herein as the "Lower Load Funds," are sold at a public offering
price that includes a maximum sales charge of 1.00% of the public offering price
of such shares; and Class A shares or shares of certain other funds, listed
below and referred to herein as the "No Load Funds," are sold at net asset
value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
---------- -----------------
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY FUND
CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL INCOME AIM TAX-FREE INTERMEDIATE FUND
VALUE FUND -- CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR LARGE CAP AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A --------------
AIM ADVISOR MULTIFLEX AIM GROWTH FUND -- CLASS A AIM MONEY MARKET FUND
FUND -- CLASS A AIM HIGH INCOME MUNICIPAL -- AIM CASH RESERVE SHARES
AIM ADVISOR REAL ESTATE FUND -- CLASS A AIM TAX-EXEMPT CASH FUND -- CLASS A
FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A
AIM AGGRESSIVE GROWTH AIM INCOME FUND -- CLASS A
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT
AIM ASIAN GROWTH FUND -- CLASS A FUND -- CLASS A
AIM BALANCED FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM BLUE CHIP FUND -- CLASS A FUND -- CLASS A
AIM CAPITAL DEVELOPMENT AIM MONEY MARKET
FUND -- CLASS A FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM MUNICIPAL BOND
AIM CONSTELLATION FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM EUROPEAN DEVELOPMENT OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH AIM WEINGARTEN FUND -- CLASS A
FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) Load Fund share
purchases of $1,000,000 or more which are subject to a contingent deferred sales
charge may not be exchanged for Lower Load Funds or for AIM TAX-EXEMPT CASH
FUND; (II) LOWER LOAD FUND SHARE PURCHASES OF $1,000,000 OR MORE AND AIM Cash
Reserve Shares of AIM MONEY MARKET FUND and AIM TAX-EXEMPT CASH FUND PURCHASES
MAY BE EXCHANGED FOR LOAD FUND SHARES IN AMOUNTS OF $1,000,000 OR MORE WHICH
WILL THEN BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE; HOWEVER, FOR
PURPOSES OF CALCULATING THE CONTINGENT DEFERRED SALES CHARGE ON THE LOAD FUND
SHARES ACQUIRED, THE 18-MONTH PERIOD SHALL BE COMPUTED FROM THE DATE OF SUCH
EXCHANGE; (iii) Class A shares may be exchanged for Class A shares, (iv) Class B
shares may be exchanged only for Class B shares; (v) Class C shares may only be
exchanged for Class C shares; and (vi) AIM Cash Reserve Shares of AIM MONEY
MARKET FUND may not be exchanged for Class A shares of AIM MONEY MARKET FUND or
for Class B or Class C shares.
MCF-02/98
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<PAGE> 28
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Funds..........
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
Funds.......... acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise, Of-
apply if No Load shares were fering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A, Class B, or Class C shares of
another Multiple Class Fund; (b) the dollar amount of the exchange must be at
least equal to the minimum investment applicable to the shares of the fund
acquired through such exchange; (c) the shares of the fund acquired through
exchange must be qualified for sale in the state in which the shareholder
resides; (d) the exchange must be made between accounts having identical
registrations and addresses; (e) the full amount of the purchase price for the
shares being exchanged must have already been received by the fund; (f) the
account from which shares have been exchanged must be coded as having a
certified taxpayer identification number on file or, in the alternative, an
appropriate Internal Revenue Service ("IRS") Form W-8 (certificate of foreign
status) or Form W-9 (certifying exempt status) must have been received by the
fund; (g) newly acquired shares (through either an initial or subsequent
investment) are held in an account for at least ten business days, and all other
shares are held in an account for at least one day, prior to the exchange; and
(h) certificates representing shares must be returned before shares can be
exchanged. There is no fee for exchanges among the AIM Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received
MCF-02/98
A-12
<PAGE> 29
after NYSE Close will result in the redemption of shares at their net asset
value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
MCF-02/98
A-13
<PAGE> 30
utable to Class B shares or (iii) on amounts that represent capital appreciation
in the shareholder's account above the purchase price of the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
- -------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE
FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, and AIM
ADVISOR REAL ESTATE FUND, by shareholders of record on April 30, 1995 of these
funds (shareholders whose broker/dealers maintain a single omnibus account with
the Transfer Agent on behalf of those shareholders, perform sub-accounting
functions with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995 from shareholders whose accounts
were opened after that date will be subject to a CDSC on all purchases made
after March 1, 1996).
Waivers. Contingent deferred sales charges on Class B and Class C shares will
be waived on redemptions (1) following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust (provided AIM Distributors is notified of such death or
post-purchase disability at the time of the redemption request and is provided
with satisfactory evidence of such death or post-purchase disability), (2) in
connection with certain distributions from individual retirement accounts,
custodial accounts maintained pursuant to Code Section 403(b), deferred
compensation plans qualified under Code Section 457 and plans qualified under
Code Section 401 (collectively, "Retirement Plans"), (3) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class B or Class C shares at the time the shareholder elects to participate
in the Systematic Withdrawal Plan, (4) effected pursuant to the right of a
Multiple Class Fund to liquidate a shareholder's account if the aggregate net
asset value of shares held in the account is less than the designated minimum
account size described in the prospectus of such Multiple Class Fund, (5)
effected by AIM of its investment in Class B or Class C shares and (6) of Class
C shares where such investor's dealer of record, due to the nature of the
investor's account, notifies AIM Distributors prior to the time of investment
that the dealer waives the payment otherwise payable to the dealer described in
the fifth paragraph under the caption "Terms and Conditions of Purchase of the
AIM Funds -- All Groups of AIM Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70-1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value in a particular AIM Fund;
(ii) in kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
MCF-02/98
A-14
<PAGE> 31
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund or AIM Cash Reserve Shares of AIM MONEY MARKET FUND which were acquired
through an exchange of shares which previously were subject to the 1% contingent
deferred sales charge will be credited with the period of time such exchanged
shares were held, and (ii) shares of any Load Fund which are subject to the 1%
contingent deferred sales charge and which were acquired through an exchange of
shares of a Lower Load Fund or a No Load Fund which previously were not subject
to the 1% contingent deferred sales charge will not be credited with the period
of time such exchanged shares were held. The charge will be waived in the
following circumstances: (1) redemptions of shares by employee benefit plans
("Plans") qualified under Sections 401 or 457 of the Code, or Plans created
under Section 403(b) of the Code and sponsored by nonprofit organizations as
defined under Section 501(c)(3) of the Code, where shares are being redeemed in
connection with employee terminations or withdrawals, and (a) the total amount
invested in a Plan is at least $1,000,000, (b) the sponsor of a Plan signs a
letter of intent to invest at least $1,000,000 in one or more of the AIM Funds,
or (c) the shares being redeemed were purchased by an employer-sponsored Plan
with at least 100 eligible employees; provided, however, that Plans created
under Section 403(b) of the Code which are sponsored by public educational
institutions shall qualify under (a), (b) or (c) above on the basis of the value
of each Plan participant's aggregate investment in the AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible employees;
(2) redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59-1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information; and (e) the proceeds of the
redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be gen-
MCF-02/98
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<PAGE> 32
uine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of
AIM MONEY MARKET FUND). After completing the appropriate authorization form,
shareholders may use checks to effect redemptions from AIM TAX-EXEMPT CASH FUND
and the AIM Cash Reserve Shares of AIM MONEY MARKET FUND. This privilege does
not apply to retirement accounts or qualified plans. Checks may be drawn in any
amount of $250 or more. Checks drawn against insufficient shares in the account,
against shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented to the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner; (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions; and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed
MCF-02/98
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<PAGE> 33
the surety coverage amount indicated on the medallion. For information regarding
whether a particular institution or organization qualifies as an "eligible
guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in Class A
shares of any AIM Fund at the net asset value next computed after receipt by the
Transfer Agent of the funds to be reinvested; provided, however, if the
redemption was made from Class A shares of either AIM LIMITED MATURITY TREASURY
FUND or AIM TAX-FREE INTERMEDIATE FUND, the reinvested proceeds will be subject
to the difference in sales charge between the shares redeemed and the shares the
proceeds are reinvested in. The shareholder must ask the Transfer Agent for such
privilege at the time of reinvestment. A realized gain on the redemption is
taxable, and reinvestment may alter any capital gains payable. If there has been
a loss on the redemption and shares of the same fund are repurchased, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in (or exchanged for) shares of another AIM Fund
at a reduced sales charge within 90 days of the payment of the sales charge, the
shareholder's basis in the fund shares redeemed may not include the amount of
the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption; however, the shareholder's basis in the fund
shares purchased will include the sales charge. Each AIM Fund may amend, suspend
or cease offering this privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation. This privilege may only be
exercised once each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
90 days after such redemption may do so at net asset value if such privilege is
claimed at the time of reinvestment. Such reinvested proceeds will not be
subject to either a front-end sales charge at the time of reinvestment or an
additional contingent deferred sales charge upon subsequent redemption. In order
to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an AIM Fund's share
will be determined as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and total assets include portfolio
securities valued at their market value, as well as income accrued but not yet
received. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the fund's officers and in accordance with methods which are specifically
authorized by its governing Board of Directors or Trustees. Short-term
obligations with maturities of 60 days or less, and the securities held by the
Money Market Funds, are valued at amortized cost as reflecting fair value. AIM
HIGH INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE FUND value variable rate securities
that have an unconditional demand or put feature exercisable within seven days
or less at par, which reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
MCF-02/98
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<PAGE> 34
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT FUND............. declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM GROWTH FUND........................... declared and paid annually annually annually
AIM HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY FUND........ declared daily; paid monthly annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE FUND............ declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares (iii) dividends and distributions attributable
to Class A shares may not be reinvested in Class B or Class C shares, and (iv)
dividends and distributions attributable to the AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund or in
any Class B or Class C shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact the Transfer
Agent at any time to obtain a form to authorize such reinvestments in another
AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such
MCF-02/98
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<PAGE> 35
payment. Any dividend and distribution election remains in effect until the
Transfer Agent receives a revised written election by the shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM HIGH INCOME MUNICIPAL FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT
CASH FUND, and AIM TAX-FREE INTERMEDIATE FUND (the "Tax-Exempt Funds") which are
exempt from federal tax. Dividends paid by a fund (other than capital gain
distributions) may qualify for the federal 70% dividends received deduction for
corporate shareholders to the extent of the qualifying dividends received by the
fund on domestic common or preferred stock. It is not likely that dividends
received from AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR REAL ESTATE
FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND
OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND or AIM TAX-FREE INTERMEDIATE FUND will
qualify for this dividends received deduction. Shortly after the end of each
year, shareholders will receive information regarding the amount and federal
income tax treatment of all distributions paid during the year. Certain
dividends declared in October, November or December of a calendar year are
taxable to shareholders as though received on December 31 of that year if paid
to shareholders during January of the following calendar year. No gain or loss
will be recognized by shareholders upon the automatic conversion of Class B
shares of a Multiple Class Fund into Class A shares of such Fund. With respect
to tax-exempt shareholders, distributions from the Funds will not be subject to
federal income taxation to the extent permitted under the applicable tax-
exemption.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on ordinary income dividends and distributions (other
than exempt-interest dividends and capital gain dividends) and return of capital
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and
MCF-02/98
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<PAGE> 36
other taxable securities. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statements of Additional Information
applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
FUND -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH
FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND AND AIM GLOBAL UTILITIES
FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is eligible to do
so, each of these funds may elect to pass through to shareholders credits for
foreign taxes paid. If the fund makes such an election, a shareholder who
receives a distribution (1) will be required to include in gross income his
proportionate share of foreign taxes allocable to the distribution and (2) may
claim a credit or deduction for such share for his taxable year in which the
distribution is received, subject to the general limitations imposed on the
allowance of foreign tax credits and deductions. Shareholders should also note
that certain gains or losses attributable to fluctuations in exchange rates or
foreign currency forward contracts may increase or decrease the amount of income
of the fund available for distribution to shareholders, and should note that if
such losses exceed other income during a taxable year, the fund would not be
able to pay ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE
INTERMEDIATE FUND, for which The Bank of New York, 90 Washington Street, 11th
Floor, New York, New York 10286, serves as custodian. Texas Commerce Bank
National Association, P.O. Box 2558, Houston, Texas 77252-8084, serves as
Sub-Custodian for retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll, LLP,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and passes upon
legal matters.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish between the year 2000 from the year 1900.
This defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers provide the AIM Funds
and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and phase (iii) has
commenced. The Project is scheduled to be completed during the fourth quarter of
1998. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm Year 2000 compliance
upon installation.
MCF-02/98
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<PAGE> 37
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF-02/98
A-21
<PAGE> 38
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif.
Transfers to Minors Other Organization Other Organization
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-02/98
B-1
<PAGE> 39
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-02/98
B-2
<PAGE> 40
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
Houston, TX 77002
For more complete information about any other Fund in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please
call (800) 347-4246 or write to A I M Distributors, Inc. and request a
free prospectus. Please read the prospectus carefully before you invest
or send money.
INT-PRO-1
<PAGE> 41
STATEMENT OF
ADDITIONAL INFORMATION
AIM ASIAN GROWTH FUND
AIM EUROPEAN DEVELOPMENT FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND
AIM GLOBAL GROWTH FUND
AIM GLOBAL INCOME FUND
AIM INTERNATIONAL EQUITY FUND
(SERIES PORTFOLIOS OF AIM INTERNATIONAL FUNDS, INC.)
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
(713) 626-1919
-----------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS,
AND IT SHOULD BE READ IN CONJUNCTION WITH
A PROSPECTUS OF THE ABOVE-NAMED FUNDS,
A COPY OF WHICH MAY BE OBTAINED FROM AUTHORIZED DEALERS
OR BY WRITING
A I M DISTRIBUTORS, INC., P.O. BOX 4739, HOUSTON, TEXAS 77210-4739,
OR BY CALLING (800) 347-4246
-----------------
Statement of Additional Information dated: February 20, 1998,
Relating to the AIM International Equity Fund Prospectus dated
February 20, 1998, the AIM Global Aggressive Growth Fund, AIM Global
Growth Fund and AIM Global Income Fund Prospectus dated February 20, 1998,
the AIM Asian Growth Fund Prospectus dated November 12, 1997, as revised
January 2, 1998, and the AIM European Development Fund Prospectus dated
November 12, 1997, as revised January 2, 1998
<PAGE> 42
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company and its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Total Return Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Yield Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Allocation of Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Brokerage Commissions Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
HEDGING STRATEGIES AND OTHER INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Privatized Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Hedging Foreign Currency Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Writing Covered Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Writing Covered Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchasing Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchasing Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Combined Option Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Stock Index Options and Futures and Financial Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Restrictions on the Use of Futures Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Restrictions on OTC Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Asset Coverage for Futures and Options Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Risk Factors in Options, Futures, Forward and Currency Transactions . . . . . . . . . . . . . . . . . . . . 15
Repurchase Agreements and Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Exchange Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Countries in Which Asian Fund and European Fund May Invest . . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Aggressive Growth Fund, Growth Fund, and Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Asian Fund and European Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Remuneration of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
AIM Funds Retirement Plan for Eligible Directors/Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 29
Deferred Compensation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Investment Advisory, Sub-Advisory and Administrative Services Agreements . . . . . . . . . . . . . . . . . . 31
THE DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
i
<PAGE> 43
<TABLE>
<S> <C>
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
NET ASSET VALUE DETERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Reinvestment of Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 44
INTRODUCTION
AIM International Funds, Inc. (the "Company") is a series mutual fund.
The rules and regulations of the Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information is included in the AIM Asian Growth Fund Prospectus dated November
12, 1997, as revised January 2, 1998; the AIM European Development Fund
Prospectus dated November 12, 1997, as revised January 2, 1998; the AIM Global
Aggressive Growth Fund, AIM Global Growth Fund and AIM Global Income Fund
Prospectus, dated February 20, 1998 and the AIM International Equity Fund
Prospectus dated February 20, 1998 (individually, a "Prospectus" and
collectively, the "Prospectuses"). Copies of each Prospectus and additional
copies of this Statement of Additional Information may be obtained without
charge by writing the principal distributor of the Fund's shares, A I M
Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston, Texas
77210-4739, or by calling (800) 347-4246. Investors must receive a Prospectus
before they invest in the Funds.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds
(hereinafter defined). Some of the information required to be in this
Statement of Additional Information is also included in each Fund's current
Prospectus, and in order to avoid repetition, reference will be made herein to
sections of the applicable Prospectus. Additionally, each Prospectus and this
Statement of Additional Information omit certain information contained in the
Company's Registration Statement filed with the SEC. Copies of the
Registration Statement, including items omitted from each Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE COMPANY
THE COMPANY AND ITS SHARES
The Company was organized in 1991 as a Maryland corporation, and is
registered with the SEC as an open-end, series, management investment company.
The Company currently consists of six separate portfolios: AIM Asian Growth
Fund (the "Asian Fund"), AIM European Development Fund ( the "European
Fund"), AIM Global Aggressive Growth Fund (the "Aggressive Growth Fund"), AIM
Global Growth Fund (the "Growth Fund") and AIM Global Income Fund ( the "Income
Fund") and AIM International Equity Fund (the "Equity Fund") (individually, a
"Fund" and collectively, the "Funds"). Each portfolio of the Company offers
Class A, Class B and Class C shares. This Statement of Additional Information
relates solely to the Funds.
As used in each Prospectus, the term "majority of the outstanding
shares" of the Company, of a particular Fund or of a class of a Fund means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Company, such Fund or such class present at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares of the Company, such Fund or
such class are present or represented by proxy or (ii) more than 50% of the
outstanding shares of the Company, such Fund or such class.
Each share of a Fund is entitled to one vote, to participate equally
in dividends and distributions declared by the Board of Directors with respect
to such Fund and, upon liquidation of the Fund, to participate proportionately
in the Fund's net assets remaining after satisfaction of the Fund's outstanding
liabilities. Fractional shares have proportionately the same rights, including
voting rights, as are provided for full shares.
PERFORMANCE
Total return and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. Performance quotations reflect
historical information and should not be considered representative of a Fund's
performance for any period in the future. Performance is a function of a
number of factors and
1
<PAGE> 45
can be expected to fluctuate. The Funds may provide performance information in
reports, sales literature and advertisements. The Funds may also, from time to
time, quote information about the Funds published or aired by publications or
other media entities which contain articles or segments relating to investment
results or other data about one or more of the Funds. The following is a list
of such publications or media entities:
<TABLE>
<S> <C> <C>
Advertising Age Financial World Nation's Business
Barron's Forbes New York Times
Best's Review Fortune Pension World
Broker World Hartford Courant Inc. Pensions & Investments
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
</TABLE>
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
<TABLE>
<S> <C>
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper Analytical Services
</TABLE>
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential
investments, investors should note that the methods of computing performance of
other potential investments are not necessarily comparable to the methods
employed by a Fund.
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share over the period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical investment in a
particular Fund over a stated period of time, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline in value had been constant over the period. While average
annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a Fund's performance is not
constant over time, but changes from year to year, and that average annual
total returns do not represent the actual year-to-year performance of such
Fund.
In addition to average annual total returns, each Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions, over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns and other performance information
may be quoted numerically or in tables, graphs or similar illustrations. For
Asian Fund and European Fund total returns may be quoted with or without taking
the Class A shares' 5.50% maximum sales charge, the Class B shares' 5% maximum
contingent deferred sales charge ("CDSC") or the Class C shares' 1% maximum
CDSC into account. For Aggressive Growth Fund, Growth
2
<PAGE> 46
Fund and Income Fund total returns may be quoted with or without taking the
Class A shares' 4.75% maximum sales charge, the Class B shares' 5% maximum CDSC
or the Class C shares' 1% maximum CDSC into account. For Equity Fund total
returns may be quoted with or without taking the Class A shares' 5.50% maximum
sales charge, the Class B shares' 5% maximum CDSC or the Class C shares' 1%
maximum CDSC into account. Excluding sales charges from a total return
calculation produces a higher total return figure.
YIELD QUOTATIONS
The standard formula for calculating yield for the Income Fund, as
described in the Prospectus, is as follows:
6
YIELD = 2[((a-b)/(c x d) +1) -1]
Where a = dividends and interest earned during a stated 30-day
period. For purposes of this calculation, dividends
are accrued rather than recorded on the ex-dividend
date. Interest earned under this formula must
generally be calculated based on the yield to maturity
of each obligation (or, if more appropriate, based on
yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during
the period.
d = the maximum offering price per share on the last day of
the period.
The yields for the Class A, Class B and Class C shares of Income Fund
for the 30-day period ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
With Without
Waivers Waivers
------- -------
<S> <C> <C>
Class A . . . . . . . . . . . 5.59% 5.06%
Class B . . . . . . . . . . . 5.38% 4.82%
Class C . . . . . . . . . . . 5.38% 4.82%
</TABLE>
HISTORICAL PORTFOLIO RESULTS
Total returns for each of the named Funds, with respect to its Class A
shares, for the one- and five-year periods (or since inception, if shorter)
ended October 31, 1997 (which include the maximum sales charge and reinvestment
of all dividends and distributions), were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
--------------------------- -----------------
Periods ended October 31, 1997 Periods ended October 31, 1997
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
One Five One Five
Class A Shares: Year Years Year Years
- --------------- -------- ----- -------- -----
Aggressive Growth Fund 4.41% 17.41%* 4.41% 65.16%*
Equity Fund 5.33% 14.34% 5.33% 95.45%
Growth Fund 11.67% 16.55%* 11.67% 61.39%*
Income Fund 3.88% 9.84%* 3.88% 34.11%*
</TABLE>
* The inception date for the Class A shares of each of Aggressive Growth Fund,
Growth Fund and Income Fund was September 15, 1994.
Total returns for each of the named Funds, with respect to its Class B
shares, for the one-year period ended October 31, 1997 and the period September
15, 1994 (inception date) through October 31, 1997 (which
3
<PAGE> 47
include the maximum contingent deferred sales charge and reinvestment of all
dividends and distributions) were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
--------------------------- -----------------
Periods ended October 31, 1997 Periods ended October 31, 1997
------------------------------ ------------------------------
One Since One Since
Class B Shares: Year Inception Year Inception
- --------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Aggressive Growth Fund 4.11% 17.97% 4.11% 67.61%
Equity Fund 9.03% 8.83% 9.03% 30.30%
Growth Fund 11.65% 17.09% 11.65% 63.76%
Income Fund 3.48% 10.22% 3.48% 35.55%
</TABLE>
Total returns for Class C shares of Aggressive Growth Fund, Equity Fund,
Growth Fund and Income Fund for the period August 4, 1997 (inception date)
through October 31, 1997 (which include the maximum contingent deferred sales
charge and reinvestment of all dividends and distributions) were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
--------------------------- -----------------
Periods ended October 31, 1997 Periods ended October 31, 1997
------------------------------ ------------------------------
One Since One Since
Class C Shares: Year Inception Year Inception
- --------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Aggressive Growth Fund N/A N/A N/A -8.48%
Equity Fund N/A N/A N/A -8.69%
Growth Fund N/A N/A N/A -6.69%
Income Fund N/A N/A N/A 1.99%
</TABLE>
Average annual total return is not available for Class A, B and C
shares of Asian Fund or European Fund as the inception date of the Class A, B
and C shares of such Funds was November 3, 1997.
During the one-year period ended October 31, 1997, a hypothetical
$1,000 investment in the Class A shares of Aggressive Growth Fund, Equity Fund,
Growth Fund and Income Fund at the beginning of such period would have been
worth $1,044.11, $1,053.32, $1,116.70 and $1,038.76, respectively, assuming the
maximum sales charge was paid and all distributions were reinvested. For the
period September 15, 1994 (inception date for Aggressive Growth Fund, Growth
Fund and Income Fund) through October 31, 1997, and the five-year period ended
October 31, 1997, for Equity Fund, a hypothetical $1,000 investment in the
Class A shares of Aggressive Growth Fund, Equity Fund, Growth Fund and Income
Fund at the beginning of such period would have been worth $1,651.60,
$1,986.22, $1,613.91 and $1,341.11, respectively, assuming the maximum sales
charge was paid and all distributions were reinvested.
During the one-year period ended October 31, 1997, a hypothetical
$1,000 investment in the Class B shares of Aggressive Growth Fund, Equity Fund,
Growth Fund and Income Fund at the beginning of such period would have been
worth $1,041.14, $1,056.11, $1,116.55 and $1,039.76, respectively, assuming
the maximum contingent deferred sales charge was paid and all distributions
were reinvested. For the period September 15, 1994 (inception date) through
October 31, 1997, a hypothetical $1,000 investment in the Class B shares of
Aggressive Growth Fund, Equity Fund, Growth Fund and Income Fund at the
beginning of such period would have been worth $1,302.97, $1,355.45, $1,637.62
and $1,676.12, respectively, assuming the maximum contingent deferred sales
charge was paid and all distributions were reinvested.
4
<PAGE> 48
For the period August 4, 1997 (inception date) through October 31,
1997, a hypothetical $1,000 investment in the Class C shares of Aggressive
Growth Fund, Equity Fund, Growth Fund and Income Fund at the beginning of such
period would have been worth $915.17, $913.11, $933.07, and $1,091.91,
respectively, assuming the maximum contingent deferred sales charge was paid
and all distributions were reinvested.
Each Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper Analytical Services, Inc. and other independent services
which monitor the performance of mutual funds. The Funds may also advertise
mutual fund performance rankings which have been assigned to each respective
Fund by such monitoring services. Each Fund's performance may also be compared
in advertising and other materials to the performance of comparative benchmarks
such as indices of stocks comparable to those in which the Funds invest, as
well as the following:
<TABLE>
<S> <C>
Standard & Poor's 500 Stock Index Dow Jones Industrial Average
Consumer Price Index Morgan Stanley Capital International Indices,
Bond Buyer Index including:
NASDAQ EAFE Index
COFI Pacific Basin Index
First Boston High Yield Index Pacific Ex Japan Index (a widely
The Financial Times - Actuaries World Indices (a recognized series of
wide range of comprehensive measures of indices in international
stock price performance for the world's market
major stock markets and regional areas) performance)
</TABLE>
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasuries
30 year Treasuries
90 Day Treasury Bills
Advertising for the Income Fund may from time to time include
discussions of general economic conditions and interest rates.
From time to time, each Fund's advertising may include discussions of
general domestic and international economic conditions and interest rates, and
may make reference to international economic sources such as The Bundesbank
(the German equivalent of the U.S. Federal Reserve Board). Each Fund's
advertising may also include references to the use of the Fund as part of an
individual's overall retirement investment program.
From time to time, each Fund's sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information
about mutual funds, variable annuities, dollar-cost averaging, stocks, bonds,
money markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning and inflation. Also from time
to time, sales literature and/or advertisements for the Funds may disclose (i)
the largest holdings in the Funds' portfolios, (ii) certain selling group
members and/or (iii) certain institutional shareholders.
5
<PAGE> 49
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
A I M Advisors, Inc. ("AIM") makes decisions to buy and sell securities
for each Fund, selects broker-dealers, effects the Funds' investment portfolio
transactions, allocates brokerage fees in such transactions, and where
applicable, negotiates commissions and spreads on transactions. AIM's primary
consideration in effecting a security transaction is to obtain the most
favorable execution of the order, which includes the best price on the security
and a low commission rate. While AIM seeks reasonably competitive commission
rates, the Funds may not pay the lowest commission or spread available. See
"Section 28(e) Standards" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
Traditionally, commission rates have not been negotiated on stock markets
outside the United States. Although in recent years many overseas stock markets
have adopted a system of negotiated rates, a number of markets maintain an
established schedule of minimum commission rates.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Funds) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and other mutual funds advised by AIM or A I M
Capital Management, Inc. (collectively, the "AIM Funds") in particular,
including sales of the Funds and of the other AIM Funds. In connection with (3)
above, the Funds' trades may be executed directly by dealers that sell shares
of the AIM Funds or by other broker-dealers with which such dealers have
clearing arrangements. AIM will not use a specific formula in connection with
any of these considerations to determine the target levels.
AIM will seek, whenever possible, to recapture for the benefit of a Fund
any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of a Fund, provided the conditions of an exemptive order received by
the Funds from the SEC are met. In addition, a Fund may purchase or sell a
security from or to another AIM Fund provided the Funds follow procedures
adopted by the Board of Directors/Trustees of the various AIM Funds, including
the Company. These intra-fund transactions do not generate brokerage
commissions but may result in custodial fees or taxes or other related expenses.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage several other investment accounts. Some of
these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by
its cash position. If the purchase or sale of securities is consistent with the
investment policies of the Fund(s) and one or more of these accounts, and is
considered at or about the same time, AIM may combine such
6
<PAGE> 50
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the judgments of the persons responsible for recommending
the investment.
7
<PAGE> 51
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to
the value of the brokerage and research services provided ... viewed in terms
of either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a Fund may pay
a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the [Company's directors] with respect to
the performance, investment activities, and fees and expenses of other mutual
funds. Broker-dealers may communicate such information electronically, orally or
in written form. Research services may also include the providing of custody
services, as well as the providing of equipment used to communicate research
information, the providing of specialized consultations with AIM personnel with
respect to computerized systems and data furnished to AIM as a component of
other research services, the arranging of meetings with management of
companies, and the providing of access to consultants who supply research
information.
The outside research assistance is useful to AIM since the broker-dealers
used by AIM tend to follow a broader universe of securities and other matters
than AIM's staff can follow. In addition, the research provides AIM with a
diverse perspective on financial markets. Research services provided to AIM by
broker-dealers are available for the benefit of all accounts managed or advised
by AIM or by its affiliates. Some broker-dealers may indicate that the provision
of research services is dependent upon the generation of certain specified
levels of commissions and underwriting concessions by AIM's clients, including
the Funds. However, the Funds are not under any obligation to deal with any
broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Funds is not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research
services had they not been provided by broker-dealers, the expenses to AIM
could be considered to have been reduced accordingly.
8
<PAGE> 52
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1997, 1996 and 1995, Aggressive
Growth Fund paid brokerage commissions of $6,227,671, $5,169,447 and
$1,409,761, respectively. The increase in brokerage commissions from October
31, 1995 through October 31, 1997 was due to the increase in Aggressive Growth
Fund's net assets during such period. For the fiscal year ended October 31,
1997, AIM allocated certain of Aggressive Growth Fund's brokerage transactions
to certain broker-dealers that provided AIM with certain research, statistical
and other information. Such transactions amounted to $79,719,730 and the
related brokerage commissions were $111,081.
For the fiscal years ended October 31, 1997, 1996, and 1995, Equity
Fund paid brokerage commissions of $6,002,915, $5,666,504 and $3,169,134,
respectively. The increase in brokerage commissions from October 31, 1995
through October 31, 1997 was due to the increase in Equity Fund's net assets
during such period. For the fiscal year ended October 31, 1997, AIM allocated
certain of Equity Fund's brokerage transactions to certain broker-dealers that
provided AIM with certain research, statistical and other information. Such
transactions amounted to $5,879,466 and the related brokerage commissions were
$2,967.
For the fiscal years ended October 31, 1997, 1996 and 1995, Growth
Fund paid brokerage commissions of $1,249,946, $826,284 and $161,100,
respectively. The increase in brokerage commissions from October 31, 1995
through October 31, 1997 was due to the increase in Growth Fund's net assets
during such period. For the fiscal year ended October 31, 1997, AIM allocated
certain of Growth Fund's brokerage transactions to certain broker-dealers that
provided AIM with certain research, statistical and other information. Such
transactions amounted to $22,934,086 and the related brokerage commissions were
$17,539.
For the fiscal years ended October 31, 1997, 1996 and 1995, Income
Fund paid brokerage commissions of $162, $1,570 and $6,939, respectively. For
the fiscal year ended October 31, 1997, none of Income Fund's brokerage
transactions were allocated to broker-dealers that provided AIM with certain
research, statistical and other information.
HEDGING STRATEGIES AND OTHER INVESTMENT POLICIES
The following discussion of certain investment strategies supplements
the discussion set forth in the Prospectus under the heading "Hedging
Strategies and Other Investment Techniques."
Each Fund may seek to hedge its portfolio against movements in the
equity markets, interest rates and exchange rates between currencies through
the use of options, futures transactions, options on futures and foreign
forward exchange transactions. Each Fund has authority to write (sell) covered
call and put options on its portfolio securities, purchase put and call options
on securities and engage in transactions in stock index options, stock index
futures and financial futures, and related options on such futures. The Funds
may also deal in certain forward contracts, including forward foreign exchange
transactions, foreign currency options and futures, and related options on such
futures. The Funds are authorized to enter into such options and futures
transactions either on exchanges or in the OTC markets. Although certain risks
are involved in options and futures transactions (as discussed in the
Prospectus and below), AIM believes that, because the Funds will only engage in
these transactions for hedging purposes, the options and futures portfolio
strategies of the Funds will not subject the Funds to the risks frequently
associated with the speculative use of options and futures transactions. While
the Funds' use of hedging strategies is intended to reduce the volatility of
the respective net asset value of each Fund's shares, a Fund's net asset value
will nevertheless fluctuate. There can be no assurance that the hedging
transactions of any of the Funds will be effective.
9
<PAGE> 53
PRIVATIZED ENTERPRISES
The governments of certain foreign countries have, to varying degrees,
embarked on privatization programs contemplating the sale of all or part of
their interests in state enterprises. European Fund's investments in the
securities of privatized enterprises include privately negotiated investments
in a government- or state-owned or controlled company or enterprise that has
not yet conducted an initial equity offering, investments in the initial
offering of equity securities of a state enterprise or former state enterprise
and investments in the securities of a state enterprise following its initial
equity offering.
In certain jurisdictions, the ability of foreign entities, such as
European Fund, to participate in privatizations may be limited by local law, or
the price or terms on which European Fund may be able to participate may be
less advantageous than for local investors. Moreover, there can be no
assurance that governments that have embarked on privatization programs will
continue to divest their ownership of state enterprises, that proposed
privatizations will be successful or that governments will not re-nationalize
enterprises that have been privatized.
In the case of the enterprises in which European Fund may invest,
large blocks of the stock of those enterprises may be held by a small group of
stockholders, even after the initial equity offerings by those enterprises.
The sale of some portion or all of those blocks could have an adverse effect on
the price of the stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or
former state enterprises go through an internal reorganization or management.
Such reorganizations are made in an attempt to better enable these enterprises
to compete in the private sector. However, certain reorganizations could
result in a management team that does not function as well as the enterprise's
prior management and may have a negative effect on such enterprise. In
addition, the privatization of an enterprise by its government may occur over a
number of years, with the government continuing to hold a controlling position
in the enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which
European Fund may invest enjoy the protection of and receive preferential
treatment from the respective sovereigns that own or control them. After
making an initial equity offering these enterprises may no longer have such
protection or receive such preferential treatment and may become subject to
market competition from which they were previously protected. Some of these
enterprises may not be able to effectively operate in a competitive market and
may suffer losses or experience bankruptcy due to such competition.
HEDGING FOREIGN CURRENCY RISKS
Generally, the foreign exchange transactions of a Fund will be
conducted on a spot (cash) basis at the spot rate then prevailing for
purchasing or selling currency in the foreign exchange market. However, the
Funds have authority to deal in forward foreign exchange between currencies
(including the U.S. dollar) as a hedge against possible variations in the
foreign exchange rate between such currencies. This is accomplished through
individually negotiated contractual agreements to purchase or to sell a
specified currency at a specified future date and price set at the time of the
contract. A Fund's dealings in forward foreign exchange may be with respect to
a specific purchase or sale of a security, or with respect to its portfolio
positions generally. The Funds will not attempt to hedge all of their
respective portfolio positions and will enter into such transactions only to
the extent, if any, deemed appropriate by AIM.
In addition to the forward exchange contracts, the Funds may also
purchase or sell listed or OTC foreign currency options, foreign currency
futures and related options as a short or long hedge against possible
variations in foreign exchange rates. The cost to a Fund of engaging in
foreign currency transactions varies with such factors as the currencies
involved, the length of the contract period and the market conditions then
prevailing. Since transactions in foreign currency exchange usually are
conducted on a principal basis,
10
<PAGE> 54
no fees or commissions are involved. Transactions involving forward exchange
contracts and futures contracts and options thereon are subject to certain
risks. A detailed discussion of such risks appears under the caption "Risk
Factors in Options, Futures, Forward and Currency Transactions."
WRITING COVERED CALL OPTIONS
Each Fund is authorized to write (sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to such options. Writing a call option obligates a
Fund to sell or deliver the option's underlying security, in return for the
strike price, upon exercise of the option. By writing a call option, a Fund
receives an option premium from the purchaser of the call option. Writing
covered call options is generally a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a Fund would seek to
mitigate the effects of a price decline. By writing covered call options,
however, a Fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price. In addition, a Fund's ability to sell the underlying security
will be limited while the option is in effect unless the Fund effects a closing
purchase transaction.
WRITING COVERED PUT OPTIONS
Each Fund is authorized to write (sell) covered put options on its
portfolio securities and to enter into closing transactions with respect to
such options.
When a Fund writes a put option, it takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the premium,
a Fund assumes the obligation to pay the strike price for the option's
underlying instrument if the other party to the option chooses to exercise it.
A Fund may seek to terminate its position in a put option it writes before
exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for an option a Fund has written,
however, the Fund must continue to be prepared to pay the strike price while
the option is outstanding, regardless of price changes, and must continue to
set aside assets to cover its position.
Each Fund may write put options as an alternative to purchasing actual
securities. If security prices rise, a Fund would expect to profit from a
written put option, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is
likely that a Fund will also profit, because it should be able to close out the
option at a lower price. If security prices fall, a Fund would expect to
suffer a loss. This loss should be less than the loss a Fund would have
experienced from purchasing the underlying instrument directly, however,
because the premium received for writing the option should mitigate the effects
of the decline.
PURCHASING PUT OPTIONS
Each Fund is authorized to purchase put options to hedge against a
decline in the market value of its portfolio securities. By buying a put
option a Fund has the right (but not the obligation) to sell the underlying
security at the exercise price, thus limiting the Fund's risk of loss through a
decline in the market value of the security until the put option expires. The
amount of any appreciation in the value of the underlying security will be
partially offset by the amount of the premium paid by a Fund for the put option
and any related transaction costs. Prior to its expiration, a put option may
be sold in a closing sale transaction and profit or loss from the sale will
depend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs. A closing sale transaction
cancels out a Fund's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. None of the Funds will purchase put options on securities
(including stock index options discussed below) if as a result of such
purchase, the aggregate cost of all outstanding options on securities held by a
Fund would exceed 5% of the market value of the Fund's total assets.
11
<PAGE> 55
PURCHASING CALL OPTIONS
Each Fund is also authorized to purchase call options. The features
of call options are essentially the same as those of put options, except that
the purchaser of a call option obtains the right to purchase, rather than sell,
the underlying instrument at the option's strike price (call options on futures
contracts are settled by purchasing the underlying futures contract). The
Funds will purchase call options only in connection with "closing purchase
transactions."
COMBINED OPTION POSITIONS
Each Fund, for hedging purposes, may purchase and write options in
combination with each other to adjust the risk and return characteristics of
the Fund's overall position. For example, a Fund may purchase a put option and
write a covered call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics are similar
to selling a futures contact. This technique, called a "straddle," enables a
Fund to offset the cost of purchasing a put option with the premium received
from writing the call option. However, by selling the call option, a Fund
gives up the ability for potentially unlimited profit from the put option.
Another possible combined position would involve writing a covered call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written covered call option in the event of a
substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
STOCK INDEX OPTIONS AND FUTURES AND FINANCIAL FUTURES
Each Fund is authorized to engage in transactions in stock index
options and futures and financial futures, and related options. A Fund may
purchase or write put and call options on stock indices to hedge against the
risks of market-wide stock price movements in the securities in which the Fund
invests. Options on indices are similar to options on securities except that
on exercise or assignment, the parties to the contract pay or receive an amount
of cash equal to the difference between the closing value of the index and the
exercise price of the option times a specified multiple. A Fund may invest in
stock index options based on a broad market index, such as the S&P 500 Index,
or on a narrow index representing an industry or market segment, such as the
AMEX Oil & Gas Index. The Funds' investments in foreign stock index futures
contracts and foreign interest rate futures contracts, and related options, are
limited to only those contracts and related options that have been approved by
the Commodities Futures Trading Commission ("CFTC") for investment by United
States investors. Additionally, with respect to a Fund's investments in
foreign options, unless such options are specifically authorized for investment
by order of the CFTC or meet the definition of "trade option" as set forth in
CFTC Regulation 32.4, a Fund will not make such investments.
Each Fund may also purchase and sell stock index futures contracts and
other financial futures contracts ("futures contracts") as a hedge against
adverse changes in the market value of its portfolio securities as described
below. A futures contract is an agreement between two parties which obligates
the purchaser of the futures contract to buy and the seller of a futures
contract to sell a security for a set price on a future date. Unlike most
other futures contracts a stock index futures contract does not require actual
delivery of securities, but results in cash settlement based upon the
difference in value of the index between the time the contract was entered into
and the time of its settlement. A Fund may effect transactions in stock index
futures contracts in connection with equity securities in which it invests and
in financial futures contracts in connection with the debt securities in which
it invests, if any. Transactions by a Fund in stock index futures and
financial futures are subject to limitations as described below under
"Restrictions on the Use of Futures Transactions."
A Fund may sell futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. When a Fund is not fully
invested in the securities markets and anticipates a significant market
advance, the Fund may purchase
12
<PAGE> 56
futures in order to gain rapid market exposure that may in part or entirely
offset increases in the cost of securities that the Fund intends to purchase.
As such purchases are made, an equivalent amount of futures contracts will be
terminated by offsetting sales. The Funds do not consider purchases of futures
contracts to be a speculative practice under these circumstances. It is
anticipated that, in a substantial majority of these transactions, the Fund
will purchase such securities upon termination of the long futures position,
whether the long position results from the purchase of a futures contract or
the purchase of a call option, but under unusual circumstances (e.g., the Fund
experiences a significant amount of redemptions) a long futures position may be
terminated without the corresponding purchase of securities.
The Funds are also authorized to purchase and write call and put
options on futures contracts and stock indices in connection with their hedging
activities. Generally, these strategies would be utilized under the same
market and market sector conditions (i.e., conditions relating to specific
types of investments) in which a Fund enters into futures transactions. A Fund
may purchase put options or write call options on futures contracts and stock
indices rather than selling the underlying futures contract in anticipation of
a decrease in the market value of securities. Similarly, a Fund can purchase
call options, or write put options on futures contracts and stock indices, as a
substitute for the purchase of such futures to hedge against the increased cost
resulting from an increase in the market value of securities which the Fund
intends to purchase.
Each Fund is also authorized to engage in options and futures
transactions on U.S. and foreign exchanges and in options in the OTC markets
("OTC options"). In general, exchange traded contracts are third-party
contracts (i.e., performance of the parties' obligations is guaranteed by an
exchange or clearing corporation) with standardized strike prices and
expiration dates. OTC options transactions are two-party contracts with price
and terms negotiated by the buyer and seller. See "Restrictions on OTC
Options" below for information as to restrictions on the use of OTC options.
Each Fund is authorized to purchase or sell listed or OTC foreign
security or currency options, foreign security or currency futures and related
options as a short or long hedge against possible variations in foreign
exchange rates and market movements. Such transactions could be effected with
respect to hedges on non-U.S. dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund. As an illustration, a Fund may use such techniques to
hedge the stated value in U.S. dollars of an investment in a yen-denominated
security. In such circumstances, for example, the Fund can purchase a foreign
currency put option enabling it to sell a specified amount of yen for U.S.
dollars at a specified price by a future date. To the extent the hedge is
successful, a loss in the value of the yen relative to the U.S. dollar will
tend to be offset by an increase in the value of the put option.
Certain differences exist between these hedging instruments. For
example, foreign currency options provide the holder thereof the rights to buy
or sell a currency at a fixed price on a future date. A futures contract on a
foreign currency is an agreement between two parties to buy and sell a
specified amount of a currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on boards of trade or
futures exchanges. The Funds will not speculate in foreign security or
currency options, futures or related options. None of the Funds will hedge a
currency substantially in excess of the market value of securities which any
such Fund has committed or anticipates to purchase which are denominated in
such currency, and in the case of securities which have been sold by such Fund
but not yet delivered, the proceeds thereof in its denominated currency. None
of the Funds will incur potential net liabilities of more than 25% of its total
assets from foreign security or currency options, futures or related options.
RESTRICTIONS ON THE USE OF FUTURES TRANSACTIONS
The purchase or sale of a futures contract differs from the purchase
or sale of a security in that no price or premium is paid or received.
Instead, an amount of cash or securities acceptable to the broker and the
relevant contract market, which varies, but is generally about 5% of the
contract amount, must be
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<PAGE> 57
deposited with the broker. This amount is known as "initial margin" and
represents a "good faith" deposit assuring the performance of both the
purchaser and seller under the futures contract. Subsequent payments to and
from the broker, called "variation margin," are required to be made on a daily
basis as the price of the futures contract fluctuates making the long and short
positions in the futures contracts more or less valuable, a process known as
"marking to market." At any time prior to the settlement date of the futures
contract, the position may be closed out by taking an opposite position which
will operate to terminate the position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid to or released by the broker and the purchaser realizes a loss or gain.
In addition, a nominal commission is paid on each completed sale transaction.
Regulations of the CFTC applicable to the Funds require that all of
the Funds' futures and options on futures transactions constitute bona fide
hedging transactions and that the Funds not enter into such transactions if,
immediately thereafter, the sum of the amount of initial margin deposits on a
Fund's existing futures positions and premiums paid for related options would
exceed 5% of the market value of such Fund's total assets. However, if an
option is "in-the-money" (the price of the option exceeds the strike price),
the in-the-money portion may be excluded in computing the 5% limit.
RESTRICTIONS ON OTC OPTIONS
The Funds will engage in transactions involving OTC options, including
over-the-counter stock index options, over-the-counter foreign security and
currency options and options on foreign security and currency futures, only
with member banks of the Federal Reserve System and primary dealers in U.S.
Government securities or with affiliates of such banks or dealers which have
capital of at least $50 million or whose obligations are guaranteed by an
entity having capital of at least $50 million. The Funds will acquire only
those OTC options for which AIM believes a Fund can receive on each business
day at least two independent bids or offers (one of which will be from an
entity other than a party to the option).
The Staff of the SEC has taken the position that purchased OTC options
and the assets used as cover for written OTC options are illiquid securities.
Therefore, the Funds have each adopted an operating policy pursuant to which
each Fund will not purchase or sell OTC options (including OTC options on
futures contracts) if, as a result of such transaction, the sum of (i) the
market value of OTC options currently outstanding which are held by a Fund,
(ii) the market value of the underlying securities covered by OTC call options
currently outstanding which were sold by such Fund, (iii) margin deposits on
the Fund's existing OTC options on futures contracts, and (iv) the market value
of all other assets of the Fund which are illiquid or are not otherwise readily
marketable, would exceed 10% of the net assets of Aggressive Growth Fund,
Growth Fund and Income Fund, and 15% of the net assets of Equity Fund, European
Fund and Asian Fund, taken at market value. However, if an OTC option is sold
by a Fund to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York, and the Fund has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then such Fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (current market value of the underlying
security minus the option's strike price). The repurchase price with primary
dealers is typically a formula price which is generally based on a multiple of
the premium received for the option, plus the amount by which the option is
"in-the-money." This policy as to OTC options is not a fundamental policy of
the Funds and may be amended by the Board of Directors of the Company without
approval of the Funds' respective shareholders. However, the Funds will not
change or modify this policy prior to the change or modification by the SEC
staff of its position.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS
The Funds will not use leverage in their options and futures
strategies. Such investments will be made for hedging purposes only. The
Funds will hold securities or other options or futures positions whose values
are expected to offset their obligations under the hedge strategies. None of
the Funds will enter into an option or futures position that exposes a Fund to
an obligation to another party unless it owns either (i) an
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<PAGE> 58
offsetting position in securities or other options or futures contracts or (ii)
cash, receivables and short-term debt securities with a value sufficient to
cover its potential obligations. The Funds will comply with guidelines
established by the SEC with respect to coverage of options and futures
strategies by mutual funds, and if the guidelines so require will segregate
liquid assets with its custodian bank in the amount prescribed. The segregated
liquid assets will not be sold while the futures or option strategy is
outstanding, unless they are replaced with similar liquid assets. As a result,
there is a possibility that segregation of a large percentage of a Fund's
liquid assets could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
RISK FACTORS IN OPTIONS, FUTURES, FORWARD AND CURRENCY TRANSACTIONS
The use of options and futures transactions to hedge a Fund's
portfolio involves the risk of imperfect correlation in movements in the price
of options and futures and movements in the price of securities or currencies
which are the subject of the hedge. If the price of the option or future moves
more or less than the price of hedged securities or currencies, the Fund will
experience a gain or loss which will not be completely offset by movements in
the price of the subject of the hedge. The successful use of options and
futures also depends on AIM's ability to correctly predict price movements in
the market involved in a particular options or futures transaction. To
compensate for imperfect correlations, the Funds may purchase or sell stock
index options or futures contracts in a greater dollar amount than the hedged
securities if the volatility of the hedged securities is historically greater
than the volatility of the stock index options or futures contracts.
Conversely, the Funds may purchase or sell fewer stock index options or futures
contracts, if the historical price volatility of the hedged securities is less
than that of the stock index options or futures contracts. The risk of
imperfect correlation generally tends to diminish as the maturity date of the
stock index option or futures contract approaches. Options are also subject to
the risks of an illiquid secondary market, particularly in strategies involving
writing options, which a Fund cannot terminate by exercise. In general,
options whose strike prices are close to their underlying instruments' current
value will have the highest trading volume, while options whose strike prices
are further away may be less liquid.
The Funds intend to enter into options and futures transactions, on an
exchange or in the OTC market, only if there appears to be a liquid secondary
market for such options or futures or, in the case of OTC transactions, AIM
believes a Fund can receive on each business day at least two independent bids
or offers. However, there can be no assurance that a liquid secondary market
will exist at any specific time. Thus, it may not be possible to close an
options or futures position. The inability to close options and futures
positions also could have an adverse impact on a Fund's ability to effectively
hedge its portfolio. There is also the risk of loss by a Fund of margin
deposits or collateral in the event of bankruptcy of a broker with whom the
Fund has an open position in an option, a futures contract or related option.
The exchanges on which options on portfolio securities and currency
options are traded have generally established limitations governing the maximum
number of call or put options on the same underlying security or currency
(whether or not covered) which may be written by a single investor, whether
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written in one or
more accounts or through one or more brokers). "Trading limits" are imposed on
the maximum number of contracts which any person may trade on a particular
trading day. AIM does not believe that these trading and position limits will
have any adverse impact on the portfolio strategies for hedging the Funds'
portfolios.
Because the Funds will engage in the options and futures transactions
described above solely in connection with their hedging activities, AIM does
not believe such options and futures transactions necessarily will have any
significant effect on the portfolio turnover rate of any of the Funds.
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REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements and reverse repurchase
agreements. A repurchase agreement is an instrument under which a Fund
acquires ownership of a debt security and the seller (usually a broker or bank)
agrees, at the time of the sale, to repurchase the obligation at a mutually
agreed upon time and price, thereby determining the yield during the Fund's
holding period. In the event of bankruptcy or other default of a seller of a
repurchase agreement, the Fund may experience both delays in liquidating the
underlying securities and losses, including: (a) a possible decline in the
value of the underlying security during the period in which the Fund seeks to
enforce its rights thereto; (b) a possible subnormal level of income and lack
of access to income during this period; and (c) expenses of enforcing its
rights. A repurchase agreement is collateralized by the security acquired by
the Fund and its value is marked to market daily in order to minimize the
Fund's risk. Repurchase agreements usually are for short periods, such as one
or two days, but may be entered into for longer periods of time.
A reverse repurchase agreement involves the sale of securities held by
a Fund, with an agreement that the Fund will repurchase such securities at an
agreed-upon price, date, and interest payment. During the time a reverse
repurchase agreement is outstanding, the applicable Fund will segregate liquid
assets having a value equal to the repurchase price under such reverse
repurchase agreement. Any investment gains made by a Fund with monies borrowed
through reverse repurchase agreements will cause the net asset value of the
Fund's shares to rise faster than would be the case if the Fund had no such
borrowings. On the other hand, if the investment performance resulting from
the investment of borrowings obtained through reverse repurchase agreements
fails to cover the cost of such borrowings to the Fund, the net asset value of
the Fund will decrease faster than would otherwise be the case.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Funds may make
secured loans of portfolio securities amounting to not more than 33-1/3% of
each Fund's respective total assets. Securities loans are made to banks,
brokers and other financial institutions pursuant to agreements requiring that
the loans be continuously secured by collateral at least equal at all times to
the value of the securities lent marked to market on a daily basis. The
collateral received will consist of cash, U.S. Government securities, letters
of credit or such other collateral as may be permitted under the applicable
Fund's investment program. While the securities are being lent, the Fund will
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. The Funds have a right to call each of
their respective loans and obtain the securities on five business days' notice
or, in connection with securities trading on foreign markets, within such
longer period of time which coincides with the normal settlement period for
purchases and sales of such securities in such foreign markets. The Funds will
not have the right to vote securities while they are being lent, but each Fund
will call a loan in anticipation of any important vote. The risks in lending
portfolio securities, as with other extensions of secured credit, consist of
possible delay in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
fail financially. Loans will only be made to persons deemed by AIM to be of
good standing and will not be made unless, in the judgment of AIM, the
consideration to be earned from such loans would justify the risk.
SHORT SALES
Each Fund may from time to time enter into short sales transactions.
A Fund will not make short sales of securities or maintain a short position
unless at all times when a short position is open, the Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short. This is a technique
known as selling short "against the box." Such short sales will be used by the
Funds for the purpose of deferring recognition of gain or loss for federal
income tax purposes. In no event may more than 10% of the value of a Fund's
total assets be deposited or pledged as collateral for such sales at any time.
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RULE 144A SECURITIES
Each Fund may purchase securities which, while privately placed, are
eligible for purchase and sale pursuant to Rule 144A under the Securities Act
of 1933 (the "1933 Act"). This Rule permits certain qualified institutional
buyers, such as the Funds, to trade in privately placed securities even though
such securities are not registered under the 1933 Act. AIM, under the
supervision of the Company's Board of Directors, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to each
Fund's restriction of investing no more than 15% of its total assets in
illiquid securities. Determination of whether a Rule 144A security is liquid
or not is a question of fact. In making this determination AIM will consider
the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition, AIM could consider
the (i) frequency of trades and quotes, (ii) number of dealers and potential
purchasers, (iii) dealer undertakings to make a market, and (iv) nature of the
security and of marketplace trades (for example, the time needed to dispose of
the security, the method of soliciting offers and the mechanics of transfer).
The liquidity of Rule 144A securities will also be monitored by AIM and, if as
a result of changed conditions, it is determined that a Rule 144A security is
no longer liquid, a Fund's holdings of illiquid securities will be reviewed to
determine what, if any, action is required to assure that the Fund does not
invest more than 15% of its total assets in illiquid securities. Investing in
Rule 144A securities could have the effect of increasing the amount of the
Fund's investments in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with
foreign currencies, and consequently the Funds may from time to time hold cash
balances in the form of foreign currencies and multinational currency units.
Such foreign currencies and multinational currency units will usually be
acquired on a spot (i.e. cash) basis at the spot rate prevailing in foreign
exchange markets and will result in currency conversion costs to the Funds.
The Funds attempt to purchase and sell foreign currencies on as favorable a
basis as practicable; however, some price spread on foreign exchange
transactions (to cover service charges) may be incurred, particularly when the
Funds change investments from one country to another, or when U.S. dollars are
used to purchase foreign securities. Certain countries could adopt policies
which would prevent the Funds from transferring cash out of such countries, and
the Funds may be affected either favorably or unfavorably by fluctuations in
relative exchange rates while the Funds hold foreign currencies.
COUNTRIES IN WHICH ASIAN FUND AND EUROPEAN FUND MAY INVEST
The Asian Fund considers issuers of securities located in the
following countries to be Asian issuers:
Bangladesh Indonesia Philippines Thailand
China Korea Singapore Vietnam
Hong Kong Malaysia Sri Lanka
India Pakistan Taiwan
In addition to Asian issuers, Asian Fund may invest up to 20% of its
total assets in securities of non-Asian issuers. The following is a list of
some of the non-Asian countries in which Asian Fund may invest from time to
time:
Australia New Zealand
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European Fund considers issuers of securities located in the following
countries to be European issuers:
Austria Germany Netherlands Slovenia
Belgium Greece Norway Spain
Croatia Hungary Poland Sweden
Czech Republic Ireland Portugal Switzerland
Denmark Italy Romania Turkey
Finland Liechtenstein Russia Ukraine
France Luxembourg Slovakia United Kingdom
In addition to European issuers, European Fund may invest up to 20% of
its total assets in securities of non-European issuers. The following is a
list of some of the non-European countries in which European Fund may invest
from time to time:
Bermuda Israel South Africa United States
Egypt
The above lists may include foreign countries that have not yet been
approved by the Company's board. Asian Fund and European Fund will only invest
in foreign countries that have been approved by the board.
The word "Development" in European Fund's name is designed to address
the general restructuring taking place in Europe as well as a more dramatic
political and economic restructuring taking place in regions such as Eastern
Europe. Also consistent with the name, the Fund has the ability to invest a
significant portion of its total assets in securities issued in emerging
markets.
INVESTMENT RESTRICTIONS
AGGRESSIVE GROWTH FUND, GROWTH FUND, AND INCOME FUND
The following fundamental policies and investment restrictions have
been adopted by Aggressive Growth Fund, Growth Fund and Income Fund and, except
as noted, such policies cannot be changed without approval by the vote of a
majority of the outstanding voting securities of the applicable Fund, as
defined in the 1940 Act.
The Funds may not:
1. Purchase or sell real estate or interests in real
estate (except that this restriction does not preclude
investments in marketable securities of companies
engaged in real estate activities).
2. Purchase or sell commodities or commodity contracts,
except that the Funds may purchase and sell stock
index and currency options, stock index futures,
interest rate futures, financial futures and currency
futures contracts and related options on such futures.
3. Purchase any security on margin, except that the Funds
may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of portfolio
securities. The payment by the Fund of initial or
variation margin in connection with
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<PAGE> 62
futures or related options transactions shall not be
considered the purchase of a security on margin.
4. Make loans, although the Funds may (a) purchase money
market securities and enter into repurchase
agreements, (b) acquire bonds, debentures, notes and
other debt securities, governmental obligations and
certificates of deposit, and (c) lend portfolio
securities.
5. Issue senior securities, except to the extent
permitted by the 1940 Act, including permitted
borrowings.
6. Underwrite securities of other persons, except to the
extent that a Fund may be deemed to be an underwriter
within the meaning of the 1933 Act in connection with
the purchase and sale of its portfolio securities in
the ordinary course of pursuing its investment
program.
7. Purchase or sell interests in oil, gas or other
mineral exploration or development programs.
8. Purchase the securities of any issuer if, as a result,
more than 25% of the value of a Fund's total assets,
taken at market value, would be invested in the
securities of issuers having their principal business
activities in the same industry. This restriction
does not apply to obligations issued or guaranteed by
the U.S. Government or by any of its agencies or
instrumentalities but will (unless and until SEC
changes its position) apply to foreign government
obligations unless the SEC permits their exclusion.
9. Purchase a security if, as a result, with respect to
75% of the value of a Fund's total assets, taken at
market value, more than 5% of a Fund's total assets,
taken at market value, would be invested in the
securities of any one issuer (including repurchase
agreements with any one entity), except securities
issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities and except that a
Fund may purchase securities of other investment
companies to the extent permitted by applicable law or
exemptive order. This restriction does not apply to
the Income Fund.
10. Purchase a security if, as a result, with respect to
50% of the value of the Fund's total assets taken at
market value, more than 5% of the value of the Fund's
total assets, taken at market value, would be invested
in securities of any one issuer, except securities
issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities and except that a
Fund may purchase securities of other investment
companies to the extent permitted by applicable law or
exemptive order. This restriction applies only to the
Income Fund.
11. Purchase a security if, as a result, more than 10% of
the outstanding voting securities of any issuer would
be held by a Fund, except that a Fund may purchase
securities of other investment companies to the extent
permitted by applicable law or exemptive order.
12. Borrow money, except that the Fund may borrow from
banks (including the Fund's custodian bank) and enter
into reverse repurchase agreements and dollar roll
transactions (Income Fund only). With respect to
Aggressive Growth Fund and Growth Fund, such permitted
borrowings shall be used as a temporary defensive
measure for extraordinary or emergency purposes.
Permitted borrowings shall be in amounts not exceeding
33- 1/3% of a Fund's total assets, taken at market
value, and
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each Fund may pledge amounts of up to 20% of its total
assets, taken at market value, to secure such
borrowings. Whenever bank borrowings exceed 5% of the
value of the total assets of Aggressive Growth Fund or
Growth Fund, such Fund will not make any additional
purchases of securities for investment purposes.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, the Funds will
not:
13. Make investments for the purpose of exercising control
or management.
14. Lend portfolio securities in excess of 33-1/3% of
total assets, taken at market value; provided that
loans of portfolio securities shall be made in
accordance with the guidelines set forth under the
heading "Lending of Portfolio Securities."
15. Invest in securities which are illiquid if more than
15% of a Fund's total assets, taken at market value,
would be invested in such securities.
16. Effect short sales of securities, except that a Fund
may make short sales "against the box" to the extent
that the value of the securities sold short, in the
aggregate, does not represent more than 10% of the
Fund's total assets, taken at market value, at any
given time.
Percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total
assets.
EQUITY FUND
The following fundamental policies and investment restrictions
have been adopted by Equity Fund and, except as noted, such policies
cannot be changed without approval by the vote of a majority of the
outstanding voting securities of the Fund, as defined in the 1940 Act.
The Fund may not:
1. Purchase or sell real estate or interests in real
estate (except that this restriction does not preclude
investments in marketable securities of companies
engaged in real estate activities).
2. Purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell stock index
and currency options, stock index futures, financial
futures and currency futures contracts and related
options on such futures.
3. Purchase any security on margin, except that the Fund
may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of portfolio
securities. The payment by the Fund of initial or
variation margin in connection with futures or related
options transactions shall not be considered the
purchase of a security on margin.
4. Make loans, although the Fund may (a) purchase money
market securities and enter into repurchase
agreements, (b) acquire bonds, debentures, notes and
other debt securities, governmental obligations and
certificates of deposit, and (c) lend portfolio
securities.
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5. Borrow money, except that the Fund may borrow from
banks (including the Fund's custodian bank) and enter
into reverse repurchase agreements as a temporary
defensive measure for extraordinary or emergency
purposes, and then only in amounts not exceeding 10%
of its total assets, taken at market value, and may
pledge amounts of up to 20% of its total assets, taken
at market value, to secure such borrowings. For
purposes of this restriction, collateral arrangements
with respect to the writing of options, futures
contracts, options on futures contracts, and
collateral arrangements with respect to initial and
variation margin are not deemed to be a pledge of
assets, and neither such arrangements nor the purchase
and sale of options, futures or related options shall
be deemed to be the issuance of a senior security.
Whenever bank borrowings and the value of the Fund's
reverse repurchase agreements exceed 5% of the value
of the Fund's total assets, the Fund will not make any
additional purchases of securities for investment
purposes.
6. Underwrite securities of other persons, except to the
extent that the Fund may be deemed to be an
underwriter within the meaning of the 1933 Act in
connection with the purchase and sale of its portfolio
securities in the ordinary course of pursuing its
investment program.
7. Purchase or sell interests in oil, gas or other
mineral exploration or development programs.
8. Purchase the securities of any issuer if, as a result,
more than 25% of the value of the Fund's total assets,
taken at market value, would be invested in the
securities of issuers having their principal business
activities in the same industry. This restriction does
not apply to obligations issued or guaranteed by the
U.S. Government or by any of its agencies or
instrumentalities but will apply to foreign government
obligations unless the Securities and Exchange
Commission permits their exclusion.
9. Purchase a security if, as a result, with respect to
75% of the value of the Fund's total assets, taken at
market value, more than 5% of the Fund's total assets,
taken at market value, would be invested in the
securities of any one issuer (including repurchase
agreements with any one entity), except securities
issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities, and except that the
Fund may purchase securities of other investment
companies to the extent permitted by applicable law or
exemptive order.
10. Purchase a security if, as a result, more than 10% of
the outstanding voting securities of any issuer would
be held by the Fund, except that the Fund may purchase
securities of other investment companies to the extent
permitted by applicable law or exemptive order.
11. Issue senior securities, except as provided in
restriction number 5 above.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, the Fund will not:
12. Make investments for the purpose of exercising control
or management.
13. Lend its portfolio securities in excess of 33-1/3% of
its total assets, taken at market value; provided that
loans of portfolio securities shall be made in
accordance with the guidelines set forth under the
heading "Lending of Portfolio Securities."
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14. Invest in securities which are illiquid if more than
15% of the Fund's total assets, taken at market value,
would be invested in such securities.
15. Effect short sales of securities, except that the Fund
may make short sales "against the box" to the extent
that the value of the securities sold short, in the
aggregate, does not represent more than 10% of the
Fund's total assets, taken at market value, at any
given time.
Percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total
assets.
ASIAN FUND AND EUROPEAN FUND
The following fundamental policies and investment restrictions have been
adopted by Asian Fund and European Fund and, except as noted, such policies
cannot be changed without approval by the vote of a majority of the outstanding
voting securities of the applicable Fund, as defined in the 1940 Act.
The Funds may not:
1. Purchase or sell real estate or interests in real
estate (except that this restriction does not preclude
investments in marketable securities of companies
engaged in real estate activities).
2. Purchase or sell commodities or commodity contracts,
except that the Funds may purchase and sell stock
index and currency options, stock index futures,
interest rate futures, financial futures and currency
futures contracts and related options on such futures.
3. Purchase any security on margin, except that the Funds
may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of portfolio
securities. The payment by the Fund of initial or
variation margin in connection with futures or related
options transactions shall not be considered the
purchase of a security on margin.
4. Make loans, although the Funds may (a) purchase money
market securities and enter into repurchase
agreements, (b) acquire bonds, debentures, notes and
other debt securities, governmental obligations and
certificates of deposit, and (c) lend portfolio
securities.
5. Issue senior securities, except to the extent
permitted by the 1940 Act, including permitted
borrowings.
6. Underwrite securities of other persons, except to the
extent that a Fund may be deemed to be an underwriter
within the meaning of the 1933 Act in connection with
the purchase and sale of its portfolio securities in
the ordinary course of pursuing its investment
program.
7. Purchase the securities of any issuer if, as a result,
more than 25% of the value of a Fund's total assets,
taken at market value, would be invested in the
securities of issuers having their principal business
activities in the same industry. This restriction
does not apply to obligations issued or guaranteed by
the U.S. Government or by any of its agencies or
instrumentalities but will (unless and until SEC
changes its position) apply to foreign government
obligations unless the SEC permits their exclusion.
22
<PAGE> 66
8. Purchase a security if, as a result, with respect to
75% of the value of a Fund's total assets, taken at
market value, more than 5% of a Fund's total assets,
taken at market value, would be invested in the
securities of any one issuer, except securities issued
or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and except that a Fund
may purchase securities of other investment companies
to the extent permitted by applicable law or exemptive
order.
9. Purchase a security if, as a result, more than 10% of
the outstanding voting securities of any issuer would
be held by a Fund, except that a Fund may purchase
securities of other investment companies to the extent
permitted by applicable law or exemptive order.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, each of the Funds
will not:
10. Make investments for the purpose of exercising control
or management.
11. Lend its portfolio securities in excess of 33-1/3% of
its total assets, taken at market value; provided that
loans of portfolio securities shall be made in
accordance with the guidelines set forth under the
heading "Lending of Portfolio Securities."
12. Invest in securities which are illiquid if more than
15% of a Fund's total assets, taken at market value,
would be invested in such securities.
13. Effect short sales of securities, except that the Fund
may make short sales "against the box" to the extent
that the value of the securities sold short, in the
aggregate, does not represent more than 10% of the
Fund's total assets, taken at market value, at any
given time.
The following non-fundamental policies apply to all Funds. Subject to
the investment restriction on lending portfolio securities, number 13 for
Aggressive Growth Fund, Equity Fund, Growth Fund and Income Fund and number 11
for Asian Fund and European Fund, the Funds may from time to time lend
securities from their respective portfolios to brokers, dealers and financial
institutions such as banks and trust companies and receive collateral in cash
or securities issued or guaranteed by the U.S. Government which will be
maintained in an amount equal to at least 100% of the current market value of
the loaned securities. Such cash will be invested in short-term securities,
which will increase the current income of the applicable Fund. Such loans will
not be for more than 30 days and will be terminable at any time. The Funds
will have the right to regain record ownership of loaned securities to exercise
beneficial rights such as voting rights, subscription rights and rights to
dividends, interest or other distributions. The Funds may pay reasonable fees
to persons unaffiliated with the Funds for services in arranging such loans.
With respect to the lending of portfolio securities, there is the risk of
failure by the borrower to return the securities involved in such transactions.
See the information under the caption "Hedging Strategies and Other Investment
Techniques -- Lending of Portfolio Securities" above.
Each Fund's ability and decisions to purchase or sell portfolio
securities may be affected by laws or regulations relating to the
convertibility and repatriation of assets. Because the shares of a Fund are
redeemable on a daily basis in U.S. dollars, the Funds intend to manage their
portfolios so as to give reasonable assurance that they will be able to obtain
U.S. dollars to the extent necessary to meet anticipated redemptions. Under
present conditions, it is not believed that these considerations will have any
significant effect on the Funds' portfolio strategies.
23
<PAGE> 67
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during at least the last five years are set forth below.
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST
------------------- ---------------------------------------------
NAME, ADDRESS AND AGE REGISTRANT 5 YEARS
--------------------- ---------- -------
<S> <C> <C>
*CHARLES T. BAUER (78) Director and Chairman of the Board of Directors,
11 Greenway Plaza, Suite 100 Chairman A I M Management Group Inc., A I M Advisors,
Houston, TX 77046 Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company;
and Vice Chairman and Director, AMVESCAP PLC.
BRUCE L. CROCKETT (53) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief
McLean, VA 22102 Executive Officer, COMSAT Corporation; and
Chairman, Board of Governors of INTELSAT
(international communications company).
OWEN DALY II (73) Director Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company and
Monumental General Insurance Company; and
Chairman of the Board of Equitable
Bancorporation.
JACK FIELDS (46) Director Chief Executive Officer, Texana Global, Inc.
Jetero Plaza, Suite E Formerly, Member of the U. S. House of
8810 Will Clayton Parkway Representatives.
Humble, TX 77338
</TABLE>
- ----------------
* A director who is an interested person of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
24
<PAGE> 68
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST
------------------- ---------------------------------------------
NAME, ADDRESS AND AGE REGISTRANT 5 YEARS
--------------------- ---------- -------
<S> <C> <C>
**CARL FRISCHLING (60) Director Partner, Kramer, Levin, Naftalis & Frankel
919 Third Avenue (law firm). Director, ERD Waste, Inc. (waste
New York, NY 10022 management company), Aegis Consumer Finance
(auto leasing company) and Lazard Funds, Inc.
(investment companies). Formerly, Partner,
Reid & Priest (law firm); and, prior thereto,
Partner, Spengler Carlson Gubar Brodsky &
Frischling (law firm).
*ROBERT H. GRAHAM (51) Director and Director, President and Chief Executive
11 Greenway Plaza, Suite 100 President Officer, A I M Management Group Inc.;
Houston, TX 77046 Director and President, A I M Advisors, Inc.;
Director and Senior Vice President,
A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company;
and Director, AMVESCAP PLC.
JOHN F. KROEGER (73) Director Director, Flag Investors International Fund,
37 Pippins Way Inc., Flag Investors Emerging Growth Fund,
Morristown, NJ 07960 Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund,
Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund,
Inc., Managed Municipal Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag
Investors Maryland Intermediate Tax-Free
Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash
Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment
companies). Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK (55) Director Attorney in private practice in Houston,
6363 Woodway, Suite 825 Texas.
Houston, TX 77057
</TABLE>
- ----------------
** A director who is an "interested person" of the Company as defined in the
1940 Act.
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
25
<PAGE> 69
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST
------------------- ---------------------------------------------
NAME, ADDRESS AND AGE REGISTRANT 5 YEARS
--------------------- ---------- -------
<S> <C> <C>
IAN W. ROBINSON (74) Director Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management
Tequesta, FL 33469 Services, Inc. (provider of centralized
management services to telephone companies);
Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone
companies); and Vice President and Chief
Financial Officer, Bell Telephone Company of
Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR (58) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
***JOHN J. ARTHUR (53) Senior Vice Director, Senior Vice President and
11 Greenway Plaza, Suite 100 President and Treasurer, A I M Advisors, Inc.; and Vice
Houston, TX 77046 Treasurer President and Treasurer, A I M Management
Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company.
GARY T. CRUM (50) Senior Vice Director and President, A I M Capital
11 Greenway Plaza, Suite 100 President Management, Inc.; Director and Senior Vice
Houston, TX 77046 President, A I M Management Group Inc. and
A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP PLC.
</TABLE>
- -----------------
*** Mr. Arthur and Ms. Relihan are married to each other.
26
<PAGE> 70
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST
------------------- ---------------------------------------------
NAME, ADDRESS AND AGE REGISTRANT 5 YEARS
--------------------- ---------- -------
<S> <C> <C>
***CAROL F. RELIHAN (43) Senior Vice Director, Senior Vice President, General
11 Greenway Plaza, Suite 100 President and Counsel and Secretary, A I M Advisors, Inc.;
Houston, TX 77046 Secretary Vice President, General Counsel and
Secretary, A I M Management Group Inc.;
Director, Vice President and General Counsel,
Fund Management Company; Vice President,
A I M Capital Management, Inc. and
A I M Distributors, Inc.; and General Counsel
and Vice President, A I M Fund Services, Inc.
DANA R. SUTTON (39) Vice President and Vice President and Fund Controller,
11 Greenway Plaza, Suite 100 Assistant Treasurer A I M Advisors, Inc.; and Assistant Vice
Houston, TX 77046 President and Assistant Treasurer, Fund
Management Company.
ROBERT G. ALLEY (49) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc.; and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance Officer,
11 Greenway Plaza, Suite 100 A I M Advisors, Inc., A I M Capital
Houston, TX 77046 Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management
Company.
JONATHAN C. SCHOOLAR (36) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc.; and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
</TABLE>
The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. The Audit
Committee is responsible for meeting with the Company's auditors to review
audit procedures and results and to consider any matters arising from an audit
to be brought to the attention of the directors as a whole with respect to the
Company's fund accounting or its internal accounting controls, and for
considering such matters as may from time to time be set forth in a charter
adopted by the Board of Directors and such committee.
- -----------------
*** Mr. Arthur and Ms. Relihan are married to each other.
27
<PAGE> 71
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. The
Investments Committee is responsible for reviewing portfolio compliance,
brokerage allocation, portfolio investment pricing issues, interim dividend and
distribution issues, and considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Fields, Kroeger, Pennock (Chairman), Robinson and Sklar. The
Nominating and Compensation Committee is responsible for considering and
nominating individuals to stand for election as directors who are not
interested persons as long as the Company maintains a distribution plan
pursuant to Rule 12b-1 under the 1940 Act, reviewing from time to time the
compensation payable to the disinterested directors, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such committee.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in attending each
meeting of the Board of Directors or any committee thereof. Each director who
is not also an officer of the Company is compensated for his services
according to a fee schedule which recognizes the fact that such director also
serves as a director or trustee of other AIM Funds. Each such director
receives a fee, allocated among the AIM Funds for which he serves as a director
or trustee, which consists of an annual retainer component and a meeting fee
component.
28
<PAGE> 72
Set forth below is information regarding compensation paid or
accrued for each director of the Company:
<TABLE>
<CAPTION>
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED COMPENSATION
COMPENSATION BY ALL APPLICABLE FROM ALL APPLICABLE
DIRECTOR FROM COMPANY(1) AIM FUNDS(2)(3) AIM FUNDS(4)
-------- --------------- ----------------- -------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
Bruce L. Crockett 6,760 67,774 84,000
Owen Daly II 6,760 103,542 84,000
Jack Fields 4,548 0 71,000
Carl Frischling(5) 6,760 96,520 84,000
Robert H. Graham 0 0 0
John F. Kroeger 6,760 94,132 82,500
Lewis F. Pennock 6,760 55,777 84,000
Ian W. Robinson 6,760 85,912 84,000
Louis S. Sklar 6,680 84,370 83,500
</TABLE>
- ----------------
(1) The total amount of compensation deferred by all directors of the
Company during the fiscal year ended October 31, 1997, including interest
earned thereon, was $28,167.
(2) During the fiscal year ended October 31, 1997, the total amount of
expenses allocated to the Company in respect of such retirement benefits was
$27,879. Data reflect compensation earned for the calendar year ended December
31, 1997.
(3) As used herein, "Applicable AIM Funds" means the regulated investment
companies managed by AIM.
(4) Each Director serves as director or trustee of a total of eleven
registered investment companies advised by AIM (comprised of over 45
portfolios). Data reflect total compensation earned during the calendar year
ended December 31, 1997.
(5) The Company paid the law firm of Kramer, Levin, Naftalis & Frankel
$27,224 in legal fees for services provided to the Funds during the fiscal year
ended October 31, 1997. Mr. Frischling, a Director of the Company, is a
partner in such firm.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the Applicable AIM Funds. Each
29
<PAGE> 73
eligible director is entitled to receive an annual benefit from the Applicable
AIM Funds commencing on the first day of the calendar quarter coincident with
or following his date of retirement equal to 75% of the retainer paid or
accrued by the Applicable AIM Funds for such director during the twelve-month
period immediately preceding the director's retirement (including amounts
deferred under a separate agreement between the Applicable AIM Funds and the
director) for the number of such director's years of service (not in excess of
10 years of service) completed with respect to any of the Applicable AIM Funds.
Such benefit is payable to each eligible director in quarterly installments.
If an eligible director dies after attaining the normal retirement date but
before receipt of any benefits under the Plan commences, the director's
surviving spouse (if any) shall receive a quarterly survivor's benefit equal to
50% of the amount payable to the deceased director for no more than ten years
beginning the first day of the calendar quarter following the date of the
director's death. Payments under the Plan are not secured or funded by any AIM
Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar are 10,10, 0, 20, 19, 16, 10 and 8 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Number of Years Annual Retainer
of Service with Paid by all Applicable AIM Funds
the Applicable
AIM Funds $80,000
--------------- --------------------------------
<S> <C>
10 $60,000
9 $54,000
8 $48,000
7 $42,000
6 $36,000
5 $30,000
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Company, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will
be paid in cash, in generally equal quarterly installments over a period of
five (5) or ten (10) years (depending on the Agreement) beginning on the date
the deferring director's retirement benefits commence under the Plan. The
Company's Board of Directors, in its sole discretion, may accelerate or extend
the distribution of such deferral accounts after the deferring director's
termination of service as a director of the Company. If a deferring director
dies prior to the distribution of amounts in his deferral account, the balance
of the deferral account will be distributed to his designated beneficiary in a
single lump sum payment as soon as practicable after
30
<PAGE> 74
such deferring director's death. The Agreements are not funded and, with
respect to the payments of amounts held in the deferral accounts, the deferring
directors have the status of unsecured creditors of the Company and of each
other AIM Fund from which they are deferring compensation.
INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), a holding company that has been engaged in the financial services
business since 1976. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, United Kingdom.
AIM and the Company have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Directors reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Sanctions for violations
of the Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
The Company, on behalf of the Funds, has entered into a Master
Investment Advisory Agreement ("Investment Advisory Agreement") and a Master
Administrative Services Agreement ("Administrative Services Agreement"), both
dated February 28, 1997, as amended, with AIM. In addition, AIM has entered
into a Master Sub-Advisory Agreement (the "Sub- Advisory Agreement") with
INVESCO Global Asset Management Limited ("IGAM") with respect to Asian Fund and
European Fund. In addition, IGAM has entered into a Sub-Sub-Advisory Agreement
with INVESCO Asia Limited ("IAL") with respect to Asian Fund and a
Sub-Sub-Advisory Agreement with INVESCO Asset Management Limited ("IAML") with
respect to European Fund. See "Management" in the Prospectus.
The Investment Advisory Agreement and, with respect to Asian Fund and
European Fund, the Sub-Advisory Agreement and Sub-Sub-Advisory Agreements
provide that each Fund will pay or cause to be paid all expenses of the Fund
not assumed by AIM (or IGAM, IAL and IAML), including, without limitation:
brokerage commissions; taxes, legal, accounting, auditing or governmental fees;
the cost of preparing share certificates; custodian, transfer and shareholder
service agent costs; expenses of issue, sale, redemption and repurchase of
shares; expenses of registering and qualifying shares for sale; expenses
relating to directors and shareholders meetings; the cost of preparing and
distributing reports and notices to shareholders; the fees and other expenses
incurred by the Company on behalf of a Fund in connection with membership in
investment company organizations; the cost of printing copies of prospectuses
and statements of additional information distributed to each Fund's
shareholders; and all other charges and costs of a Fund's operations unless
otherwise expressly provided.
The Investment Advisory Agreement for the Funds and the Sub-Advisory
Agreement and Sub-Sub-Advisory Agreements for Asian Fund and European Fund,
each provides that such agreement will continue in effect for two years, and
from year to year thereafter only if such continuance is specifically approved
at least annually by the Company's Board of Directors and by the affirmative
vote of a majority of the directors who are not parties to the agreement or
"interested persons" of any such party (the "Non-Interested Directors") by
votes cast in person at a meeting called for such purpose. The Investment
Advisory Agreement and the Sub-Advisory Agreement each provides that the Funds
or AIM and, with respect to the Sub-Sub-Advisory Agreements each provides that
the applicable Fund, Sub-Sub-Advisor or the Sub-Advisor, may terminate such
agreement on sixty (60) days' written notice without penalty. The
31
<PAGE> 75
Investment Advisory Agreement, Sub-Advisory Agreement and Sub-Sub-Advisory
Agreements each terminates automatically in the event of its assignment. Under
the Investment Advisory Agreement, AIM is entitled to receive from each Fund a
fee calculated at the following annual rates based on the average daily net
assets of the Fund:
AIM ASIAN GROWTH FUND
AIM EUROPEAN DEVELOPMENT FUND
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C> <C>
First $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.95%
Over $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.90%
AIM GLOBAL AGGRESSIVE GROWTH FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.90%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.85%
AIM GLOBAL GROWTH FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.85%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
AIM GLOBAL INCOME FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.70%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.65%
AIM INTERNATIONAL EQUITY FUND
Net Assets Annual Rate
---------- -----------
First $1 billion . . . . . . . . . . . . . . . . . . . . . . . 0.95%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . 0.90%
</TABLE>
AIM has voluntarily agreed to waive advisory fees under the Investment
Advisory Agreement in order to achieve the following annual fee structure for
Equity Fund: 0.95% of the first $500 million of Equity Fund's average daily net
assets; 0.90% of the next $500 million of Equity Fund's average daily net
assets; and 0.85% of Equity Fund's average daily net assets exceeding $1
billion. AIM may terminate such fee waiver at any time without notice to
Shareholders.
AIM may from time to time voluntarily waive or reduce its fees, while
retaining its ability to be reimbursed for such fee prior to the end of each
fiscal year. Any fee waivers will be shared proportionately
32
<PAGE> 76
by the sub-advisor. Fee waivers or reductions other than those contained in
the Advisory Agreement, Sub-Advisory Agreement or Sub-Sub-Advisory Agreements,
may be modified or terminated at any time and without notice to investors.
For the fiscal years ended October 31, 1997, 1996 and 1995, AIM
received advisory fees, net of advisory fee waivers from each Fund as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 19,996,061 $ 8,571,918 $ 1,106,108
Equity Fund $ 17,546,102 $ 10,085,495 $ 6,148,093
Growth Fund $ 2,895,282 $ 1,163,814 $ 125,323
Income Fund $ 44,375 $ -0- $ -0-
</TABLE>
Under the Sub-Advisory Agreement, IGAM is entitled to receive from AIM
with respect to each of Asian Fund and European Fund, a fee calculated at the
following annual rates based on the average daily net assets of the Fund:
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C>
First $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.20%
Over $ 500 million . . . . . . . . . . . . . . . . . . . . . . 0.175%
</TABLE>
Under the Sub-Sub-Advisory Agreements IAL, with respect to Asian Fund,
and IAML, with respect to European Fund, are each entitled to receive from IGAM
an annual fee equal to 100% of the fee received by the Sub-Advisor with respect
to the applicable Fund.
For the fiscal years ended October 31, 1997, 1996 and 1995, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ -0- $ -0- $ -0-
Equity Fund $ 738,005 $ 299,147 $ 77,672
Growth Fund $ -0- $ -0- $ 19,558
Income Fund $ 302,278 $ 182,596 $ 55,087
</TABLE>
The Administrative Services Agreement for the Funds provides that AIM
may perform, or arrange for the performance of, certain accounting and other
administrative services to each Fund which are not required to be performed by
AIM under the Investment Advisory Agreement. For such services, AIM is entitled
to receive from each Fund reimbursement of AIM's costs or such reasonable
compensation as may be approved by the Company's Board of Directors. The
Administrative Services Agreement provides that such agreement will continue in
effect for two years, and shall continue in effect from year to year thereafter
only if such continuance is specifically approved at least annually by the
Company's Board of Directors, and by the affirmative note of the Non-Interested
Directors by votes cast in person at a meeting called for such purpose.
For the fiscal years ended October 31, 1997, 1996 and 1995, AIM
received reimbursement of administrative services costs from each Fund as
follows:
33
<PAGE> 77
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 109,161 $ 86,330 $ 25,218
Equity Fund $ 105,163 $ 94,250 $ 29,858
Growth Fund $ 87,673 $ 78,151 $ 21,984
Income Fund $ 74,031 $ 74,433 $ 29,858
</TABLE>
In addition, the Transfer Agency and Service Agreement for the Funds
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent
and wholly owned subsidiary of AIM, will perform certain shareholder services
for the Funds for a fee per account serviced. The Transfer Agency and Service
Agreement provides that AFS will process orders for purchases, redemptions and
exchanges of shares, prepare and transmit payments for dividends and
distributions declared by the Funds, maintain shareholder accounts and provide
shareholders with information regarding the Funds and their accounts.
For the fiscal years ended October 31, 1997, 1996 and 1995, AFS
received transfer agency and shareholder services fees with respect to each
Fund as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 3,429,751 $ 1,474,675 $ 258,683
Equity Fund $ 1,774,819 $ 1,170,699 $ 757,067
Growth Fund $ 479,472 $ 216,804 $ 33,579
Income Fund $ 72,578 $ 40,282 $ 9,321
</TABLE>
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN. The Company has adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to the Class A and
Class C shares of the Funds (the "Class A and C Plan"). The Class A and C Plan
provides that for Aggressive Growth Fund, Growth Fund and Income Fund the Class
A shares pay 0.50% per annum of their average daily net assets, for Equity Fund
the Class A shares pay 0.30% per annum of their average daily net assets and
for Asian Fund and European Fund the Class A shares pay 0.35% per annum of
their average daily net assets as compensation to AIM Distributors for the
purpose of financing any activity which is primarily intended to result in the
sale of Class A shares. Under the Class A and C Plan, Class C shares of each
Fund pay compensation to AIM Distributors at an annual rate of 1.00% of the
average daily net assets attributable to Class C shares. Of such amount, each
Fund pays a service fee of 0.25% of the average daily net assets attributable
to Class A and Class C shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who
purchase and own Class A and Class C shares. Activities appropriate for
financing under the Class A and C Plan include, but are not limited to, the
following: printing of prospectuses and statements of additional information
and reports for other than existing shareholders; overhead; preparation and
distribution of advertising material and sales literature; expenses of
organizing and conducting sales seminars; supplemental payments to dealers and
other institutions such as asset-based sales charges or as payments of service
fees under shareholder service arrangements; and costs of administering the
Class A and C Plan.
THE CLASS B PLAN. The Company has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
the Funds (the "Class B Plan", and collectively with the Class A and C Plan,
the "Plans"). Under the Class B Plan, each Fund pays compensation to AIM
Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class B shares. Of such amount, each Fund pays a service fee of
0.25% of the average daily net assets attributable to Class B shares to
selected dealers and other institutions which furnish continuing personal
shareholder services to their
34
<PAGE> 78
customers who purchase and own Class B shares. Amounts paid in accordance with
the Class B Plan may be used to finance any activity primarily intended to
result in the sale of Class B shares, including but not limited to printing of
prospectuses and statements of additional information and reports for other
than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and
conducting sales seminars; supplemental payments to dealers and other
institutions such as asset-based sales charges or as payments of service fees
under shareholder service arrangements; and costs of administering the Class B
Plan. AIM Distributors may transfer and sell its rights to payments under the
Class B Plan in order to finance distribution expenditures in respect of Class
B shares.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment
dealers selected from time to time by AIM Distributors for the provision of
distribution assistance in connection with the sale of the Funds' shares to
such dealers' customers, and for the provision of continuing personal
shareholder services to customers who may from time to time directly or
beneficially own shares of the Funds. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: distributing sales literature; answering routine customer inquiries
concerning the Funds; assisting customers in changing dividend options, account
designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of the Funds' shares;
assisting in the establishment and maintenance of customer accounts and records
and in the processing of purchase and redemption transactions; investing
dividends and any capital gains distributions automatically in the Funds'
shares; and providing such other information and services as the Funds or the
customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding a Fund and
the Company; performing sub-accounting; establishing and maintaining
shareholder accounts and records; processing customer purchase and redemption
transactions; providing periodic statements showing a shareholder's account
balance and the integration of such statements with those of other transactions
and balances in the shareholder's other accounts serviced by the bank;
forwarding applicable prospectuses, proxy statements, reports and notices to
bank clients who hold Fund shares; and such other administrative services as a
Fund reasonably may request, to the extent permitted by applicable statute,
rule or regulation. Similar agreements may be permitted under the Plans for
institutions which provide recordkeeping for and administrative services to
401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
Under a Shareholder Service Agreement, a Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment
period for each business day of the Funds during such period at the annual rate
of 0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only
to those selected dealers or other institutions who are dealers or institutions
of record at the close of business on the last business day of the applicable
payment period for the account in which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments
made to dealers and other financial institutions who provide continuing
personal shareholder services to their customers who purchase and own shares of
the Funds to no more than 0.25% per annum of the average daily net assets of
the funds attributable to the customers of such dealers or financial
35
<PAGE> 79
institutions, and by imposing a cap on the total sales charges, including asset
based sales charges, that may be paid by the Funds and their respective
classes.
AIM Distributors does not act as principal, but rather as agent for
the Fund, in making dealer incentive and shareholder servicing payments under
the Plans. These payments are an obligation of the Fund and not of AIM
Distributors.
For the fiscal year ended October 31, 1997, the Funds paid the
following amounts under the Class A and C Plan and the Class B Plan:
<TABLE>
<CAPTION>
% of Class
Average Daily
Net Assets
------------------------------
Class A Class B Class C* Class A Class B Class C
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Fund $ 5,877,002 $ 11,173,566 $ 6,233 0.50% 1.00% 1.00%
Equity Fund $ 4,249,575 $ 5,581,303 $ 13,568 0.30% 1.00% 1.00%
Growth Fund $ 778,588 $ 1,847,507 $ 1,532 0.50% 1.00% 1.00%
Income Fund $ 137,912 $ 219,155 $ 240 0.50% 1.00% 1.00%
</TABLE>
An estimate by category of actual fees paid by the Funds with regard to the
Class A shares under the Class A and C Plan during the year ended October 31,
1997 follows:
<TABLE>
<CAPTION>
Aggressive Equity Growth Income
Growth Fund Fund Fund Fund
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
CLASS A
Advertising . . . . . . . . . . . . $ 140,844 $ 439,918 $ 23,330 $ 4,444
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) . . . . . . . . . . . $ 12,986 $ 39,902 $ 2,029 $ -0-
Seminars . . . . . . . . . . . . . . $ 38,957 $ 120,702 $ 7,100 $ 1,111
Compensation to Underwriters to partially
offset other marketing expenses . . $ -0- $ -0- $ -0- $ -0-
Compensation to Dealers including
finder's fees . . . . . . . . . . . $ 5,684,215 $ 3,650,053 $ 746,129 $ 132,357
Compensation to Sales Personnel . . $ -0- $ -0- $ -0- $ -0-
Annual Report Total . . . . . . . . $ 5,877,002 $ 4,249,575 $ 778,588 $ 137,912
</TABLE>
- --------------
* The Class C shares of all Funds commenced sales on August 4, 1997.
36
<PAGE> 80
An estimate by category of actual fees paid by the Funds under the
Class B Plan during the year ended October 31, 1997 as follows:
<TABLE>
<CAPTION>
Aggressive Equity Growth Income
Growth Fund Fund Fund Fund
----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
CLASS B
Advertising . . . . . . . . . . . . $ 1,170,558 $ 574,366 $ 191,750 $ 20,522
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) . . . . . . . . . . . $ 108,051 $ 51,943 $ 16,978 $ 1,954
Seminars . . . . . . . . . . . . . . $ 320,152 $ 156,827 $ 51,932 $ 6,840
Compensation to Underwriters to partially
offset upfront dealer commissions and
other marketing costs . . . . . . . $ 8,380,175 $ 4,185,977 $ 1,385,630 $ 164,366
Compensation to Dealers . . . . . . $ 1,194,630 $ 612,190 $ 201,217 $ 25,473
Compensation to Sales Personnel . . $ -0- $ -0- $ -0- $ -0-
Annual Report Total . . . . . . . . $11,173,566 $ 5,581,303 $ 1,847,507 $ 219,155
</TABLE>
An estimate by category of actual fees paid by the Funds with regard
to the Class C shares under the Class A and C Plan during the period August 4,
1997 (inception date) through October 31, 1997 as follows:
<TABLE>
<CAPTION>
Aggressive Equity Growth Income
Growth Fund Fund Fund Fund
----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
CLASS C
Advertising . . . . . . . . . . . . $ 1,095 $ 2,652 $ 310 $ 10
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) . . . . . . . . . . . $ 70 $ 222 $ 68 $ 1
Seminars . . . . . . . . . . . . . . $ 388 $ 411 $ -0- $ -0-
Compensation to Underwriters to partially
offset upfront dealer commissions and
other marketing costs . . . . . . . $ 4,675 $ 10,176 $ 1,149 $ 180
Compensation to Dealers . . . . . . $ 5 $ 107 $ 5 $ 49
Compensation to Sales Personnel . . $ -0- $ -0- $ -0- $ -0-
Annual Report Total . . . . . . . . $ 6,233 $ 13,568 $ 1,532 $ 240
</TABLE>
37
<PAGE> 81
The Plans require AIM Distributors to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plans and the purposes for which such expenditures were made. The Board of
Directors reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Directors, including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of the Company and who have no direct or indirect financial interest
in the operation of the Plans or in any agreements related to the Plans
("Qualified Directors"). In approving the Plans in accordance with the
requirements of Rule 12b-1, the directors considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of the Funds and their respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the
fee payable to AIM Distributors thereunder at any given time, the Funds will
not be obligated to pay more than that fee. If AIM Distributors' expenses are
less than the fee it receives, AIM Distributors will retain the full amount of
the fee.
Unless terminated earlier in accordance with their terms, the Plans
continue in effect until June 30, 1998 and each year thereafter, as long as
such continuance is specifically approved at least annually by the Board of
Directors, including a majority of the Qualified Directors.
The Plans may be terminated by the vote of a majority of the
Independent Directors, or, with respect to a particular class, by the vote of a
majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the
distribution expenses paid by the applicable class requires shareholder
approval; otherwise, it may be amended by the directors, including a majority
of the Qualified Directors, by votes cast in person at a meeting called for the
purpose of voting upon such amendment. As long as the Plans are in effect, the
selection or nomination of the Qualified Directors is committed to the
discretion of the Qualified Directors. In the event the Class A and C Plan is
amended in a manner which the Board of Directors determines would materially
increase the charges paid under the Class A and C Plan, the Class B shares of
the Funds will no longer convert into Class A shares of the same Funds unless
the Class B shares, voting separately, approve such amendment. If the Class B
shareholders do not approve such amendment, the Board of Directors will (i)
create a new class of shares of the Funds which is identical in all material
respects to the Class A shares as they existed prior to the implementation of
the amendment and (ii) ensure that the existing Class B shares of the Funds
will be exchanged or converted into such new class of shares no later than the
date the Class B shares were scheduled to convert into Class A shares.
The principal differences between the Class A and C Plan, on the one
hand, and the Class B Plan, on the other hand, are: (i) the Class A and C Plan
allows payment to AIM Distributors or to dealers or financial institutions of
up to 0.50% of average daily net assets of the Class A shares of Aggressive
Growth Fund, Income Fund, and Growth Fund, of up to 0.35% of average daily net
assets of the Class A shares of Asian Fund and European Fund, and of up to
0.30% of average daily net assets of the Class A shares of Equity Fund, as
compared to 1.00% of such assets of each Fund's Class B shares; (ii) the Class
B Plan obligates the Class B shares to continue to make payments to AIM
Distributors following termination of the Class B shares Distribution Agreement
with respect to Class B shares sold by or attributable to the distribution
efforts of AIM Distributors unless there has been a complete termination of the
Class B Plan (as defined in such Plan) and (iii) the Class B Plan expressly
authorizes AIM Distributors to assign, transfer or pledge its rights to
payments pursuant to the Class B Plan.
38
<PAGE> 82
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of
the Funds' shares is set forth in the Prospectus under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." A
Master Distribution Agreement with AIM Distributors relating to the Class A
and Class C shares of the Funds was approved by the Board of Directors on June
11, 1997. A Master Distribution Agreement with AIM Distributors relating to
the Class B shares of the Funds was also approved by the Board of Directors on
December 11, 1996. Both such Master Distribution Agreements are hereinafter
collectively referred to as the "Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear
the expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or
sales literature used by AIM Distributors or furnished by AIM Distributors to
dealers in connection with the public offering of the Funds' shares, including
expenses of advertising in connection with such public offerings. AIM
Distributors has not undertaken to sell any specified number of shares of any
classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of
the Funds at the time of such sales. Payments with respect to Class B shares
will equal 4.0% of the purchase price of the Class B shares sold by the dealer
or institution, and will consist of a sales commission equal to 3.75% of the
purchase price of the Class B shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. The portion of the payments
to AIM Distributors under the Class B Plan which constitutes an asset-based
sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a
portion of such sales commissions plus financing costs. AIM Distributors
anticipates that it will require a number of years to recoup from Class B Plan
payments the sales commissions paid to dealers and institutions in connection
with sales of Class B shares. In the future, if multiple distributors serve a
Fund, each such distributor (or its assignee or transferee) would receive a
share of the payments under the Class B Plan based on the portion of the Fund's
Class B shares sold by or attributable to the distribution efforts of that
distributor.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares.
AIM Distributors will retain all payments received by it relating to Class C
shares for the first year after they are purchased. The portion of the
payments to AIM Distributors under the Class A and C Plan attributable to Class
C shares which constitutes an asset-based sales charge (0.75%) is intended in
part to permit AIM Distributors to recoup a portion of on-going sales
commissions to dealers plus financing costs, if any. After the first full
year, AIM Distributors will make such payments quarterly to dealers and
institutions based on the average net asset value of Class C shares which are
attributable to shareholders for whom the dealers and institutions are
designated as dealers of record.
The Company (on behalf of any class of the Funds) or AIM Distributors
may terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate automatically in
the event of their assignment. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset based distribution fees in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments to AIM Distributors. Termination of the
Class B Plan or Distribution Agreement does not affect the obligation of the
Funds and their Class B shareholders to pay contingent deferred sales charges.
39
<PAGE> 83
The following chart reflects the total sales charges paid in
connection with the sale of Class A shares of each Fund and the amount retained
by AIM Distributors for the fiscal years ended October 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- -----
Sales Amount Sales Amount Sales Amount
Charges Retained Charges Retained Charges Retained
------------ ---------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund $12,462,271 $2,200,552 $17,453,757 $3,270,278 $4,770,524 $779,090
Equity Fund $ 7,481,513 $1,172,508 $ 8,663,571 $1,489,975 $3,662,531 $565,101
Growth Fund $ 1,621,736 $ 286,414 $ 2,044,262 $ 388,799 $ 473,172 $ 82,337
Income Fund $ 348,033 $ 59,763 $ 325,210 $ 57,096 $ 156,910 $ 27,115
</TABLE>
The following chart reflects the contingent deferred sales charges
paid by Class A, Class B and Class C shareholders for the fiscal years ended
October 31, 1997, 1996 and 1995 for Class A and Class B shares and for the
period August 4, 1997 (inception date) through October 31, 1997 for Class C
shares:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $133,018 $ 84,130 $ 68,427
Equity Fund $ 91,984 $ 39,753 $106,168
Growth Fund $ 25,870 $ 14,106 $ 25,155
Income Fund $ 3,397 $ 4,924 $ 3,877
</TABLE>
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of each Fund may
be purchased appears in the Prospectus under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."
The sales charge normally deducted on purchases of Class A shares of
each Fund is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of the Fund's Class
A shares. Since there is little expense associated with unsolicited orders
placed directly with AIM Distributors by persons who, because of their
relationship with the Funds or with AIM and its affiliates, are familiar with
the Funds, or whose programs for purchase involve little expense (e.g., because
of the size of the transaction and shareholder records required), AIM
Distributors believes that it is appropriate and in the Funds' best interest
that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase Class A
shares of the Funds through AIM Distributors without payment of a sales charge.
The persons who may purchase Class A shares of the Funds without a sales charge
are set forth in the Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under
the heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the heading "How to Redeem Shares." AIM may redeem all
shares of Aggressive Growth Fund, Equity Fund and Growth Fund in cash. In
addition to the Funds' obligation to redeem shares, AIM Distributors may also
repurchase shares as an accommodation to shareholders. To effect a repurchase,
those dealers who have executed Selected Dealer Agreements with AIM
Distributors must phone orders to the order desk of the Fund (Telephone: (800)
959-4246) and guarantee delivery of all required documents in good order. A
repurchase is effected at the net asset value per share of a Fund next
determined after the repurchase order is received. Such arrangement is subject
to timely receipt by A I M Fund Services, Inc., the Funds' transfer agent, of
all required documents in good order. If such documents are not received
within a reasonable time after the order
40
<PAGE> 84
is placed, the order is subject to cancellation. While there is no charge
imposed by the Funds or by AIM Distributors (other than any applicable CDSC)
when shares are redeemed or repurchased, dealers may charge a fair service fee
for handling the transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE ") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
NET ASSET VALUE DETERMINATION
In accordance with current SEC rules and regulations, the net asset
value per share of a Fund is determined once daily as of the close of trading
of the NYSE (generally 4:00 p.m. Eastern Time) on each business day of the
Fund. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time)
on a particular day, the net asset value of a Fund share is determined as of
the close of the NYSE on such day. For purposes of determining net asset value
per share, futures and options contract closing prices which are available
fifteen (15) minutes after the close of trading of the NYSE will generally be
used. Each Class' net asset value per share is determined by subtracting the
Class' liabilities (e.g., the expenses) from the Class' assets, and dividing
the result by the total number of Class shares outstanding. Determination of
the Class' net asset value per share is made in accordance with generally
accepted accounting principles.
Equity securities listed or traded on U.S. or foreign securities
exchanges or included in a national market system are valued at the last quoted
sales price. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors of the Company. Short-term obligations having 60 days
or less to maturity are valued at amortized cost, which approximates fair
market value.
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset value
of a Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares of the same class of each Fund unless the
shareholder has requested in writing to receive such dividends and
distributions in cash or that they be invested in shares of another AIM Fund,
subject to the terms and conditions set forth in the Prospectus under the
caption "Special Plans -- Automatic Dividend Investment Plan." If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
41
<PAGE> 85
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting each Fund and its shareholders that are not
described in the Funds' Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Funds' Prospectus is not intended as a substitute
for careful tax planning. Investors are urged to consult their tax advisers
with specific reference to their own tax situation.
Qualification as a Regulated Investment Company. As stated in the
Funds' Prospectus, each Fund intends to qualify each year as a regulated
investment company under Part I of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In order to qualify for tax treatment as a
regulated investment company under the Code, each Fund is required, among other
things, to derive at least 90% of its gross income in each taxable year from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
and other income (including but not limited to gains from options, futures or
forward contracts derived with respect to the Fund's business of investing in
such stock, securities or currencies) (the "Income Requirement"). Foreign
currency gains (including gains from options, futures or forward contracts on
foreign currencies) that are not "directly related" to a Fund's principal
business may, under regulations not yet issued, not be qualifying income for
purposes of the Income Requirement.
At the close of each quarter of its taxable year, at least 50% of the
value of each Fund's assets must consist of cash and cash items, U.S.
Government securities, securities of other regulated investment companies, and
securities of other issuers (as to which the Fund has not invested more than 5%
of the value of its total assets in securities of such issuer and as to which
the Fund does not hold more than 10% of the outstanding voting securities of
such issuer), and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two
or more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses (the "Asset Diversification Test"). For purposes
of the Asset Diversification Test, it is unclear under present law who should
be treated as the issuer of forward foreign currency exchange contracts, of
options on foreign currencies, or of foreign currency futures and related
options. It has been suggested that the issuer in each case may be the foreign
central bank or foreign government backing the particular currency.
Consequently, a Fund may find it necessary to seek a ruling from the Internal
Revenue Service on this issue or to curtail its trading in forward foreign
currency exchange contracts in order to stay within the limits of the Asset
Diversification Test.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and
such distributions will be taxable as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions will
be eligible for the dividends received deduction in the case of corporate
shareholders.
Fund Distributions. Under the Code, each Fund is exempt from U.S.
federal income tax on its net investment income and realized capital gains
which it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (net investment income and the excess
of net short-term capital gain over net long-term capital loss) and its net
exempt-interest income for the year. Distributions of investment company
taxable income will be taxable to shareholders as ordinary income, regardless
of whether such distributions are paid in cash or are reinvested in shares.
Each Fund also intends to distribute to shareholders substantially all
of the excess of its net long-term capital gain over net short-term capital
loss as a capital gain dividend. Capital gain dividends are taxable to
shareholders as a long-term capital gain, regardless of the length of time a
shareholder has held his shares.
42
<PAGE> 86
Treasury regulations permit a regulated investment company in
determining its investment company taxable income and undistributed net capital
gain for any taxable year to elect to treat all or part of any net capital
loss, any net long-term capital loss, or any net foreign currency loss incurred
after October 31 as if it had been incurred in the succeeding year.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute in each calendar year an amount equal to 98%
of their ordinary taxable income for the calendar year plus 98% of their
"capital gain net income" (excess of capital gains over capital losses) for the
one-year period ending on October 31 of such calendar year. The balance of
such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable
year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(1) offset a net ordinary loss (but not below the net capital gain) for any
calendar year in determining its capital gain net income for the one-year
period ending on October 31 of such calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, to include such gains and losses in determining ordinary taxable
income for the succeeding calendar year). Each Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and
capital gain net income prior to the end of each calendar year to avoid
liability for the excise tax.
Investment in Foreign Financial Instruments. Under Code Section 988,
gains or losses from certain foreign currency forward contracts or fluctuations
in exchange rates will generally be treated as ordinary income or loss. Such
Code Section 988 gains or losses will increase or decrease the amount of a
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the
amount of the Fund's net capital gains. Additionally, if Code Section 988
losses exceed other investment company taxable income during a taxable year,
the Fund would not be able to pay any ordinary income dividends, and any such
dividends paid before the losses were realized, but in the same taxable year,
would be recharacterized as a return of capital to shareholders, thereby
reducing the tax basis of Fund shares.
Hedging Transactions. Some of the forward foreign currency exchange
contracts, options and futures contracts that the Funds may enter into will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date.
Any gain or loss recognized as a consequence of the year-end deemed disposition
of Section 1256 contracts is combined with any other gain or loss that was
previously recognized upon the termination of Section 1256 contracts during
that taxable year. The net amount of such gain or loss for the entire taxable
year (including gain or loss arising as a consequence of the year-end deemed
sale of such contracts) is deemed to be 60% long-term (taxable at 20%) and 40%
short-term gain or loss. However, in the case of Section 1256 contracts that
are forward foreign currency exchange contracts, the net gain or loss is
separately determined and (as discussed above) generally treated as ordinary
income or loss.
The Funds may engage in certain hedging transactions (such as short
sales "against the box") that may be subject to special tax treatment as
"constructive sales" under section 1259 of the Code if a Fund holds certain
"appreciated Financial positions" (defined generally as any interest (including
a futures or forward contract, short sale or option) with respect to stock,
certain debt instruments, or partnership interests if there would be a gain
were such interest sold, assigned, or otherwise terminated at its fair market
value). Upon entering into a constructive sales transaction with respect to an
appreciated financial position, a Fund will be deemed to have constructively
sold such appreciated financial position and will recognize gain as if such
position were sold, assigned, or otherwise terminated at its fair market value
on the date of such constructive sale (and will take into account any gain in
the taxable year which includes such date unless the closed transaction
exception applies).
43
<PAGE> 87
Other hedging transactions in which the Funds may engage may result in
"straddles" or "conversion transactions" for U.S. federal income tax purposes.
The straddle and conversion transaction rules may affect the character of gains
(or in the case of the straddle rules, losses) realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules and
the conversion transaction rules have been promulgated, the tax consequences to
the Funds of hedging transactions are not entirely clear. The hedging
transactions may increase the amount of short-term capital gain realized by the
Funds (and, if they are conversion transactions, the amount of ordinary income)
which is taxed as ordinary income when distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character, and timing of the recognition of gains or losses from
the affected straddle positions will be determined under rules that vary
according to the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or losses from the
affected straddle positions.
Because application of any of the foregoing rules governing Section
1256 contracts, constructive sales, straddle and conversion transactions may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected investment or straddle
positions, the amount which must be distributed to shareholders and which will
be taxed to shareholders as ordinary income or long-term capital gain may be
increased or decreased as compared to a fund that did not engage in such
transactions.
PFIC Investments. Each Fund may invest in stocks of foreign companies
that are classified under the Code as passive foreign investment companies
("PFICs"). In general, a foreign company is classified as a PFIC if at least
one-half of its assets constitute investment-type assets or 75% or more of its
gross income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund held the PFIC stock.
The Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax had
actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.
Each Fund may be able to elect alternative tax treatment with respect
to PFIC stock. Under one such election (the "QEF Election"), a Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether any distributions are received
from the PFIC. For Taxable years beginning after December 31, 1997, each Fund
will alternatively be able to make an election to mark any shares of PFIC stock
that it holds to market (the "Section 1296 Election"). If the Section 1296
election is made with respect to any PFIC stock, a Fund will recognize
ordinary income to the extent that the fair market value of such PFIC stock at
the close of any taxable year exceeds its adjusted basis and will also
recognize ordinary income in the event that it disposes of any shares of such
PFIC stock at a gain. In each case, such ordinary income will be treated as
dividend income for purposes of the Income Requirement. A Fund making the
Section 1296 Election with respect to any PFIC stock will similarly recognize a
deductible ordinary loss to the extent that the adjusted basis of such PFIC
stock exceeds its fair market value at the close of any taxable year and will
also recognize a deductible ordinary loss in the event that it disposes of such
PFIC stock at a loss. However, the amount of any ordinary loss recognized by a
Fund making a Section 1296 Election with respect to any PFIC stock may not
exceed the amount of ordinary income previously recognized by such Fund by
reason of marking such PFIC stock to market. If either the QEF Election or the
Section 1296 Election is made, the special rules, discussed above, relating to
the taxation of excess distributions, would not apply. The Funds' intentions
to qualify annually as regulated investment companies may limit their ability
to invest and hold PFIC stock.
44
<PAGE> 88
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of
the recognition of income with respect to PFIC stock, as well as subject the
Funds themselves to tax on certain income from PFIC stock, the amount that
must be distributed to shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gains, may be increased or decreased
substantially as compared to a fund that did not invest in PFIC stock.
Redemption or Exchange of Shares. Upon a redemption or exchange of
shares, a shareholder will recognize a taxable gain or loss depending upon his
or her basis in the shares. Unless the shares are disposed of as part of a
conversion transaction, such gain or loss will be treated as capital gain or
loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's holding period for
the shares. Except to the extent otherwise provided in future Treasury
regulations any long-term capital gain recognized by a non-corporate
shareholder will be subject to tax at a maximum rate of 20% if the shares sold
or redeemed were held for more than 18 months. Any loss recognized by a
shareholder on the sale of Fund shares held six months or less will be treated
as a long-term capital loss to the extent of any distributions of net capital
gains received by the shareholder with respect to such shares.
If a shareholder exercises the exchange privilege within 90 days of
acquiring Class A shares, then the loss such shareholder recognizes on the
exchange will be reduced (or the gain increased) to the extent the sales charge
paid upon the purchase of Class A shares reduces any charge such shareholder
would have owed upon purchase of the new Class A shares in the absence of the
exchange privilege. Instead, such sales charge will be treated as an amount
paid for the new Class A shares. In addition, any loss recognized on a sale or
exchange will be disallowed to the extent that disposed Class A shares, Class B
shares or Class C shares are replaced within the 61-day period beginning 30
days before and ending 30 days after the disposition of such shares. In such a
case, the basis of the shares acquired will be increased to reflect the
disallowed loss. Shareholders should particularly note that this loss
disallowance rule applies even where shares are automatically replaced under
the dividend reinvestment plan.
Foreign Income Taxes. Investment income received by each Fund from
sources within foreign countries may be subject to foreign income taxes
withheld at the source. The United States has entered into tax treaties with
many foreign countries which entitle the Funds to a reduced rate of, or
exemption from, taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of a Fund's assets to
be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of
each taxable year consists of the stock or securities of foreign corporations,
the Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign income taxes paid by the Fund (the "Foreign Tax Election"). Pursuant
to the Foreign Tax Election, shareholders will be required (i) to include in
gross income, even though not actually received, their respective pro-rata
shares of the foreign income taxes paid by the Fund that are attributable to
any distributions they receive; and (ii) either to deduct their pro-rata share
of foreign taxes in computing their taxable income, or to use it (subject to
various Code limitations) as a foreign tax credit against Federal income tax
(but not both). No deduction for foreign taxes may be claimed by a
non-corporate shareholder who does not itemize deductions or who is subject to
alternative minimum tax.
Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax (determined without regard to
the availability of the credit) attributable to the shareholder's foreign
source taxable income. In determining the source and character of
distributions received from a Fund for this purpose, shareholders will be
required to allocate Fund distributions according to the source of the income
realized by the Fund. Each Fund's gains from the sale of stock and securities
and certain currency fluctuation gains and losses will generally be treated as
derived from U.S. sources. In addition, the limitation on the foreign tax
credit is applied separately to foreign source "passive" income, such as
dividend income. Because of these limitations, shareholders may be unable to
claim a credit for the full amount of their proportionate shares of the foreign
income taxes paid by a Fund.
45
<PAGE> 89
Backup Withholding. Under certain provisions of the Code, the Funds
may be required to withhold 31% of reportable dividends, capital gains
distributions and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom a certified
taxpayer identification number is not on file with the Company or who, to the
Company's knowledge, have furnished an incorrect number, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. When establishing an account, an investor must provide his or her
taxpayer identification number and certify under penalty of perjury that such
number is correct and that he or she is not otherwise subject to backup
withholding. Corporate shareholders and other shareholders specified in the
Code are exempt from backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against a shareholder's
U.S. federal income tax liability.
Foreign Shareholders. Dividends from a Fund's investment company
taxable income and distributions constituting returns of capital paid to a
nonresident alien individual, a foreign trust or estate, foreign corporation,
or foreign partnership (a "foreign shareholder") generally will be subject to
U.S. withholding tax at a rate of 30% (or lower treaty rate) upon the gross
amount of the dividend. Foreign shareholders may be subject to U.S.
withholding tax at a rate of 30% on the income resulting from the Fund's
election to treat any foreign income taxes paid by it as paid by its
shareholders, but may not be able to claim a credit or deduction with respect
to the withholding tax for the foreign taxes treated as having been paid by
them.
A foreign shareholder generally will not be subject to U.S. taxation
on gain realized upon the redemption or exchange of shares of a Fund or on
capital gain dividends. In the case of a foreign shareholder who is a
nonresident alien individual, however, gain realized upon the sale or
redemption of shares of a Fund and capital gain dividends ordinarily will be
subject to U.S. income tax at a rate of 30% (or lower applicable treaty rate)
if such individual is physically present in the U.S. for 183 days or more
during the taxable year and certain other conditions are met. In the case of a
foreign shareholder who is a nonresident alien individual, the Funds may be
required to withhold U.S. federal income tax at a rate of 31% unless proper
notification of such shareholder's foreign status is provided.
Notwithstanding the foregoing, if distributions by the Funds are
effectively connected with a U.S. trade or business of a foreign shareholder,
then dividends from such Fund's investment company taxable income, capital
gains, and any gains realized upon the sale of shares of the Fund will be
subject to U.S. income tax at the graduated rates applicable to U.S. citizens
or domestic corporations.
Transfers by gift of shares of a Fund by a foreign shareholder who is
a nonresident alien individual will not be subject to U.S. federal gift tax.
An individual who, at the time of death, is a foreign shareholder will
nevertheless be subject to U.S. federal estate tax with respect to shares at
the graduated rates applicable to U.S. citizens and residents, unless a treaty
exception applies. In the absence of a treaty, there is a $13,000 statutory
estate tax credit.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in any of
the Funds.
Miscellaneous Considerations; Effect of Future Legislation. The
foregoing general discussion of federal income tax consequences is based on the
Code and the regulations issued thereunder as in effect on February 1, 1998.
Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of dividend and capital gain
distributions from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other U.S. state
and local tax rules affecting investments in the Funds.
46
<PAGE> 90
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Board of Directors will issue to shareholders at least
semi-annually the Funds' financial statements. Financial statements, audited
by independent auditors, will be issued annually. The firm of KPMG Peat
Marwick LLP, 700 Louisiana, Houston, Texas 77002, currently serves as the
auditors of each Fund.
LEGAL MATTERS
Legal matters for the Company are passed upon by Ballard Spahr Andrews
& Ingersoll, LLP, Philadelphia, Pennsylvania.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. Under its contract with the Company relating to each Fund, the
Custodian is authorized to establish separate accounts in foreign currencies
and to cause foreign securities owned by each Fund to be held in its offices
outside the United States and with certain foreign banks and securities
depositories. The Custodian attends to the collection of principal and income,
pays and collects all monies for securities bought and sold by each Fund, and
performs certain other ministerial duties. A I M Fund Services, Inc. (the
"Transfer Agent"), a wholly owned subsidiary of AIM, P.O. Box 4739, Houston,
Texas 77210-4739, is a transfer and dividend disbursing agent for the Class A,
Class B and Class C shares of each of the Funds. Each Fund pays the Custodian
and the Transfer Agent such compensation as may be agreed upon from time to
time.
Chase Bank of Texas, N.A. (formerly, Texas Commerce Bank National
Association), 712 Main, Houston, Texas 77002, serves as Sub-Custodian for
retail purchases of the AIM Funds.
SHAREHOLDER INQUIRIES
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
47
<PAGE> 91
PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of each of the
Company's portfolios as of February 2, 1998, and the amount of outstanding
shares held by such holders are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
AIM International Merrill Lynch, Pierce, 33.13%** -0-
Equity Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 36.84%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 47.42%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
AIM Global Aggressive Merrill Lynch, Pierce, 15.62% -0-
Growth Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
</TABLE>
- ------------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
48
<PAGE> 92
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
Class B shares Merrill Lynch, Pierce, 26.14%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 46.94%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
AIM Global Growth Merrill Lynch, Pierce, 12.45% -0-
Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 22.43% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
</TABLE>
- ------------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
49
<PAGE> 93
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
Class C shares Merrill Lynch, Pierce 36.29%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
AIM Global Income Fund - Merrill Lynch, Pierce 10.86% -0-
Class B shares Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Dain Rauscher Incorporated -0- 21.31%
FBO Guarantee & Trust Co.
Cust. J. Stuart Johnson IRA
3000 Penn Avenue W. Ext.
Warren, PA 16365
Merrill Lynch Pierce 12.45% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
Karl Walker & -0- 11.14%
Peggy Walker C/PROP
RT 2, Box 186
Hockley, TX 77447
Joyce N. Wilson -0- 6.19%
TRST. Wilson Family Trust
2524 E. Ames Ave.
Anaheim, CA 92806-4701
</TABLE>
- -----------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined
in the 1940 Act.
50
<PAGE> 94
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
Class B Shares PaineWebber -0- 5.97%
FBO Robert S. Carpenter &
Alma Lee Carpenter TTEES
FBO Robert S. Charit.
Remnder TR
9 Lowell Road
Wellesley, MA 02181-2723
Donaldson Lufkin, Jenrette 5.68% -0-
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-9998
AIM European
Development Fund -
Class A shares Jonathan C. Schoolar -0- 26.00%**
3722 Tartan Lane
Houston, TX 77025
INVESCO Trust Company 25.04%** -0-
Attn: Sheila Wendland
7800 E. Union Avenue
Denver, CO 80237-0000
Michael J. Cemo -0- 12.18%
5604 Buffalo Speedway
Houston, TX 77005
Obie & Co. -0- 7.68%
FBO Charles T. Bauer
02 001 1365200
PO Box 200547
Mutual Fund Unti 16-HCB-09
Houston, TX 77216-0547
Joel Dobberpuhl and -0- 6.77%
Holly Dobberpuhl JTWROS
9006 Ensemble Ct
Houston, TX 77040-0000
</TABLE>
- ---------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
51
<PAGE> 95
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
Class B shares Merrill Lynch Pierce 29.60%* -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
PaineWebber for the Benefit of -0- 10.48%
William F. Manus and
Maryette Manus JT TEN
11 Meeker Street
West Orange, NJ 07052-4328
Fahnestock & Co. Inc. -0- 7.04%
FBO A013235138
Jack Sweeney
125 Broad Street
New York, NY 10004
Interstate/Johnson Lane -0- 7.04%
FBO 238-82128-19
Interstate Tower
P. O. Box 1220
Charlotte, NC 28201-1220
Interstate/Johnson Lane -0- 5.26%
FBO 238-82073-14
Interstate Tower
P. O. Box 1220
Charlotte, NC 28201-1220
Interstate/Johnson Lane -0- 5.06%
FBO 238-75290-15
Interstate Tower
P. O. Box 1220
Charlotte, NC 28201-1220
</TABLE>
- ---------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
52
<PAGE> 96
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
Class C shares Donaldson Lufkin Jenrette 67.08%** -0-
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-9998
Interstate/Johnson Lane -0- 39.32%**
FBO 238-75485-10
Interstate Tower
P. O. Box 1220
Charlotte, NC 28201-1220
AIM Asian Growth Fund -
Class A shares INVESCO Trust Company 29.65%** -0-
Attn: Sheila Wendland
7800 E Union Ave.
Denver, CO 80237-0000
Arthur Dale Griffin III -0- 10.73%
36 Windemere Lane
Houston, TX 77063
Jonathan C. Schoolar -0- 10.57%
3722 Tartan Lane
Houston, TX 77025
Obie & Co -0- 10.36%
FBO Charles T. Bauer
02 001 1365200
PO Box 200547
Mutual Fund Unti 16-HCB-09
Houston, TX 77216-0547
Class B shares Merrill Lynch Pierce 23.18% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
</TABLE>
- ---------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
53
<PAGE> 97
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
John Hamilton Mueller TTEE -0- 14.29%
John Hamilton Mueller Revocable
Living Trust
DTD 02-26-88
3110 E. Fernan Hill Rd
Coeur D Alene, ID 83814-7564
Thomas F. Weigel and -0- 12.50%
Kathleen M. Weigel JTWROS
309 4th Ave NW
Mandan, ND 58554-0000
Donaldson Lufkin Jenrette 8.58% -0-
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-9998
Class C shares Interstate/Johnson Lane -0- 54.87%**
FBO 238-75485-10
Interstate Tower
P. O. Box 1220
Charlotte, NC 28201-1220
NFSC FEBO # X33-102920 -0- 45.13%**
Gregory S. Beck
8217 W 146th Ter
Overland Park, KS 66223
</TABLE>
As of February 2, 1998, the directors and officers of the Company as a
group owned less than 1% of the outstanding shares of Aggressive Growth Fund,
Growth Fund, Equity Fund, Income Fund, Class B and Class C shares of Asian Fund
and Class B and Class C shares of European Fund. Also as February 2, 1998, the
directors and officers of the Company as a group owned 12.62% and 29.43% of the
outstanding Class A shares of Asian Fund and European Fund, respectively.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the
portfolios of the Company have filed with the SEC under the 1933 Act and the
1940 Act, and reference is hereby made to the Registration Statement for
further information with respect to each portfolio of the Company and the
securities offered hereby. The Registration Statement is available for
inspection by the public at the Securities and Exchange Commission in
Washington, D.C.
- ---------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
54
<PAGE> 98
APPENDIX A
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all
Money Market Obligations, and the Funds reserve the right to invest in Money
Market Obligations other than those listed below:
1. GOVERNMENT OBLIGATIONS.
U.S. GOVERNMENT DIRECT OBLIGATIONS --Bills, notes, and bonds issued by
the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES --Certain federal agencies such as
the Government National Mortgage Association have been established as
instrumentalities of the U. S. Government to supervise and finance certain
types of activities. Issues of these agencies, while not direct obligations of
the U. S. Government, are either backed by the full faith and credit of the
United States or are guaranteed by the Treasury or supported by the issuing
agencies' right to borrow from the Treasury.
FOREIGN GOVERNMENT OBLIGATIONS -- These are U.S. dollar denominated
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Fund's investment advisor to be of comparable quality to the other
obligations in which the Fund may invest. Such securities also include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank. The percentage of the Fund's assets invested
in securities issued by foreign governments will vary depending on the relative
yields of such securities, the economic and financial markets of the countries
in which the investments are made and the interest rate climate of such
countries.
2. BANK INSTRUMENTS.
BANKERS' ACCEPTANCES --A bill of exchange or time draft drawn on and
accepted by a commercial bank. It is used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument
with a specific maturity. Certificates of deposit are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market, prior to maturity.
TIME DEPOSITS --A non-negotiable receipt issued by a bank in exchange
for the deposit of funds. Like a certificate of deposit, it earns a specified
rate of interest over a definite period of time; however, it cannot be traded
in the secondary market.
EURODOLLAR OBLIGATIONS -- A Eurodollar obligation is a U.S.
dollar-denominated obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS -- A Yankee dollar obligation is a U.S.
dollar-denominated obligation issued by a domestic branch of a foreign bank.
55
<PAGE> 99
3. COMMERCIAL INSTRUMENTS.
COMMERCIAL PAPER --The term used to designate unsecured short-term
promissory notes issued by corporations and other entities. Maturities on
these issues vary from a few days to nine months.
VARIABLE RATE MASTER DEMAND NOTES --Variable rate master demand notes
are unsecured demand notes that permit investment of fluctuating amounts of
money at variable rates of interest pursuant to arrangements with the issuers.
The interest rate on a variable amount master demand note is periodically
redetermined according to a prescribed formula. Although there is no secondary
market in master demand notes, the payee may demand payment of the principal
amount of the note on relatively short notice.
4. REPURCHASE AGREEMENTS -- A repurchase agreement is a contractual
undertaking whereby the seller of securities (limited to U.S. Government
securities, including securities issued or guaranteed by the U.S. Treasury or
the various agencies and instrumentalities of the U.S. Government) agrees to
repurchase the securities at a specified price on a future date determined by
negotiations.
56
<PAGE> 100
APPENDIX B
DESCRIPTION OF CORPORATE BOND RATINGS
Investment grade debt securities are those rating categories indicated
by an asterisk (*).
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS ARE AS FOLLOWS:
*Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
*Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
*A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium- grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
*Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
57
<PAGE> 101
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in the Aa and A
groups when assigning ratings to industrial development bonds and bonds secured
by either a letter of credit or bond insurance. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
STANDARD AND POOR'S RATINGS SERVICES CLASSIFICATIONS ARE AS FOLLOWS:
*AAA
Debt rated 'AAA' has the highest rating assigned by Standard & Poor's
("S&P"). Capacity to pay interest and repay principal is extremely strong.
*AA
Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
*A
Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
*BBB
Debt rated 'BBB' regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher categories.
BB, B, CCC, CC, C
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. 'BB' indicates the
lowest degree of speculation and 'C' the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
58
<PAGE> 102
BB
Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B
Debt rated 'B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'BB' or 'BB-' rating.
CCC
Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The 'CCC'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'B' or 'B-' rating.
CC
The rating 'CC' is typically applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C
The rating 'C' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
C1
The rating 'C1' is reserved for income bonds on which no interest is
being paid.
D
Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal or principal payments are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
PLUS (+) OR MINUS (-)
The rating from 'AA' to 'CCC' may be modified by the addition of a
plus or minus sign to show relative standing within the major categories.
59
<PAGE> 103
DUFF & PHELPS FIXED-INCOME RATINGS ARE AS FOLLOWS:
*AAA
Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
*AA+, AA AND AA-
High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
*A+, A AND A-
Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
*BBB+, BBB AND BBB-
Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
BB+, BB AND BB-
Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B AND B-
Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according
to economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in quality rating within this category or into a
higher or lower quality rating grade.
CCC
Well below investment grade securities. May be in default or have
considerable uncertainty as to timely payment of interest, preferred dividends
and/or principal. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable company
developments.
DD
Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP
Preferred stock with dividend arrearages.
60
<PAGE> 104
FITCH INVESTORS SERVICE, INC.'S BOND RATINGS ARE AS FOLLOWS:
*AAA
Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
*AA
Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated 'AAA.' Because bonds rated
in the 'AAA' and 'AA' categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated 'F-1+.'
*A
Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
*BBB
Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC
Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
61
<PAGE> 105
C
Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D
Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. 'DDD'
represents the highest potential for recovery on these bonds, and 'D'
represents the lowest potential for recovery.
PLUS (+) MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the 'AAA', 'DDD', 'DD', or 'D' categories.
62
<PAGE> 106
FINANCIAL STATEMENTS
FS
<PAGE> 107
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Global Aggressive Growth Fund (a
portfolio of AIM International Funds, Inc.), including
the schedule of investments, as of October 31, 1997, and
the related statement of operations for the year then
ended, the statement of changes in net assets for each of
the years in the two-year period then ended and the
financial highlights for the three-year period then ended
and the period September 15, 1994 (date operations
commenced) through October 31, 1994. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements 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 Global
Aggressive Growth 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, the financial highlights for
the three-year period then ended and the period September
15, 1994 (date operations commenced) through October 31,
1994, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
FS-1
<PAGE> 108
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-31.90%
AEROSPACE/DEFENSE-0.27%
BE Aerospace, Inc.(a) 137,500 $ 3,867,188
- ---------------------------------------------------------------
Precision Castparts Corp. 50,000 2,940,625
- ---------------------------------------------------------------
6,807,813
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.02%
Borg-Warner Automotive, Inc. 8,000 436,000
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.30%
Bank United Corp.-Class A 150,000 6,300,000
- ---------------------------------------------------------------
First Savings Bank of Washington
Bancorp, Inc. 50,000 1,187,500
- ---------------------------------------------------------------
7,487,500
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.09%
Curative Health Services, Inc.(a) 75,000 2,259,375
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.46%
Heftel Broadcasting Corp.(a) 130,000 8,645,000
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 65,500 2,742,812
- ---------------------------------------------------------------
11,387,812
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.36%
ADC Telecommunications, Inc.(a) 130,000 4,306,250
- ---------------------------------------------------------------
Brightpoint, Inc.(a) 218,750 7,218,750
- ---------------------------------------------------------------
Coherent Communications Systems
Corp.(a) 179,500 5,429,875
- ---------------------------------------------------------------
MasTec, Inc.(a) 200,000 6,487,500
- ---------------------------------------------------------------
P-COM, Inc.(a) 200,000 4,025,000
- ---------------------------------------------------------------
REMEC, Inc.(a) 75,000 1,903,125
- ---------------------------------------------------------------
Tellabs, Inc.(a) 84,800 4,579,200
- ---------------------------------------------------------------
33,949,700
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-0.53%
Concord EFS, Inc.(a) 199,737 5,929,692
- ---------------------------------------------------------------
Dell Computer Corp.(a) 50,000 4,006,250
- ---------------------------------------------------------------
IDX Systems Corp.(a) 100,000 3,375,000
- ---------------------------------------------------------------
13,310,942
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.23%
International Network Services(a) 100,000 2,200,000
- ---------------------------------------------------------------
Premiere Technologies, Inc.(a) 100,000 3,400,000
- ---------------------------------------------------------------
5,600,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.10%
Network Appliance, Inc.(a) 50,000 2,512,500
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-2.18%
Advanced Fibre Communications,
Inc.(a) 200,000 5,812,500
- ---------------------------------------------------------------
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Analysts International Corp. 81,000 $ 3,655,125
- ---------------------------------------------------------------
Computer Task Group, Inc. 107,400 3,034,050
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 77,200 2,615,150
- ---------------------------------------------------------------
Engineering Animation, Inc.(a) 126,800 5,595,050
- ---------------------------------------------------------------
HBO & Co. 111,800 4,863,300
- ---------------------------------------------------------------
JDA Software Group, Inc.(a) 50,000 1,562,500
- ---------------------------------------------------------------
NOVA Corp.(a) 150,000 4,031,250
- ---------------------------------------------------------------
Security Dynamics Technologies,
Inc.(a) 125,000 4,234,375
- ---------------------------------------------------------------
Simulation Sciences, Inc.(a) 300,000 5,475,000
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 104,200 3,458,139
- ---------------------------------------------------------------
Veritas Software Corp.(a) 112,500 4,682,813
- ---------------------------------------------------------------
Viasoft, Inc.(a) 54,100 2,218,100
- ---------------------------------------------------------------
Whittman-Hart, Inc.(a) 21,600 626,400
- ---------------------------------------------------------------
Wind River Systems(a) 60,750 2,331,282
- ---------------------------------------------------------------
54,195,034
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.33%
Action Performance Companies,
Inc.(a) 100,000 2,562,500
- ---------------------------------------------------------------
Blyth Industries, Inc.(a) 222,800 5,542,150
- ---------------------------------------------------------------
8,104,650
- ---------------------------------------------------------------
CONSUMER FINANCE-0.87%
AmeriCredit Corp.(a) 100,000 2,906,250
- ---------------------------------------------------------------
Delta Financial Corp.(a) 43,300 790,225
- ---------------------------------------------------------------
FIRSTPLUS Financial Group,
Inc.(a) 150,100 8,255,500
- ---------------------------------------------------------------
IMC Mortgage Co.(a) 200,000 3,475,000
- ---------------------------------------------------------------
Money Store, Inc. (The) 100,000 2,837,500
- ---------------------------------------------------------------
SLM Holding Corp. 25,000 3,509,375
- ---------------------------------------------------------------
21,773,850
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.12%
Patterson Dental Co.(a) 76,900 3,076,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.25%
Berg Electronics Corp.(a) 152,800 3,571,700
- ---------------------------------------------------------------
HADCO Corp.(a) 60,000 3,322,500
- ---------------------------------------------------------------
Kemet Corp.(a) 100,000 2,175,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 111,000 8,297,250
- ---------------------------------------------------------------
Sawtek Inc.(a) 150,000 5,100,000
- ---------------------------------------------------------------
SCI Systems, Inc.(a) 150,000 6,600,000
- ---------------------------------------------------------------
Solectron Corp.(a) 51,000 2,001,750
- ---------------------------------------------------------------
31,068,200
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.43%
Benchmarq Microelectronics,
Inc.(a) 250,000 5,187,500
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 109
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (COMPONENT
DISTRIBUTORS)-(CONTINUED)
Computer Products, Inc.(a) 200,000 $ 5,450,000
- ---------------------------------------------------------------
10,637,500
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.55%
CellStar Corp.(a) 275,000 9,332,812
- ---------------------------------------------------------------
Perkin-Elmer Corp. 55,500 3,468,750
- ---------------------------------------------------------------
ThermoQuest Corp.(a) 45,000 804,375
- ---------------------------------------------------------------
13,605,937
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-2.17%
Alliance Semiconductor Corp.(a) 150,000 1,125,000
- ---------------------------------------------------------------
Altera Corp.(a) 75,000 3,328,125
- ---------------------------------------------------------------
ANADIGICS, Inc.(a) 100,000 3,700,000
- ---------------------------------------------------------------
Burr-Brown Corp.(a) 115,400 3,490,850
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 270,000 3,037,500
- ---------------------------------------------------------------
Dallas Semiconductor Corp. 100,000 4,887,500
- ---------------------------------------------------------------
Integrated Device Technology,
Inc.(a) 300,000 3,468,750
- ---------------------------------------------------------------
Lattice Semiconductor Corp.(a) 55,100 2,758,444
- ---------------------------------------------------------------
Linear Technology Corp. 91,000 5,721,625
- ---------------------------------------------------------------
Micrel, Inc.(a) 100,000 3,587,500
- ---------------------------------------------------------------
National Semiconductor Corp.(a) 130,000 4,680,000
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 100,000 2,637,500
- ---------------------------------------------------------------
Sipex Corp.(a) 300,000 9,862,500
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 37,500 1,626,562
- ---------------------------------------------------------------
53,911,856
- ---------------------------------------------------------------
ENTERTAINMENT-0.09%
Regal Cinemas, Inc.(a) 100,000 2,300,000
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS)-1.15%
BMC Industries, Inc. 110,000 3,540,625
- ---------------------------------------------------------------
Credence Systems Corp.(a) 100,000 2,950,000
- ---------------------------------------------------------------
DuPont Photomasks, Inc.(a) 100,000 4,300,000
- ---------------------------------------------------------------
Electroglas, Inc.(a) 200,000 3,800,000
- ---------------------------------------------------------------
Photronics, Inc.(a) 125,000 5,359,375
- ---------------------------------------------------------------
Silicon Valley Group, Inc.(a) 175,000 5,031,250
- ---------------------------------------------------------------
Teradyne, Inc.(a) 100,000 3,743,750
- ---------------------------------------------------------------
28,725,000
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.28%
Amresco, Inc.(a) 100,000 3,137,500
- ---------------------------------------------------------------
SunAmerica, Inc. 105,000 3,773,438
- ---------------------------------------------------------------
6,910,938
- ---------------------------------------------------------------
FOOTWEAR-0.05%
Wolverine World Wide, Inc. 59,925 1,318,350
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.40%
Dura Pharmaceuticals, Inc.(a) 57,900 2,800,912
- ---------------------------------------------------------------
MARKET
SHARES VALUE
HEALTH CARE (DRUGS-GENERIC &
OTHER)-(CONTINUED)
Medicis Pharmaceutical Corp.(a) 150,000 $ 7,218,750
- ---------------------------------------------------------------
10,019,662
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.58%
Health Management Associates,
Inc.-Class A(a) 335,700 8,182,688
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 75,000 2,292,187
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 89,800 3,956,812
- ---------------------------------------------------------------
14,431,687
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.25%
HEALTHSOUTH Corp.(a) 150,000 3,834,375
- ---------------------------------------------------------------
Sunrise Assisted Living, Inc.(a) 63,200 2,346,300
- ---------------------------------------------------------------
6,180,675
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.45%
Concentra Managed Care, Inc.(a) 99,115 3,233,627
- ---------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 40,000 2,255,000
- ---------------------------------------------------------------
Oxford Health Plans, Inc.(a) 45,100 1,164,144
- ---------------------------------------------------------------
PhyCor, Inc.(a) 49,950 1,151,972
- ---------------------------------------------------------------
Wellpoint Health Networks,
Inc.(a) 75,000 3,431,250
- ---------------------------------------------------------------
11,235,993
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.35%
Physician Sales & Service,
Inc.(a) 50,000 1,225,000
- ---------------------------------------------------------------
Quintiles Transnational Corp.(a) 70,000 5,075,000
- ---------------------------------------------------------------
ResMed, Inc.(a) 40,000 1,120,000
- ---------------------------------------------------------------
Sybron International Corp.(a) 32,800 1,316,100
- ---------------------------------------------------------------
8,736,100
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-1.05%
American HomePatient, Inc.(a) 100,000 2,575,000
- ---------------------------------------------------------------
First Commonwealth, Inc.(a) 45,000 652,500
- ---------------------------------------------------------------
FPA Medical Management, Inc.(a) 200,000 4,825,000
- ---------------------------------------------------------------
NCS HealthCare, Inc.-Class A(a) 110,000 2,571,250
- ---------------------------------------------------------------
Omnicare, Inc. 173,300 4,819,906
- ---------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 123,000 2,129,438
- ---------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 15,200 642,200
- ---------------------------------------------------------------
Renal Care Group, Inc.(a) 92,400 3,095,400
- ---------------------------------------------------------------
Renal Treatment Centers, Inc.(a) 50,000 1,659,375
- ---------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 32,300 1,001,300
- ---------------------------------------------------------------
Total Renal Care Holdings,
Inc.(a) 62,667 1,930,916
- ---------------------------------------------------------------
Transition Systems, Inc.(a) 14,700 297,675
- ---------------------------------------------------------------
26,199,960
- ---------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES-0.23%
Ethan Allen Interiors, Inc. 160,000 5,670,000
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 110
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOUSEWARES-0.48%
Central Garden and Pet Co.(a) 75,000 $ 1,968,750
- ---------------------------------------------------------------
Helen of Troy Ltd.(a) 600,000 9,975,000
- ---------------------------------------------------------------
11,943,750
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.25%
CapMAC Holdings, Inc. 35,000 1,050,000
- ---------------------------------------------------------------
CMAC Investment Corp. 24,400 1,334,375
- ---------------------------------------------------------------
HCC Insurance Holdings, Inc. 137,550 3,215,231
- ---------------------------------------------------------------
Vesta Insurance Group, Inc. 12,000 697,500
- ---------------------------------------------------------------
6,297,106
- ---------------------------------------------------------------
LODGING (HOTELS)-0.07%
Prime Hospitality Corp.(a) 30,000 611,250
- ---------------------------------------------------------------
Suburban Lodges of America,
Inc.(a) 20,000 495,000
- ---------------------------------------------------------------
Wyndham Hotel Corp.(a) 16,700 750,456
- ---------------------------------------------------------------
1,856,706
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.13%
DT Industries, Inc. 105,000 3,150,000
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.59%
Halter Marine Group, Inc.(a) 187,700 9,819,056
- ---------------------------------------------------------------
US Filter Corp.(a) 120,150 4,821,019
- ---------------------------------------------------------------
14,640,075
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.27%
Daisytek International Corp.(a) 50,000 1,906,250
- ---------------------------------------------------------------
Herman Miller, Inc. 100,000 4,887,500
- ---------------------------------------------------------------
6,793,750
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-4.55%
Camco International, Inc. 100,000 7,225,000
- ---------------------------------------------------------------
Cliffs Drilling Co.(a) 100,000 7,268,750
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 100,000 7,225,000
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 100,000 6,225,000
- ---------------------------------------------------------------
ENSCO International, Inc. 140,000 5,888,750
- ---------------------------------------------------------------
EVI, Inc.(a) 200,000 12,837,500
- ---------------------------------------------------------------
Falcon Drilling Company, Inc.(a) 150,000 5,456,250
- ---------------------------------------------------------------
Global Industries Ltd.(a) 250,000 5,031,250
- ---------------------------------------------------------------
Global Marine, Inc.(a) 125,000 3,890,625
- ---------------------------------------------------------------
Marine Drilling Companies,
Inc.(a) 140,000 4,147,500
- ---------------------------------------------------------------
Maverick Tube Corp.(a) 77,200 2,721,300
- ---------------------------------------------------------------
National-Oilwell, Inc.(a) 150,000 11,484,375
- ---------------------------------------------------------------
Newpark Resources, Inc.(a) 200,000 8,300,000
- ---------------------------------------------------------------
Pride International, Inc.(a) 178,800 5,900,400
- ---------------------------------------------------------------
Tuboscope Vetco International
Corp. 156,600 4,972,050
- ---------------------------------------------------------------
Varco International, Inc.(a) 107,500 6,550,781
- ---------------------------------------------------------------
MARKET
SHARES VALUE
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Veritas DGC, Inc.(a) 200,000 $ 8,187,500
- ---------------------------------------------------------------
113,312,031
- ---------------------------------------------------------------
PERSONAL CARE-0.28%
Rexall Sundown, Inc.(a) 321,000 7,021,875
- ---------------------------------------------------------------
RESTAURANTS-0.60%
Apple South, Inc. 150,800 2,808,650
- ---------------------------------------------------------------
Foodmaker, Inc.(a) 300,000 4,931,250
- ---------------------------------------------------------------
Landry's Seafood Restaurants,
Inc.(a) 100,000 2,800,000
- ---------------------------------------------------------------
Papa John's International,
Inc.(a) 22,500 665,156
- ---------------------------------------------------------------
Showbiz Pizza Time, Inc.(a) 96,600 2,052,750
- ---------------------------------------------------------------
Starbucks Corp.(a) 50,000 1,650,000
- ---------------------------------------------------------------
14,907,806
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.17%
Eagle Hardware & Garden, Inc.(a) 250,000 4,250,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.75%
CompUSA, Inc.(a) 172,000 5,633,000
- ---------------------------------------------------------------
MicroAge, Inc.(a) 250,000 5,500,000
- ---------------------------------------------------------------
Tech Data Corp.(a) 166,600 7,413,700
- ---------------------------------------------------------------
18,546,700
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.14%
Men's Wearhouse, Inc. (The)(a) 87,400 3,386,750
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.13%
Quality Food Centers, Inc.(a) 67,900 3,233,738
- ---------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.29%
CDW Computer Centers, Inc.(a) 85,800 5,319,600
- ---------------------------------------------------------------
Micro Warehouse, Inc.(a) 134,700 2,020,500
- ---------------------------------------------------------------
7,340,100
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.65%
Garden Ridge Corp.(a) 75,000 1,003,125
- ---------------------------------------------------------------
Genesco Inc.(a) 200,000 2,537,500
- ---------------------------------------------------------------
Hollywood Entertainment Corp.(a) 200,000 2,450,000
- ---------------------------------------------------------------
Inacom Corp.(a) 50,000 1,540,625
- ---------------------------------------------------------------
Michaels Stores, Inc.(a) 100,000 3,006,250
- ---------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 200,000 4,875,000
- ---------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 67,000 2,060,250
- ---------------------------------------------------------------
Pier 1 Imports, Inc. 397,500 7,254,375
- ---------------------------------------------------------------
Staples, Inc.(a) 235,800 6,189,750
- ---------------------------------------------------------------
Tiffany & Co. 50,200 1,982,900
- ---------------------------------------------------------------
Viking Office Products, Inc.(a) 106,100 2,539,769
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 75,000 3,009,375
- ---------------------------------------------------------------
Zale Corp.(a) 100,000 2,525,000
- ---------------------------------------------------------------
40,973,919
- ---------------------------------------------------------------
</TABLE>
FS-4
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-0.42%
Gap, Inc. 58,400 $ 3,106,150
- ---------------------------------------------------------------
Pacific Sunwear of California(a) 112,500 3,107,813
- ---------------------------------------------------------------
TJX Companies, Inc. 140,500 4,162,312
- ---------------------------------------------------------------
10,376,275
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.10%
Dime Bancorp, Inc. 100,000 2,400,000
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.28%
CKS Group, Inc.(a) 190,000 6,887,500
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.27%
ABR Information Services, Inc.(a) 75,000 1,762,500
- ---------------------------------------------------------------
Caribiner International, Inc.(a) 100,000 4,456,250
- ---------------------------------------------------------------
Cerner Corp.(a) 202,000 4,898,500
- ---------------------------------------------------------------
Children's Comprehensive
Services, Inc.(a) 186,200 3,360,328
- ---------------------------------------------------------------
Equity Corp. International(a) 255,000 5,195,625
- ---------------------------------------------------------------
IntelliQuest Information Group,
Inc.(a) 245,000 4,165,000
- ---------------------------------------------------------------
MSC Industrial Direct Co.,
Inc.-Class A(a) 40,000 1,665,000
- ---------------------------------------------------------------
Rental Service Corp.(a) 92,900 2,485,075
- ---------------------------------------------------------------
Strayer Education, Inc. 75,000 3,581,250
- ---------------------------------------------------------------
31,569,528
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.31%
Insight Enterprises, Inc.(a) 150,000 5,868,750
- ---------------------------------------------------------------
SunGard Data Systems Inc.(a) 80,200 1,894,725
- ---------------------------------------------------------------
7,763,475
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.89%
Affiliated Computer Services,
Inc.(a) 128,400 3,226,050
- ---------------------------------------------------------------
BDM International Inc.(a) 126,500 2,798,813
- ---------------------------------------------------------------
BISYS Group, Inc. (The)(a) 81,900 2,549,137
- ---------------------------------------------------------------
Computer Data Systems, Inc. 75,100 3,107,262
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 85,000 3,330,938
- ---------------------------------------------------------------
Envoy Corp.(a) 100,000 2,800,000
- ---------------------------------------------------------------
National Data Corp. 75,000 2,770,312
- ---------------------------------------------------------------
PMT Services, Inc.(a) 100,000 1,612,500
- ---------------------------------------------------------------
22,195,012
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.36%
RemedyTemp, Inc.- Class A(a) 38,000 874,000
- ---------------------------------------------------------------
Robert Half International,
Inc.(a) 111,000 4,544,063
- ---------------------------------------------------------------
Romac International, Inc.(a) 100,000 2,000,000
- ---------------------------------------------------------------
Vincam Group, Inc. (The)(a) 49,500 1,553,062
- ---------------------------------------------------------------
8,971,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.18%
Billing Information Concepts(a) 79,600 3,124,300
- ---------------------------------------------------------------
MARKET
SHARES VALUE
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
USLD Communications Corp.(a) 64,200 $ 1,271,963
- ---------------------------------------------------------------
4,396,263
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.85%
Jones Apparel Group, Inc.(a) 100,000 5,087,500
- ---------------------------------------------------------------
Liz Claiborne, Inc. 69,000 3,497,437
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(a) 125,000 3,328,125
- ---------------------------------------------------------------
Quicksilver, Inc.(a) 100,000 3,075,000
- ---------------------------------------------------------------
St. John Knits, Inc. 75,000 3,014,062
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 87,900 3,477,544
- ---------------------------------------------------------------
21,479,668
- ---------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.18%
Mohawk Industries, Inc.(a) 75,000 2,306,250
- ---------------------------------------------------------------
WestPoint Stevens, Inc.(a) 50,000 2,050,000
- ---------------------------------------------------------------
4,356,250
- ---------------------------------------------------------------
TRUCKING-0.24%
Caliber System, Inc. 25,000 1,303,125
- ---------------------------------------------------------------
Hub Group, Inc.(a) 100,000 3,050,000
- ---------------------------------------------------------------
Swift Transportation Co., Inc.(a) 50,000 1,600,000
- ---------------------------------------------------------------
5,953,125
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.33%
Thermo Instrument Systems Inc.(a) 20,000 721,250
- ---------------------------------------------------------------
USA Waste Services, Inc.(a) 200,000 7,400,000
- ---------------------------------------------------------------
8,121,250
- ---------------------------------------------------------------
Total Domestic Common Stocks 793,976,811
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-61.07%
ARGENTINA-2.22%
Banco de Galicia y Buenos Aires
S.A. de C.V.-ADR
(Banks-Regional) 500,439 12,127,826
- ---------------------------------------------------------------
Banco Rio de La Plata S.A.-ADR
(Banks-Money Center)(a) 461,000 4,840,500
- ---------------------------------------------------------------
Disco S.A.-ADR (Retail-Food
Chains)(a) 69,500 2,814,750
- ---------------------------------------------------------------
Perez Companc S.A.-Class B (Oil &
Gas-Refining & Marketing) 2,004,489 12,555,697
- ---------------------------------------------------------------
Telefonica de Argentina S.A.-ADR
(Telephone) 268,500 7,551,562
- ---------------------------------------------------------------
YPF S.A.-ADR (Oil-International
Integrated) 479,600 15,347,200
- ---------------------------------------------------------------
55,237,535
- ---------------------------------------------------------------
AUSTRALIA-0.48%
QBE Insurance Group Ltd.
(Insurance-Property-Casualty) 2,055,929 9,614,782
- ---------------------------------------------------------------
QBE Insurance Group Ltd.-Bonus
shares
(Insurance-Property-Casualty)(a) 513,982 2,342,248
- ---------------------------------------------------------------
11,957,030
- ---------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 112
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
AUSTRIA-0.38%
VA Technologie A.G. (Engineering
& Construction) 53,200 $ 9,439,946
- ---------------------------------------------------------------
BELGIUM-0.74%
Barco Industries
(Manufacturing-Diversified) 41,000 7,909,040
- ---------------------------------------------------------------
COLRUYT S.A. (Retail-Food Chains) 8,800 4,720,923
- ---------------------------------------------------------------
UCB S.A.
(Manufacturing-Diversified) 1,650 5,701,352
- ---------------------------------------------------------------
18,331,315
- ---------------------------------------------------------------
BRAZIL-3.94%
Banco Bradesco S.A. (Banks-Major
Regional) 1,316,000 9,788,380
- ---------------------------------------------------------------
CESP-Companhia Energetica de Sao
Paulo (Electric Companies)(a) 65,000 4,068,212
- ---------------------------------------------------------------
Cia. Riograndense de
Telecomunicacoes-Pfd.
(Telephone) (Acquired 08/06/97;
Cost $181,844)(a)(b) 1,425 109,847
- ---------------------------------------------------------------
Cia. Riograndense de
Telecomunicacoes-Pfd.
(Telephone) 65,000 5,011,565
- ---------------------------------------------------------------
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar (Retail-Food Chains) 326,500 6,219,330
- ---------------------------------------------------------------
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar-ADR (Retail-Food Chains) 120,519 2,229,602
- ---------------------------------------------------------------
Companhia Energetica de Minas
Gerais (Electric Companies) 196,000 7,822,577
- ---------------------------------------------------------------
Companhia Paranaense de
Energia-Copel (Electric
Companies) 240,000 2,897,546
- ---------------------------------------------------------------
Companhia Paranaense de
Energia-Copel-ADR (Electric
Companies) 400,000 4,775,000
- ---------------------------------------------------------------
Companhia de Saneamento Basico do
Estado de Sao Paulo (Water
Utilities) 39,041 7,224,263
- ---------------------------------------------------------------
Eletricidade de Sao Paulo S.A.
(Electric Companies)(a) 13,600 2,319,198
- ---------------------------------------------------------------
Eletricidade de Sao Paulo S.A.
Rts. (Electric Companies)(a) 3,265 11,848
- ---------------------------------------------------------------
Multicanal Participacoes S.A.-ADR
(Broadcasting-Television, Radio &
Cable)(a) 315,000 1,949,063
- ---------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras (Oil &
Gas-Exploration & Production) 46,200 8,590,866
- ---------------------------------------------------------------
Telecomunicacoes de Sao Paulo
S.A.-TELESP-Pfd. (Telephone) 44,700 11,677,264
- ---------------------------------------------------------------
Telecomunicacoes Brasileiras
S.A.-Telebras-ADR (Telephone) 94,700 9,612,050
- ---------------------------------------------------------------
Uniao de Bancos Brasileiros
S.A.-GDR (Banks-Regional)(a) 278,200 7,580,950
- ---------------------------------------------------------------
Votorantim Celulose e Papel S.A.
(Paper & Forest Products) 259,500 6,192,975
- ---------------------------------------------------------------
98,080,536
- ---------------------------------------------------------------
CANADA-6.45%
ATI Technologies, Inc.
(Computers-Hardware)(a) 160,000 3,303,651
- ---------------------------------------------------------------
MARKET
SHARES VALUE
CANADA-(CONTINUED)
ATS Automation Tooling Systems,
Inc.
(Manufacturing-Diversified)
(Acquired 09/22/97; Cost
$2,432,112)(a)(b) 70,000 $ 2,446,163
- ---------------------------------------------------------------
ATS Automation Tooling Systems,
Inc.
(Manufacturing-Diversified)(a) 110,000 3,843,971
- ---------------------------------------------------------------
Biovail Corporation International
(Health Care-Drugs-Generic &
Other)(a) 160,000 4,620,000
- ---------------------------------------------------------------
Canadian Fracmaster Ltd. (Oil &
Gas-Exploration & Production) 155,000 2,557,030
- ---------------------------------------------------------------
Canadian Natural Resources Ltd.
(Oil & Gas-Exploration &
Production)(a) 345,000 10,036,542
- ---------------------------------------------------------------
CanWest Global Communications
Corp. (Broadcasting-Television,
Radio & Cable) 355,998 6,820,127
- ---------------------------------------------------------------
CGI Group, Inc.
(Services-Computer Systems)(a) 135,000 3,836,343
- ---------------------------------------------------------------
C-MAC Industries Inc.
(Electronics-Component
Distributors)(a) 200,000 2,909,143
- ---------------------------------------------------------------
Discreet Logic, Inc.
(Communications Equipment)(a) 175,000 3,423,438
- ---------------------------------------------------------------
Enerflex Systems Ltd.
(Manufacturing- Specialized) 96,000 2,724,660
- ---------------------------------------------------------------
Ensign Resource Service Group,
Inc. (Oil & Gas-Drilling &
Equipment) 200,000 7,287,047
- ---------------------------------------------------------------
Extendicare, Inc.-Class A (Health
Care-Long Term Care)(a) 350,000 5,389,009
- ---------------------------------------------------------------
Four Seasons Hotels, Inc.
(Lodging-Hotels) 85,000 2,816,547
- ---------------------------------------------------------------
Geac Computer Corporation Ltd.
(Services-Computer Systems)(a) 581,400 17,367,537
- ---------------------------------------------------------------
Gulf Canada Resources Ltd.
(Oil-International
Integrated)(a) 250,000 2,093,750
- ---------------------------------------------------------------
Hummingbird Communications Ltd.
(Computers-Software &
Services)(a) 72,000 2,567,141
- ---------------------------------------------------------------
Imax Corp. (Communications
Equipment)(a) 150,000 3,806,250
- ---------------------------------------------------------------
IPSCO, Inc. (Iron & Steel) 60,000 2,596,942
- ---------------------------------------------------------------
JDS Fitel Inc. (Manufacturing
Specialized)(a) 200,000 11,459,183
- ---------------------------------------------------------------
Leitch Technology Corp.
(Electronics-Instrumentation)
(Acquired 06/25/97; Cost
$376,739)(a)(b) 16,500 504,594
- ---------------------------------------------------------------
Leitch Technology Corp.
(Electronics-Instrumentation)(a) 147,000 4,495,477
- ---------------------------------------------------------------
Linamar Corp. (Machinery
Diversified) 58,000 3,656,508
- ---------------------------------------------------------------
MDS, Inc.-Class B (Health
Care-Specialized Services) 218,000 5,034,874
- ---------------------------------------------------------------
Mitel Corp. (Communications
Equipment)(a) 370,200 3,244,027
- ---------------------------------------------------------------
Newcourt Credit Group, Inc.
(Savings & Loan Companies) 120,000 4,150,850
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Communications Equipment) 25,000 2,242,188
- ---------------------------------------------------------------
Philip Services Corp. (Waste
Management)(a) 200,000 3,500,000
- ---------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 113
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Precision Drilling Corp. (Oil &
Gas-Drilling & Equipment)(a) 250,000 $ 7,687,500
- ---------------------------------------------------------------
Prudential Steel Ltd. (Oil &
Gas-Drilling & Equipment) 200,000 8,372,654
- ---------------------------------------------------------------
Royal Group Technologies Ltd.
(Manufacturing-Specialized)(a) 105,000 2,674,637
- ---------------------------------------------------------------
Sears Canada, Inc.
(Retail-Department Stores) 300,000 4,959,733
- ---------------------------------------------------------------
Shaw Industries Ltd. (Oil &
Gas-Exploration & Production) 14,200 574,307
- ---------------------------------------------------------------
Suncor, Inc. (Oil-International
Integrated) 210,000 7,561,997
- ---------------------------------------------------------------
160,563,820
- ---------------------------------------------------------------
CHILE-1.12%
Cia. de Telecomunicaciones de
Chile S.A.-ADR (Telephone) 287,300 7,972,575
- ---------------------------------------------------------------
Distribucion y Servicio D&S
S.A.-ADR (Retail-Food
Chains)(a) 650,000 11,415,625
- ---------------------------------------------------------------
Quinenco S.A.-ADR
(Financial-Diversified)(a) 580,900 8,495,663
- ---------------------------------------------------------------
27,883,863
- ---------------------------------------------------------------
DENMARK-0.56%
Bang & Olufsen Holding A/S-Class
B (Electronics-Component
Distributors) 90,000 5,487,721
- ---------------------------------------------------------------
Kobenhavns Lufthavne A/S
(Shipping) 35,000 4,188,199
- ---------------------------------------------------------------
Olicom A/S
(Computers-Networking)(a) 150,000 4,312,500
- ---------------------------------------------------------------
13,988,420
- ---------------------------------------------------------------
FINLAND-0.71%
KCI Konecranes
(Machinery-Diversified) 76,750 2,893,007
- ---------------------------------------------------------------
Hartwall OY A.B.
(Beverages-Alcoholic) 80,000 6,572,272
- ---------------------------------------------------------------
TT Tieto OY -Class B
(Computers-Software & Services) 74,000 8,296,525
- ---------------------------------------------------------------
17,761,804
- ---------------------------------------------------------------
FRANCE-1.91%
BERTRAND FAURE (Auto Parts &
Equipment) 110,000 6,636,328
- ---------------------------------------------------------------
Christian Dalloz
(Manufacturing-Diversified) 11,400 1,353,790
- ---------------------------------------------------------------
Compagnie Generale de Geophysique
S.A. (Services-Commercial &
Consumer)(a) 26,000 3,605,946
- ---------------------------------------------------------------
Coflexip S.A. (Metal Fabricators) 48,161 5,310,171
- ---------------------------------------------------------------
Coflexip S.A.-ADR (Metal
Fabricators) 15,900 874,500
- ---------------------------------------------------------------
Dassault Systemes S.A.-ADR
(Computers-Software & Services) 200,000 6,000,000
- ---------------------------------------------------------------
Grand Optical Photoservice
(Services- Commercial &
Consumer) 26,400 4,251,828
- ---------------------------------------------------------------
ISIS (Oil-International
Integrated) (Acquired 10/23/97;
Cost $2,222,817)(a)(b) 19,400 2,270,186
- ---------------------------------------------------------------
Labinal S.A. (Aerospace/Defense) 8,300 2,151,172
- ---------------------------------------------------------------
LDC S.A. (Foods) 7,500 1,209,206
- ---------------------------------------------------------------
MARKET
SHARES VALUE
FRANCE-(CONTINUED)
Le Carbone-Lorraine (Housewares) 9,100 $ 2,413,730
- ---------------------------------------------------------------
Moulinex (Household Furnishings &
Appliances)(a) 250,000 5,634,291
- ---------------------------------------------------------------
Penauille Polyservices
(Services-Facilities &
Environmental) 5,300 1,068,591
- ---------------------------------------------------------------
Vallourec S.A.
(Manufacturing-Diversified) 73,000 4,796,429
- ---------------------------------------------------------------
47,576,168
- ---------------------------------------------------------------
GERMANY-1.79%
BETA Systems Software A.G.
(Computers-Software &
Services)(Acquired 06/26/97;
Cost $289,738)(a)(b) 5,000 478,996
- ---------------------------------------------------------------
Boewe Systec A.G. (Office
Equipment & Supplies) 75,000 2,220,803
- ---------------------------------------------------------------
Continental A.G. (Auto Parts &
Equipment) 185,000 4,414,607
- ---------------------------------------------------------------
Fresenius A.G.-Pfd. (Health
Care-Medical Products &
Supplies) 26,000 4,392,835
- ---------------------------------------------------------------
Hugo Boss A.G.-Pfd.
(Textile-Apparel) 1,750 2,214,997
- ---------------------------------------------------------------
IWKA A.G. (Machinery-Diversified) 8,100 2,017,534
- ---------------------------------------------------------------
Plettac A.G.
(Manufacturing-Diversified) 10,000 1,817,285
- ---------------------------------------------------------------
Plettac A.G.-Rts.
(Manufacturing-Diversified)(a) 10,000 581
- ---------------------------------------------------------------
Porsche A.G. (Automobiles) 6,300 9,272,506
- ---------------------------------------------------------------
ProSieben Media A.G.-Pfd.
(Broadcasting-Television, Radio, &
Cable)(a) 54,000 2,649,287
- ---------------------------------------------------------------
SCHMALBACH LUBECA A.G.
(Containers-Metal & Glass) 20,000 3,715,853
- ---------------------------------------------------------------
Schwarz Pharma A.G. (Health
Care-Drugs-Generic & Other) 85,000 6,020,844
- ---------------------------------------------------------------
SKW Trostberg A.G.
(Chemicals-Diversified) 77,600 2,667,240
- ---------------------------------------------------------------
Vossloh A.G.
(Manufacturing-Specialized) 50,200 2,541,551
- ---------------------------------------------------------------
44,424,919
- ---------------------------------------------------------------
GREECE-0.12%
Titan Cement Co. S.A.
(Construction-Cement &
Aggregates) 60,000 2,932,041
- ---------------------------------------------------------------
HONG KONG-4.94%
Asia Satellite Telecommunications Holdings
Ltd.
(Telecommunications-Cellular/Wireless) 1,530,000 3,680,786
- ---------------------------------------------------------------
Asia Satellite Telecommunications
Holdings Ltd.-ADR
(Telecommunications-Cellular/Wireless) 177,300 4,144,389
- ---------------------------------------------------------------
China Resources Enterprise Ltd.
(Manufacturing-Diversified) 5,414,000 14,845,347
- ---------------------------------------------------------------
China Telecom (Hong Kong) Ltd.
ADR
(Telecommunications-Cellular &
Wireless)(a) 202,000 6,539,750
- ---------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 9,100,000 10,593,029
- ---------------------------------------------------------------
Esprit Asia Holdings Ltd.
(Retail-Specialty- Apparel) 10,520,000 3,741,835
- ---------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 114
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HONG KONG-(CONTINUED)
First Pacific Company Ltd.
(Distributors-Food & Health) 13,326,033 $ 8,402,562
- ---------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
(Natural Gas) 6,723,840 12,697,156
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Retail-Food Chains) 2,255,000 15,604,023
- ---------------------------------------------------------------
Johnson Electric Holdings Ltd.
(Electrical Equipment) 4,968,000 13,558,145
- ---------------------------------------------------------------
New World Infrastructure Ltd.
(Services-Commercial &
Consumer)(a) 3,080,000 6,095,066
- ---------------------------------------------------------------
Shanghai Industrial Holdings Ltd.
(Manufacturing-Diversified) 2,532,000 11,265,705
- ---------------------------------------------------------------
South China Morning Post Ltd.
(Publishing-Newspapers) 8,168,000 7,078,264
- ---------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Land Development) 625,000 4,607,773
- ---------------------------------------------------------------
122,853,830
- ---------------------------------------------------------------
HUNGARY-0.19%
Richter Gedeon Rt.-GDR (Health
Care-Drugs-Major
Pharmaceuticals) 50,000 4,650,000
- ---------------------------------------------------------------
INDONESIA-0.58%
Gulf Indonesia Resources Ltd.
(Oil-International
Integrated)(a) 310,000 6,510,000
- ---------------------------------------------------------------
PT Indosat (Telephone) 808,000 1,821,082
- ---------------------------------------------------------------
PT Indosat-ADR (Telephone) 87,500 2,072,656
- ---------------------------------------------------------------
PT Ramayana Lestari Sentosa
(Retail- Department Stores) 2,324,000 3,932,427
- ---------------------------------------------------------------
14,336,165
- ---------------------------------------------------------------
ITALY-0.26%
Autogrill S.p.A (Restaurants)(a) 775,000 3,556,852
- ---------------------------------------------------------------
Gewiss S.p.A. (Electrical
Equipment) 150,000 2,923,804
- ---------------------------------------------------------------
6,480,656
- ---------------------------------------------------------------
IRELAND-0.72%
CBT Group PLC-ADR
(Computers-Software &
Services)(a) 7,600 583,300
- ---------------------------------------------------------------
Elan Corp. PLC-ADR (Health
Care-Drugs-Generic & Other)(a) 200,000 9,975,000
- ---------------------------------------------------------------
Saville Systems Ireland
PLC-ADR(a)(Services- Data
Processing) 125,000 7,468,750
- ---------------------------------------------------------------
18,027,050
- ---------------------------------------------------------------
ISRAEL-2.60%
Blue Square-Israel Ltd.-ADR
(Retail-Food Chains)(a) 550,000 6,393,750
- ---------------------------------------------------------------
Crystal Systems Solutions
(Computers- Software &
Services)(a) 110,000 2,310,000
- ---------------------------------------------------------------
ESC Medical Systems Ltd. (Health
Care- Medical Products &
Supplies)(a) 300,000 11,775,000
- ---------------------------------------------------------------
MARKET
SHARES VALUE
ISRAEL-(CONTINUED)
NICE-Systems Ltd. ADR
(Communications Equipment)(a) 113,000 $ 5,268,625
- ---------------------------------------------------------------
Orbotech, Ltd.
(Computers-Software & Services) 138,000 5,899,500
- ---------------------------------------------------------------
Panamerican Beverages, Inc.-Class
A (Beverages-Non-Alcoholic) 574,400 17,806,400
- ---------------------------------------------------------------
Tecnomatix Technologies Ltd.
(Computers-Software &
Services)(a) 87,500 2,701,563
- ---------------------------------------------------------------
Teledata Communication Ltd.
(Communications Equipment)(a) 70,100 2,173,100
- ---------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 198,500 9,279,875
- ---------------------------------------------------------------
Tower Semiconductor Ltd.
(Electronics-Semiconductors) 100,000 1,175,000
- ---------------------------------------------------------------
64,782,812
- ---------------------------------------------------------------
JAPAN-2.78%
Aderans Co. Ltd. (Personal Care) 394,000 10,607,063
- ---------------------------------------------------------------
Bellsystem 24, Inc.
(Services-Commercial &
Consumer) 48,000 6,620,690
- ---------------------------------------------------------------
Capcom Co., Ltd.
(Computers-Software & Services) 201,000 3,340,257
- ---------------------------------------------------------------
Circle K Japan Co. Ltd.
(Retail-Food Chains) 222,000 11,399,751
- ---------------------------------------------------------------
FCC Co. Ltd. (Auto Parts &
Equipment) 143,110 2,259,319
- ---------------------------------------------------------------
Fujitsu Denso Ltd. (Electrical
Equipment) 340,000 5,311,175
- ---------------------------------------------------------------
Hokuto Corp. (Agricultural
Products) 185,250 5,248,878
- ---------------------------------------------------------------
Noritsu Koki Co. Ltd.
(Photography/Imaging) 315,600 10,489,406
- ---------------------------------------------------------------
77 Bank (Banks-Major Regional) 770,000 7,293,727
- ---------------------------------------------------------------
Shohkoh Fund & Co.
(Financial-Diversified) 20,600 6,675,529
- ---------------------------------------------------------------
69,245,795
- ---------------------------------------------------------------
MEXICO-4.62%
Cifra S.A. de C.V.
(Retail-General Merchandise)(a) 6,454,900 11,162,320
- ---------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR
(Beverages-Non-Alcoholic) 363,700 15,707,294
- ---------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento S.A.
(Entertainment)(a) 683,000 3,958,712
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-Class B
(Beverages-Alcoholic) 2,852,700 20,072,665
- ---------------------------------------------------------------
Grupo Financiero Banamex Accival,
S.A. de C.V.
(Financial-Diversified)(a) 5,850,000 11,581,395
- ---------------------------------------------------------------
Grupo Industrial Maseca S.A. de
C.V.-Class B (Foods) 5,844,600 5,645,945
- ---------------------------------------------------------------
Grupo Modelo S.A. de C.V.
(Beverages- Alcoholic) 1,056,000 7,820,823
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 424,700 13,165,700
- ---------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de
C.V.-Class A (Paper & Forest
Products) 2,460,500 10,783,945
- ---------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 115
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO-(CONTINUED)
Organizacion Soriana S.A. de C.V.
(Retail-Department Stores) 2,900,000 $ 9,649,374
- ---------------------------------------------------------------
Tubos de Acero de Mexico S.A.
(Oil & Gas-Drilling &
Equipment)(a) 125,000 2,523,438
- ---------------------------------------------------------------
TV Azteca, S.A. de C.V.-ADR
(Broadcasting-Television, Radio &
Cable)(a) 156,100 2,985,413
- ---------------------------------------------------------------
115,057,024
- ---------------------------------------------------------------
NETHERLANDS-4.43%
Aalberts Industries N.V.
(Manufacturing-Diversified) 115,000 3,014,937
- ---------------------------------------------------------------
Beter Bed Holding N.V. (Household
Furnishings & Appliances) 115,000 2,505,537
- ---------------------------------------------------------------
Brunel International N.V.
(Services- Employment)
(Acquired 06/19/97; Cost
$1,997,948)(a)(b) 95,000 2,006,181
- ---------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 517,200 12,174,113
- ---------------------------------------------------------------
Draka Holding N.V. (Metal
Fabricators) 60,000 2,898,790
- ---------------------------------------------------------------
Fugro N.V. (Services-Commercial &
Consumer) 180,000 6,350,760
- ---------------------------------------------------------------
Gamma Holding N.V.
(Textiles-Apparel) 53,000 2,839,042
- ---------------------------------------------------------------
Getronics N.V.
(Computers-Software & Services) 300,000 9,904,713
- ---------------------------------------------------------------
IHC Caland N.V.
(Manufacturing-Specialized) 114,000 7,010,868
- ---------------------------------------------------------------
Internatio-Muller N.V.
(Manufacturing-Diversified) 288,000 9,152,511
- ---------------------------------------------------------------
Koninklijke Ahrend Groep N.V.
(Household Furnishings &
Appliances) 210,000 6,998,197
- ---------------------------------------------------------------
Koninklijke Van Ommeren N.V.
(Shipping) 122,000 4,367,242
- ---------------------------------------------------------------
NORIT N.V. (Chemicals Specialty) 200,000 3,224,311
- ---------------------------------------------------------------
Nutreco Holding N.V.
(Agricultural Products)(a) 235,000 5,277,363
- ---------------------------------------------------------------
Oce-Van Der Grinten N.V. (Office
Equipment & Supplies) 67,000 7,643,832
- ---------------------------------------------------------------
Ordina Beheer N.V.-W.I.
(Services-Commercial &
Consumer)(a) 400,000 6,469,225
- ---------------------------------------------------------------
Randstad Holdings N.V.
(Services-Commercial &
Consumer) 292,500 11,675,895
- ---------------------------------------------------------------
Simac Techniek N.V.
(Electronics-Instrumentation) 25,000 3,197,270
- ---------------------------------------------------------------
Vedior N.V. (Services-Commercial & Consumer)
(Acquired 06/05/97; Cost
$1,500,539)(a)(b) 75,000 1,541,333
- ---------------------------------------------------------------
Vedior N.V. (Services-Commercial
& Consumer) 100,000 2,055,112
- ---------------------------------------------------------------
110,307,232
- ---------------------------------------------------------------
NORWAY-2.56%
ASK A.S.A. (Computer
Peripherals)(a) 405,000 3,627,785
- ---------------------------------------------------------------
Blom A.S.A. (Services-Facilities
& Environmental)(a) 244,000 2,412,933
- ---------------------------------------------------------------
MARKET
SHARES VALUE
NORWAY-(CONTINUED)
Blom A.S.A.-Rts.
(Services-Facilities &
Environmental)(a) 34,268 $ 4,911
- ---------------------------------------------------------------
Det Sondenfjelds-Norske
Dampskibsselskab (Oil &
Gas-Refining & Marketing)(a) 250,000 5,625,305
- ---------------------------------------------------------------
Ekornes A.S.A. (Household
Furnishings & Appliances) 300,000 2,751,741
- ---------------------------------------------------------------
Farstad Shipping A.S.A.
(Shipping) 406,000 2,612,635
- ---------------------------------------------------------------
Fred. Olsen Energy A.S.A. (Oil &
Gas-Drilling & Equipment)
(Acquired 10/07/97; Cost
$3,100,584)(a)(b) 152,900 3,856,795
- ---------------------------------------------------------------
Merkantildata A.S.A.
(Services-Commercial &
Consumer) 150,000 5,052,025
- ---------------------------------------------------------------
NetCom A.S.A.
(Cellular/Wireless
Telecommunications) (a) 150,000 3,633,158
- ---------------------------------------------------------------
Saevik Supply A.S.A.
(Oil-International
Integrated)(a) 160,000 3,668,988
- ---------------------------------------------------------------
Seateam Technology A.S.A.
(Oil & Gas-Exploration &
Production)(a) 150,000 3,009,717
- ---------------------------------------------------------------
Smedvig A.S.A.-Class A (Oil &
Gas-Drilling & Equipment) 160,000 4,838,479
- ---------------------------------------------------------------
Smedvig A.S.A.-Class B (Oil &
Gas-Drilling & Equipment) 140,000 4,133,345
- ---------------------------------------------------------------
Tandberg A.S.A. (Communications
Equipment)(a) 110,000 1,734,170
- ---------------------------------------------------------------
Tandberg Television A.S.A.
(Communications Equipment)(a) 440,000 4,225,070
- ---------------------------------------------------------------
Tomra Systems A.S.A.
(Manufacturing Specialized) 486,000 12,537,621
- ---------------------------------------------------------------
63,724,678
- ---------------------------------------------------------------
PERU-0.47%
Telefonica del Peru S.A.-ADR
(Telephone) 486,500 9,608,375
- ---------------------------------------------------------------
Telefonica del Peru S.A.-Class B
(Telephone) 1,026,000 2,044,442
- ---------------------------------------------------------------
11,652,817
- ---------------------------------------------------------------
PHILIPPINES-0.98%
DMCI Holdings Inc.
(Homebuilding)(a) 23,400,000 1,848,236
- ---------------------------------------------------------------
International Container Terminal
Services, Inc. (Air Freight)(a) 12,225,000 2,413,963
- ---------------------------------------------------------------
Ionics Circuit Inc.
(Electronics-Component
Distributors) 6,040,000 3,535,402
- ---------------------------------------------------------------
Metro Pacific Corp.
(Manufacturing-Diversified) 36,247,820 2,413,113
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co. (Telephone) 194,920 4,811,142
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co.-ADR (Telephone) 159,400 3,865,450
- ---------------------------------------------------------------
SM Prime Holdings Inc. (Land
Development) 32,000,000 5,596,615
- ---------------------------------------------------------------
24,483,923
- ---------------------------------------------------------------
</TABLE>
FS-9
<PAGE> 116
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PORTUGAL-1.51%
Cimpor-Cimentos de Portugal S.A.
(Construction-Cement &
Aggregates) 250,000 $ 6,326,415
- ---------------------------------------------------------------
Electricidade de Portugal,
S.A.-ADR (Electric
Companies)(a) 158,500 5,537,594
- ---------------------------------------------------------------
Jeronimo Martins & Filho, S.A.
(Retail General Merchandise) 56,000 3,662,212
- ---------------------------------------------------------------
Portugal Telecom S.A. (Telephone) 265,000 10,872,761
- ---------------------------------------------------------------
Semapa (Building Materials) 110,000 2,539,664
- ---------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Cellular/Wireless
Telecommunications) (a) 34,900 3,149,725
- ---------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.-ADR
(Cellular/Wireless
Telecommunications) (a) 60,000 5,425,078
- ---------------------------------------------------------------
37,513,449
- ---------------------------------------------------------------
SINGAPORE-0.80%
City Developments Ltd. (Land
Development) 789,000 3,306,286
- ---------------------------------------------------------------
Creative Technology Limited
(Computers-Peripherals)(a) 100,000 2,543,750
- ---------------------------------------------------------------
DBS Land Ltd. (Land Development) 3,205,000 5,453,587
- ---------------------------------------------------------------
Overseas Union Bank Ltd.
(Banks-Major Regional) 1,236,000 4,120,000
- ---------------------------------------------------------------
Wing Tai Holdings Ltd. (Land
Development) 3,600,000 4,571,429
- ---------------------------------------------------------------
19,995,052
- ---------------------------------------------------------------
SOUTH AFRICA-0.54%
Dimension Data Holdings Ltd.
(Computers-Software &
Services)(a) 1,500,000 6,233,766
- ---------------------------------------------------------------
Persetel Holdings Ltd.
(Computers-Software & Services) 760,000 4,777,143
- ---------------------------------------------------------------
Protea Furnishers Ltd. (Household
Furnishings & Appliances) 4,700,000 2,441,559
- ---------------------------------------------------------------
13,452,468
- ---------------------------------------------------------------
SPAIN-1.12%
Azkoyen S.A.
(Manufacturing-Specialized) 17,000 1,870,970
- ---------------------------------------------------------------
Corp. Financiera Reunida, S.A.
(Investment Management)(a) 1,475,000 7,908,847
- ---------------------------------------------------------------
Mapfre Vida (Insurance-Life &
Health) 54,000 3,303,774
- ---------------------------------------------------------------
Prosegur, CIA de Seguridad S.A.
(Services- Commercial &
Consumer) 400,000 4,482,024
- ---------------------------------------------------------------
Tele Pizza, S.A. (Restaurants)(a) 100,000 6,867,395
- ---------------------------------------------------------------
Vidrala S.A.
(Manufacturing-Specialized) 80,000 3,514,127
- ---------------------------------------------------------------
27,947,137
- ---------------------------------------------------------------
SWEDEN-1.27%
AB Lindex
(Retail-Specialty-Apparel) 130,000 3,662,265
- ---------------------------------------------------------------
Allgon A.B.-Class B (Electronic
Components/Miscellaneous) 57,000 913,230
- ---------------------------------------------------------------
MARKET
SHARES VALUE
SWEDEN-(CONTINUED)
Assa Abloy A.B.-Class B (Metal
Fabricators) 230,000 $ 5,251,071
- ---------------------------------------------------------------
B.T. Industries A.B.
(Machinery-Diversified) 130,000 2,777,073
- ---------------------------------------------------------------
Europolitan Holdings A.B.
(Telecommunications-Cellular &
Wireless)(a) 94,400 3,377,775
- ---------------------------------------------------------------
Hemkopskedjan A.B. (Retail-Food
Chains)(a)(b) 100,000 1,034,727
- ---------------------------------------------------------------
Hoganas A.B. (Metals Mining) 170,000 6,309,831
- ---------------------------------------------------------------
Munters A.B.(Services-Facilities
& Environmental)(a) (b) 185,000 1,877,195
- ---------------------------------------------------------------
Scandic Hotels A.B.
(Lodging-Hotels)(a) 39,500 896,541
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 122,360 5,414,430
- ---------------------------------------------------------------
31,514,138
- ---------------------------------------------------------------
SWITZERLAND-2.33%
Ares-Serono Group-Class B (Health
Care-Drugs-Generic & Other) 4,000 7,570,077
- ---------------------------------------------------------------
Georg Fischer A.G. (Auto Parts &
Equipment) 1,800 2,398,715
- ---------------------------------------------------------------
Gurit-Heberlein A.G. (Chemicals
Diversified) 1,400 4,424,210
- ---------------------------------------------------------------
Kuoni Reisen A.G.
(Services-Commercial &
Consumer) 1,600 6,056,061
- ---------------------------------------------------------------
Mikron Holding A.G.
(Machinery-Diversified)(a) 17,000 2,828,781
- ---------------------------------------------------------------
Mikron Holding A.G. Wts.,
expiring 12/10/97
(Machinery-Diversified)(a) 17,000 29,138
- ---------------------------------------------------------------
Rieter Holdings Ltd.
(Machinery-Diversified) 24,500 10,585,610
- ---------------------------------------------------------------
Saurer A.G.
(Machinery-Diversified) 18,500 12,234,244
- ---------------------------------------------------------------
Selecta Group (The) (Retail-Speciality)
(Acquired 05/12/97; Cost
$2,339,099)(a)(b) 16,150 2,260,596
- ---------------------------------------------------------------
Sika Finanz A.G. (Engineering &
Construction) 16,500 4,854,847
- ---------------------------------------------------------------
Sulzer Medica (Health
Care-Medical Products &
Supplies)(a) 120,600 3,226,050
- ---------------------------------------------------------------
TAG Heuer International S.A.
(Consumer Jewelry, Novelties &
Gift)(a) 13,900 1,588,287
- ---------------------------------------------------------------
58,056,616
- ---------------------------------------------------------------
TAIWAN-0.11%
ASE Test Ltd.
(Electronics-Semiconductors)(a) 49,100 2,688,225
- ---------------------------------------------------------------
UNITED KINGDOM-7.55%
Aegis Group PLC
(Services-Advertising/Marketing) 6,000,000 6,090,233
- ---------------------------------------------------------------
Airtours PLC (Services-Commercial
& Consumer) 815,000 16,134,922
- ---------------------------------------------------------------
Alexon Group PLC
(Textiles-Apparel)(a) 555,000 2,206,828
- ---------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 117
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Amersham International PLC
(Health Care-Drugs-Generic &
Other) 245,000 $ 9,423,293
- ---------------------------------------------------------------
Avis Europe PLC
(Services-Commercial &
Consumer) (Acquired 03/26/97;
Cost $2,977,263)(b) 1,484,550 3,711,149
- ---------------------------------------------------------------
Blacks Leisure Group PLC (Retail
General Merchandise) 200,000 1,469,709
- ---------------------------------------------------------------
British-Borneo Petroleum
Syndicate PLC (Oil &
Gas/Exploration & Production) 1,080,000 8,624,977
- ---------------------------------------------------------------
Capita Group PLC (Services
Commercial & Consumer) 570,000 2,945,458
- ---------------------------------------------------------------
Compass Group PLC (Services
Commercial & Consumer) 335,000 3,571,804
- ---------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Equipment & Supplies) 114,700 4,243,900
- ---------------------------------------------------------------
Dewhirst Group PLC
(Textiles-Apparel) 404,000 1,721,640
- ---------------------------------------------------------------
Dr. Solomon's Group PLC-ADR
(Computers-Software &
Services)(a) 109,600 3,356,500
- ---------------------------------------------------------------
FirstBus PLC (Shipping) 1,350,000 4,552,575
- ---------------------------------------------------------------
Games Workshop Group PLC (Leisure
Time- Products) 165,000 1,896,277
- ---------------------------------------------------------------
Goode Durrant PLC (Manufacturing
Diversified) 214,000 1,784,421
- ---------------------------------------------------------------
Graseby PLC (Electronics
Instrumentation) 425,000 1,493,827
- ---------------------------------------------------------------
Holliday Chemical Holdings PLC
(Chemicals Specialty) 675,000 2,151,714
- ---------------------------------------------------------------
Independent Insurance Group PLC
(Insurance-Property-Casualty) 185,000 3,569,413
- ---------------------------------------------------------------
Jarvis Hotels PLC
(Lodging-Hotels) 675,000 1,653,423
- ---------------------------------------------------------------
JBA Holdings PLC (Computer
Software & Services) 150,000 2,378,211
- ---------------------------------------------------------------
J.D. Wetherspoon PLC (Leisure
Time- Products) 105,000 2,853,853
- ---------------------------------------------------------------
JJB Sports PLC (Retail-General
Merchandise) 430,000 4,112,165
- ---------------------------------------------------------------
Kwik-Fit Holdings PLC
(Retail-General Merchandise) 880,500 4,778,932
- ---------------------------------------------------------------
Manchester United PLC (Leisure
Time-Products) 500,000 5,360,411
- ---------------------------------------------------------------
Mayflower Corp. PLC (The)
(Auto Parts & Equipment) 890,000 2,971,463
- ---------------------------------------------------------------
Micro Focus Group PLC ADR
(Computer Software/Services)(a) 80,000 2,685,000
- ---------------------------------------------------------------
Millennium & Copthorne Hotels PLC
(Lodging-Hotels) 350,000 2,266,640
- ---------------------------------------------------------------
Misys PLC (Services-Commercial &
Consumer) 500,000 12,604,097
- ---------------------------------------------------------------
Parity PLC (Services Commercial &
Consumer) 350,000 3,388,216
- ---------------------------------------------------------------
PizzaExpress PLC (Restaurants) 387,000 4,876,162
- ---------------------------------------------------------------
MARKET
SHARES VALUE
UNITED KINGDOM-(CONTINUED)
Powerscreen International PLC
(Machinery-Diversified) 515,000 $ 6,035,328
- ---------------------------------------------------------------
Provident Financial PLC (Consumer
Finance) 1,000,000 11,576,475
- ---------------------------------------------------------------
Sage Group PLC (The)
(Computers-Software & Services) 300,000 3,623,940
- ---------------------------------------------------------------
Scholl PLC (Health
Care-Diversified) 200,000 934,507
- ---------------------------------------------------------------
Select Appointments Holdings PLC
(Services-Commercial &
Consumer) 300,000 2,753,187
- ---------------------------------------------------------------
SEMA Group PLC (Manufacturing
Diversified) 500,000 11,232,536
- ---------------------------------------------------------------
Senior Engineering Group PLC
(Metal Fabricators) 1,100,000 3,063,572
- ---------------------------------------------------------------
Stagecoach Holdings PLC
(Shipping) 790,000 9,662,330
- ---------------------------------------------------------------
Stanley Leisure PLC (Leisure
Time-Products) 425,000 2,185,478
- ---------------------------------------------------------------
Taylor Woodrow PLC (Engineering &
Construction) 1,450,000 4,451,910
- ---------------------------------------------------------------
TBI PLC (Land Development) 500,000 721,433
- ---------------------------------------------------------------
Weir Group PLC (The)
(Machinery-Diversified) 600,000 2,793,454
- ---------------------------------------------------------------
187,911,363
- ---------------------------------------------------------------
VENEZUELA-0.29%
Cia. Anonima Nacional Telefonos
de Venezuela
(Telecommunications-Long
Distance) 165,000 7,218,750
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity
Interests 1,520,076,577
- ---------------------------------------------------------------
DOMESTIC PREFERRED STOCK-0.23%
LODGING (HOTELS)-0.23%
Royal Caribbean Cruises
Ltd.-$3.63 Conv. Pfd. 76,000 5,776,000
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE CORPORATE NOTES-0.15%
ADVERTISING/BROADCASTING-0.06%
Jacor Communications Inc., Conv.
Sr. LYON, 5.50%, 06/12/11(c) $ 2,350,000 1,439,210
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.09%
Loews Corp., Conv. Sub. Notes,
3.125%, 09/15/07 2,100,000 2,396,415
- ---------------------------------------------------------------
Total Domestic Convertible
Corporate
Notes 3,835,625
- ---------------------------------------------------------------
FOREIGN CONVERTIBLE CORPORATE BONDS-0.12%
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
$2,172,563)(b) 1,850,000 1,748,250
- ---------------------------------------------------------------
</TABLE>
FS-11
<PAGE> 118
<TABLE>
<CAPTION>
PRINCIPAL MARKET
FOREIGN CONVERTIBLE CORPORATE AMOUNT VALUE
BONDS-(CONTINUED)
<S> <C> <C>
New World Infrastructure Ltd.
(Services-Commercial &
Consumer), Conv. Bonds, 5.00%,
07/15/01 $ 1,170,000 $ 1,105,650
- ---------------------------------------------------------------
Total Foreign Convertible
Corporate
Bonds 2,853,900
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
REPURCHASE AGREEMENT(D)-5.40%
SBC Warburg Inc., 5.40%,
11/03/97(e) $134,491,340 $ 134,491,340
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.87% 2,461,010,253
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.13% 28,169,726
- ---------------------------------------------------------------
NET ASSETS-100.00% 2,489,179,979
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
GDR - Global Depository Receipt
LYON - Liquid Yield Option Notes
Pfd. - Preferred
Rts. - Rights
Sr. - Senior
Sub. - Subordinated
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 10/31/97 was $20,934,090,
which represented 0.84% of the Fund's net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts, private accounts and certain
non-registered investment companies managed by the investment advisor or its
affiliates.
(e) Joint repurchase agreement entered into 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.
FS-12
<PAGE> 119
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,987,194,427) $2,461,010,253
- ------------------------------------------------------------
Foreign currencies, at market value (cost
$19,159,068) 19,307,806
- ------------------------------------------------------------
Receivables for:
Investments sold 11,150,791
- ------------------------------------------------------------
Capital stock sold 18,652,156
- ------------------------------------------------------------
Dividends and interest 1,503,948
- ------------------------------------------------------------
Investment for deferred compensation plan 17,360
- ------------------------------------------------------------
Other assets 69,112
- ------------------------------------------------------------
Total assets 2,511,711,426
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 11,143,700
- ------------------------------------------------------------
Capital stock reacquired 6,695,997
- ------------------------------------------------------------
Deferred compensation 17,360
- ------------------------------------------------------------
Accrued advisory fees 1,984,585
- ------------------------------------------------------------
Accrued administrative services fees 8,156
- ------------------------------------------------------------
Accrued directors' fees 6,600
- ------------------------------------------------------------
Accrued distribution fees 1,704,146
- ------------------------------------------------------------
Accrued transfer agent fees 542,373
- ------------------------------------------------------------
Accrued operating expenses 428,530
- ------------------------------------------------------------
Total liabilities 22,531,447
- ------------------------------------------------------------
Net assets applicable to shares outstanding $2,489,179,979
============================================================
NET ASSETS:
Class A $1,242,504,885
============================================================
Class B $1,241,999,324
============================================================
Class C $ 4,675,770
============================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
CLASS A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 71,884,207
============================================================
CLASS B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 73,069,124
============================================================
CLASS C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 275,023
============================================================
CLASS A:
Net asset value and redemption price per
share $ 17.28
============================================================
Offering price per share:
(Net asset value $17.28 divided by 95.25%)$ 18.14
============================================================
CLASS B:
Net asset value and offering price per
share $ 17.00
============================================================
CLASS C:
Net asset value and offering price per
share $ 17.00
============================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,998,577 foreign
withholding tax) $ 17,106,552
- -------------------------------------------------------------
Interest 2,731,848
- -------------------------------------------------------------
Total investment income 19,838,400
- -------------------------------------------------------------
EXPENSES:
Advisory fees 19,996,061
- -------------------------------------------------------------
Administrative services fees 109,161
- -------------------------------------------------------------
Directors' fees 20,096
- -------------------------------------------------------------
Distribution fees-Class A 5,877,002
- -------------------------------------------------------------
Distribution fees-Class B 11,173,566
- -------------------------------------------------------------
Distribution fees-Class C 6,233
- -------------------------------------------------------------
Custodian fees 1,728,899
- -------------------------------------------------------------
Transfer agent fees-Class A 2,809,254
- -------------------------------------------------------------
Transfer agent fees-Class B 3,311,554
- -------------------------------------------------------------
Transfer agent fees-Class C 1,951
- -------------------------------------------------------------
Other 1,293,733
- -------------------------------------------------------------
Total expenses 46,327,510
- -------------------------------------------------------------
Less: Expenses paid indirectly (61,449)
- -------------------------------------------------------------
Net expenses 46,266,061
- -------------------------------------------------------------
Net investment income (loss) (26,427,661)
- -------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) on sales of:
Investment securities (60,146,645)
- -------------------------------------------------------------
Foreign currencies (1,044,469)
- -------------------------------------------------------------
(61,191,114)
- -------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 272,184,029
- -------------------------------------------------------------
Foreign currencies 217,562
- -------------------------------------------------------------
272,401,591
- -------------------------------------------------------------
Net gain (loss) on investment securities
and foreign
currencies 211,210,477
- -------------------------------------------------------------
Net increase in net assets resulting from
operations $184,782,816
=============================================================
</TABLE>
See Notes to Financial Statements.
FS-13
<PAGE> 120
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 (loss) $ (26,427,661) $ (8,221,031)
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities
and foreign currencies (61,191,114) (32,408,407)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 272,401,591 171,434,202
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 184,782,816 130,804,764
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized capital gains:
Class A -- (766,625)
- -----------------------------------------------------------------------------------------------
Class B -- (520,242)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 221,978,537 657,118,189
- -----------------------------------------------------------------------------------------------
Class B 350,877,196 635,669,948
- -----------------------------------------------------------------------------------------------
Class C 5,007,454 --
- -----------------------------------------------------------------------------------------------
Net increase in net assets 762,646,003 1,422,306,034
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,726,533,976 304,227,942
- -----------------------------------------------------------------------------------------------
End of period $2,489,179,979 $1,726,533,976
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,116,538,293 $1,557,038,579
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (36,158) (14,054)
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and
foreign currencies (101,414,669) (32,181,471)
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 474,092,513 201,690,922
- -----------------------------------------------------------------------------------------------
$2,489,179,979 $1,726,533,976
===============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Aggressive Growth Fund (the "Fund") is a series portfolio of AIM
International Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company consisting of four operating
series portfolios: AIM Global Aggressive Growth Fund, AIM Global Growth Fund,
AIM Global Income Fund and AIM International Equity 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. Matters
affecting each portfolio or class are voted on exclusively by the shareholders
of such portfolio or class. The assets, liabilities and operations of each
portfolio are accounted for separately. Information presented in these financial
statements pertains only to the Fund. The Fund's investment objective is to
provide above-average long-term growth of capital appreciation. The Fund seeks
to achieve its objective by investing in a portfolio of global equity securities
including securities of selected companies with relatively small market
capitalization.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at the last sales price on the exchange where
the security is principally traded or, lacking any sales, at the mean between
the closing bid and asked prices on the day of valuation. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Securities traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) are valued at the mean between the closing bid and asked prices on
valuation date. Securities reported on the NASDAQ National Market System are
valued at the last sales price on the valuation date or, absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may be
determined
FS-14
<PAGE> 121
without exclusive reliance on quoted prices, and may reflect appropriate
factors such as yield, type of issue, coupon rate and maturity date.
Securities for which market quotations are either not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors. Investments with maturities of 60 days
or less are valued on the basis of amortized cost which approximates market
value. Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which would not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts -- A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1997,
capital was decreased by $18,363,473, undistributed net investment income was
increased by $26,405,557 and undistributed net realized gains decreased by
$8,042,084 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 $91,801,587 (which may be carried forward to offset future
taxable 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 among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master advisory agreement, the
Fund pays an advisory fee to AIM at the annual rate of 0.90% of the first $1
billion of the Fund's average daily net assets, plus 0.85% of the Fund's average
daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1997, AIM was
reimbursed $109,161 for such services.
The Fund, pursuant to a transfer agency and services 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 $3,429,751 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 and Class C Plan, pays AIM Distributors compensation at
the annual rate of 0.50% 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 and Class C
Plan is designed to compensate AIM Distributors for certain promotional and
other sales related costs, and to implement a dealer incentive program which
provides for periodic payments to selected dealers who furnish continuing
personal shareholder services to their customers who purchase and own Class A or
Class C shares of the Fund. The Fund, pursuant to the Class B Plan, will pay AIM
Distributors an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of this amount, the Fund pays a service fee
of 0.25% of the average daily net assets of the Class B shares to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class B shares of the Fund. Any
amounts not paid as a service fee under such Plans would constitute an asset-
FS-15
<PAGE> 122
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, Class A shares and
Class B shares and the period August 4, 1997 through October 31, 1997 Class C
shares paid AIM Distributors $5,877,002, $11,173,566 and $6,233, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $2,200,552 from the 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 $133,018 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 paid legal fees of $8,986 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-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 which reduced the
Fund's expenses by $8,359 for the year ended October 31, 1997. The Fund also
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
custodian fees of $29,827 and $23,263, respectively, under expense offset
arrangements. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $61,449 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
$1,686,305,972 and $1,247,124,354, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1997, on a tax basis, is as follows.
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 600,581,618
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (136,378,875)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 464,202,743
=========================================================
</TABLE>
Cost of investments for tax purposes is $1,996,807,510.
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 41,562,019 $ 712,389,030 50,205,954 $ 748,519,743
- --------------------- ----------- ------------- ---------- --------------
Class B 31,043,322 516,329,374 45,280,451 673,914,740
- --------------------- ----------- ------------- ---------- --------------
Class C* 281,009 5,113,170 -- --
- --------------------- ----------- ------------- ---------- --------------
Issued as
reinvestment of
dividends:
Class A -- -- 56,549 727,221
- --------------------- ----------- ------------- ---------- --------------
Class B -- -- 38,442 491,285
- --------------------- ----------- ------------- ---------- --------------
Reacquired:
Class A (28,025,133) (490,410,493) (6,124,044) (92,128,775)
- --------------------- ----------- ------------- ---------- --------------
Class B (9,784,297) (165,452,178) (2,588,161) (38,736,077)
- --------------------- ----------- ------------- ---------- --------------
Class C* (5,986) (105,716) -- --
- --------------------- ----------- ------------- ---------- --------------
35,070,934 $ 577,863,187 86,869,191 $1,292,788,137
===================== =========== ============= ========== ==============
</TABLE>
* Class C commenced sales on August 4, 1997.
FS-16
<PAGE> 123
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and Class B
capital stock 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 share of Class C capital stock outstanding
for the period August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 15.76 $ 13.09 $ 10.22 $ 10.00
- ------------------------------------------------------------ ---------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.09)(a) (0.09)(a) --
- ------------------------------------------------------------ ---------- -------- -------- --------
Net gains on securities (both realized and unrealized) 1.67 2.81 2.96 0.22
- ------------------------------------------------------------ ---------- -------- -------- --------
Total from investment operations 1.52 2.72 2.87 0.22
- ------------------------------------------------------------ ---------- -------- -------- --------
Less distributions:
Distributions from net realized gains -- (0.05) -- --
- ------------------------------------------------------------ ---------- -------- -------- --------
Net asset value, end of period $ 17.28 $ 15.76 $ 13.09 $ 10.22
============================================================ ========== ======== ======== ========
Total return(b) 9.65% 20.83% 28.08% 2.20%
============================================================ ========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,242,505 $919,319 $186,029 $ 18,410
============================================================ ========== ======== ======== ========
Ratio of expenses to average net assets 1.75%(c)(d) 1.83% 2.11% 2.02%(e)(f)
============================================================ ========== ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.88)%(c) (0.62)% (0.68)% 0.27%(f)(g)
============================================================ ========== ======== ======== ========
Portfolio turnover rate 57% 44% 64% 2%
============================================================ ========== ======== ======== ========
Average brokerage commission rate paid(h) $ 0.0131 $ 0.0155 N/A N/A
============================================================ ========== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are based on average net assets of $1,175,400,376.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements is
4.03% (annualized) for 1994.
(f) Annualized.
(g) 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 (1.74)% (annualized) for 1994.
(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.
<TABLE>
<CAPTION>
1997 1996 1995 1994
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 15.58 $ 13.02 $ 10.21 $ 10.00
- ------------------------------------------------------------ ---------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.24)(a) (0.17)(a) (0.14)(a) --
- ------------------------------------------------------------ ---------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 1.66 2.78 2.95 0.21
- ------------------------------------------------------------ ---------- -------- -------- --------
Total from investment operations 1.42 2.61 2.81 0.21
- ------------------------------------------------------------ ---------- -------- -------- --------
Less distributions:
Distributions from net realized gains -- (0.05) -- --
- ------------------------------------------------------------ ---------- -------- -------- --------
Net asset value, end of period $ 17.00 $ 15.58 $ 13.02 $ 10.21
============================================================ ========== ======== ======== ========
Total return(b) 9.11% 20.09% 27.52% 2.10%
============================================================ ========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,241,999 $807,215 $118,199 $ 6,201
============================================================ ========== ======== ======== ========
Ratio of expenses to average net assets 2.30%(c)(d) 2.37% 2.62% 2.54%(e)(f)
============================================================ ========== ======== ======== ========
Ratio of net investment income (loss) to average net assets (1.44)%(c) (1.16)% (1.19)% (0.25)%(f)(g)
============================================================ ========== ======== ======== ========
Portfolio turnover rate 57% 44% 64% 2%
============================================================ ========== ======== ======== ========
Average brokerage commission rate paid(h) $ 0.0131 $ 0.0155 N/A N/A
============================================================ ========== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are based on average net assets of $1,117,630,574.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average assets would have been the same.
(e) After fee waivers and expense reimbursements. Ratio of expenses to average
net assets prior to fee waivers and/or expense reimbursements is 4.43%
(annualized) for 1994.
(f) Annualized.
(g) After fee waivers and expense reimbursements. Ratio of net investment income
(loss) to average net assets prior to fee waivers and/or expense
reimbursements is (2.14)% (annualized) for 1994.
(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.
FS-17
<PAGE> 124
<TABLE>
<CAPTION>
1997
----------
<S> <C>
CLASS C:
Net asset value, beginning of period $ 18.39
- ------------------------------------------------------------ ----------
Income from investment operations:
Net investment income (loss) (0.04)(a)
- ------------------------------------------------------------ ----------
Net gains (losses) on securities (both realized and
unrealized) (1.35)
- ------------------------------------------------------------ ----------
Total from investment operations (1.39)
- ------------------------------------------------------------ ----------
Less distributions:
Distributions from net realized gains --
- ------------------------------------------------------------ ----------
Net asset value, end of period $ 17.00
============================================================ ==========
Total return(b) (7.56)%
============================================================ ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,676
============================================================ ==========
Ratio of expenses to average net assets 2.36%(c)(d)
============================================================ ==========
Ratio of net investment income (loss) to average net assets (1.50)%(c)
============================================================ ==========
Portfolio turnover rate 57%
============================================================ ==========
Average brokerage commission rate paid(e) $ 0.0131
============================================================ ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) Ratios are annualized and based on average net assets of $2,556,355.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average assets would have been the same.
(e) 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.
FS-18
<PAGE> 125
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Global Growth Fund (a portfolio of AIM
International Funds, Inc.), including the schedule of
investments, as of October 31, 1997, and the related
statement of operations for the year then ended, the
statement of changes in net assets for the two-year
period then ended and the financial highlights for the
three-year period then ended and the period September 15,
1994 (date operations commenced) through October 31,
1994. These financial statements and financial highlights
are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 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 Global
Growth Fund as of October 31, 1997, the results of its
operations for the year then ended, and changes in its
net assets for the two-year period then ended and the
financial highlights for the three-year period then ended
and the period September 15, 1994 (date operations
commenced) through October 31, 1994, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
FS-19
<PAGE> 126
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-29.98%
AGRICULTURAL PRODUCTS-0.41%
DIMON, Inc. 25,000 $ 648,437
- ---------------------------------------------------------------
Universal Corp. 26,000 999,375
- ---------------------------------------------------------------
1,647,812
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.13%
NationsBank Corp. 9,000 538,875
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.94%
BankAmerica Corp. 17,000 1,215,500
- ---------------------------------------------------------------
Chase Manhattan Corp. 11,500 1,326,812
- ---------------------------------------------------------------
Citicorp 10,000 1,250,625
- ---------------------------------------------------------------
3,792,937
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.21%
Crompton & Knowles Corp. 34,600 873,650
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.49%
Lucent Technologies, Inc. 15,500 1,277,781
- ---------------------------------------------------------------
Tellabs, Inc.(a) 13,000 702,000
- ---------------------------------------------------------------
1,979,781
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.52%
Compaq Computer Corp. 29,000 1,848,750
- ---------------------------------------------------------------
Dell Computer Corp.(a) 21,000 1,682,625
- ---------------------------------------------------------------
Digital Equipment Corp.(a) 30,000 1,501,875
- ---------------------------------------------------------------
International Business Machines Corp. 11,500 1,127,719
- ---------------------------------------------------------------
6,160,969
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.67%
Bay Networks, Inc.(a) 45,000 1,423,125
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 16,000 1,312,500
- ---------------------------------------------------------------
2,735,625
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.21%
EMC Corp.(a) 15,000 840,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-1.15%
BMC Software, Inc.(a) 11,400 688,275
- ---------------------------------------------------------------
Computer Associates International, Inc. 19,000 1,416,687
- ---------------------------------------------------------------
Compuware Corp.(a) 21,000 1,388,625
- ---------------------------------------------------------------
Microsoft Corp.(a) 9,000 1,170,000
- ---------------------------------------------------------------
4,663,587
- ---------------------------------------------------------------
CONSUMER FINANCE-1.12%
FIRSTPLUS Financial Group, Inc.(a) 11,500 632,500
- ---------------------------------------------------------------
Green Tree Financial Corp. 32,000 1,348,000
- ---------------------------------------------------------------
Household International, Inc. 10,000 1,132,500
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-(CONTINUED)
SLM Holding Corp. 10,000 $ 1,403,750
- ---------------------------------------------------------------
4,516,750
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.56%
AmeriSource Health Corp.-Class A(a) 25,000 1,484,375
- ---------------------------------------------------------------
Cardinal Health, Inc. 10,650 790,762
- ---------------------------------------------------------------
2,275,137
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.76%
General Electric Co. 23,000 1,484,937
- ---------------------------------------------------------------
Solectron Corp.(a) 25,400 996,950
- ---------------------------------------------------------------
Symbol Technologies, Inc. 15,000 596,250
- ---------------------------------------------------------------
3,078,137
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.27%
Waters Corp.(a) 25,000 1,100,000
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.65%
Intel Corp. 18,000 1,386,000
- ---------------------------------------------------------------
Texas Instruments, Inc. 11,500 1,226,906
- ---------------------------------------------------------------
2,612,906
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS)-0.55%
Applied Materials, Inc.(a) 25,700 857,737
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 15,000 659,062
- ---------------------------------------------------------------
Teradyne, Inc.(a) 18,400 688,850
- ---------------------------------------------------------------
2,205,649
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.27%
American Express Co. 15,000 1,170,000
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp. 31,800 1,204,425
- ---------------------------------------------------------------
Federal National Mortgage Association 27,200 1,317,500
- ---------------------------------------------------------------
MBIA, Inc. 2,400 143,400
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover
& Co. 25,900 1,269,100
- ---------------------------------------------------------------
SunAmerica, Inc. 450 16,172
- ---------------------------------------------------------------
5,120,597
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.06%
Abbott Laboratories 12,300 754,144
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 11,500 1,009,125
- ---------------------------------------------------------------
Johnson & Johnson 19,500 1,118,812
- ---------------------------------------------------------------
Warner-Lambert Co. 9,900 1,417,556
- ---------------------------------------------------------------
4,299,637
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.28%
Watson Pharmaceuticals, Inc.(a) 35,800 1,136,650
- ---------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 127
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-0.53%
Merck & Co., Inc. 8,000 $ 714,000
- ---------------------------------------------------------------
Pfizer, Inc. 4,200 297,150
- ---------------------------------------------------------------
Schering-Plough Corp. 20,000 1,121,250
- ---------------------------------------------------------------
2,132,400
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.35%
Quorum Health Group, Inc.(a) 41,250 1,000,312
- ---------------------------------------------------------------
Tenet Healthcare Corp.(a) 13,900 424,819
- ---------------------------------------------------------------
1,425,131
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.26%
HEALTHSOUTH Corp.(a) 41,000 1,048,063
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.22%
Baxter International Inc. 21,000 971,250
- ---------------------------------------------------------------
Becton, Dickinson & Co. 30,000 1,381,875
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 22,500 1,023,750
- ---------------------------------------------------------------
Guidant Corp. 4,400 253,000
- ---------------------------------------------------------------
Stryker Corp. 23,000 855,313
- ---------------------------------------------------------------
Sybron International Corp.(a) 10,700 429,337
- ---------------------------------------------------------------
4,914,525
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.18%
Maytag Corp. 22,200 740,925
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.36%
Dial Corp. 51,000 860,625
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 9,000 612,000
- ---------------------------------------------------------------
1,472,625
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.38%
AFLAC Inc. 10,400 529,100
- ---------------------------------------------------------------
Conseco Inc. 18,000 785,250
- ---------------------------------------------------------------
Torchmark Corp. 6,000 239,250
- ---------------------------------------------------------------
1,553,600
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.73%
Ace, Ltd. 13,900 1,291,831
- ---------------------------------------------------------------
Allmerica Financial Corp. 4,200 196,875
- ---------------------------------------------------------------
American International Group, Inc. 5,250 535,828
- ---------------------------------------------------------------
Travelers Group, Inc. 13,000 910,000
- ---------------------------------------------------------------
2,934,534
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.32%
Everest Reinsurance Holdings, Inc. 34,000 1,279,250
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.30%
Merrill Lynch & Co., Inc. 17,900 1,210,488
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT-0.47%
Franklin Resources, Inc. 5,900 $ 530,263
- ---------------------------------------------------------------
T. Rowe Price Associates, Inc. 20,500 1,358,125
- ---------------------------------------------------------------
1,888,388
- ---------------------------------------------------------------
LODGING-HOTELS-0.51%
Doubletree Corp.(a) 8,700 362,137
- ---------------------------------------------------------------
ITT Corp. 22,500 1,680,469
- ---------------------------------------------------------------
2,042,606
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.76%
Caterpillar Inc. 16,000 820,000
- ---------------------------------------------------------------
Deere & Co. 21,000 1,105,125
- ---------------------------------------------------------------
Dover Corp. 17,000 1,147,500
- ---------------------------------------------------------------
3,072,625
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.96%
Carlisle Companies, Inc. 7,500 324,375
- ---------------------------------------------------------------
Eaton Corp. 16,000 1,546,000
- ---------------------------------------------------------------
Thermo Electron Corp.(a) 26,000 970,125
- ---------------------------------------------------------------
Tyco International Ltd. 16,000 604,000
- ---------------------------------------------------------------
U.S. Industries, Inc. 16,050 431,344
- ---------------------------------------------------------------
3,875,844
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.21%
U.S. Filter Corp.(a) 21,000 842,625
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.70%
Halliburton Co. 23,000 1,371,375
- ---------------------------------------------------------------
Nabors Industries, Inc.(a) 21,000 863,625
- ---------------------------------------------------------------
Schlumberger Ltd. 6,600 577,500
- ---------------------------------------------------------------
2,812,500
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.27%
Exxon Corp. 18,000 1,105,875
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.24%
Bowater, Inc. 23,000 961,688
- ---------------------------------------------------------------
PERSONAL CARE-0.66%
Avon Products, Inc. 19,400 1,270,700
- ---------------------------------------------------------------
Gillette Co.(The) 15,500 1,380,469
- ---------------------------------------------------------------
2,651,169
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.29%
Xerox Corp. 14,900 1,181,756
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.21%
Starwood Lodging Trust 14,000 837,375
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.68%
CompUSA, Inc.(a) 39,500 1,293,625
- ---------------------------------------------------------------
</TABLE>
FS-21
<PAGE> 128
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (COMPUTERS & ELECTRONICS)-(CONTINUED)
Tech Data Corp.(a) 33,000 $ 1,468,500
- ---------------------------------------------------------------
2,762,125
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.90%
Fred Meyer, Inc.(a) 37,400 1,068,238
- ---------------------------------------------------------------
Federated Department Stores, Inc.(a) 26,000 1,144,000
- ---------------------------------------------------------------
Proffitt's, Inc.(a) 50,000 1,434,375
- ---------------------------------------------------------------
3,646,613
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.55%
CVS Corp. 21,000 1,287,563
- ---------------------------------------------------------------
Rite Aid Corp. 16,000 950,000
- ---------------------------------------------------------------
2,237,563
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.73%
Kroger Co.(a) 50,000 1,631,250
- ---------------------------------------------------------------
Safeway, Inc.(a) 23,000 1,336,875
- ---------------------------------------------------------------
2,968,125
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.18%
Wal-Mart Stores, Inc. 20,900 734,113
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.77%
Bed Bath & Beyond, Inc.(a) 25,000 793,750
- ---------------------------------------------------------------
Office Depot, Inc.(a) 64,000 1,320,000
- ---------------------------------------------------------------
Payless ShoeSource, Inc.(a) 17,700 986,775
- ---------------------------------------------------------------
3,100,525
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.26%
TJX Companies, Inc. (The) 35,000 1,036,875
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.58%
Ahmanson (H.F.) & Co. 25,000 1,475,000
- ---------------------------------------------------------------
Washington Mutual, Inc. 12,500 855,469
- ---------------------------------------------------------------
2,330,469
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.85%
HFS, Inc.(a) 21,000 1,480,500
- ---------------------------------------------------------------
Service Corp. International 64,800 1,972,350
- ---------------------------------------------------------------
3,452,850
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.88%
Equifax, Inc. 36,000 1,118,250
- ---------------------------------------------------------------
First Data Corp. 26,000 755,625
- ---------------------------------------------------------------
Fiserv, Inc.(a) 14,100 630,975
- ---------------------------------------------------------------
National Data Corp. 29,000 1,071,188
- ---------------------------------------------------------------
3,576,038
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.11%
AccuStaff, Inc.(a) 16,000 457,000
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-0.69%
MCI Communications Corp. 45,000 $ 1,597,500
- ---------------------------------------------------------------
WorldCom, Inc.(a) 34,930 1,174,521
- ---------------------------------------------------------------
2,772,021
- ---------------------------------------------------------------
TELEPHONE-0.22%
Bell Atlantic Corp. 10,900 870,638
- ---------------------------------------------------------------
TOBACCO-0.25%
Philip Morris Companies, Inc. 25,000 990,625
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.17%
USA Waste Services, Inc.(a) 19,000 703,000
- ---------------------------------------------------------------
Total Domestic Common Stocks 121,201,271
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-60.34%
ARGENTINA-1.77%
Banco de Galicia y Buenos Aires
S.A. de C.V.-ADR (Banks-Regional) 45,609 1,105,305
- ---------------------------------------------------------------
Banco Rio de La Plata S.A.-ADR
(Banks-Money Center)(a) 75,000 787,500
- ---------------------------------------------------------------
Perez Companc S.A.-Class B (Oil
& Gas-Refining & Marketing) 311,717 1,952,530
- ---------------------------------------------------------------
Telefonica de Argentina S.A.-ADR
(Telephone) 43,300 1,217,812
- ---------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Oil-International Integrated) 65,600 2,099,200
- ---------------------------------------------------------------
7,162,347
- ---------------------------------------------------------------
AUSTRALIA-0.72%
Boral Ltd. (Engineering & Construction) 369,000 970,527
- ---------------------------------------------------------------
Coca-Cola Amatil Ltd.
(Beverages-Non-Alcoholic) 115,510 869,187
- ---------------------------------------------------------------
QBE Insurance Group Ltd.- Bonus Shares
(Insurance-Property-Casualty)(a) 45,281 206,349
- ---------------------------------------------------------------
QBE Insurance Group Ltd.
(Insurance-Property-Casualty) 181,125 847,052
- ---------------------------------------------------------------
2,893,115
- ---------------------------------------------------------------
AUSTRIA-0.66%
OMV A.G. (Oil & Gas-Refining &
Marketing) 9,400 1,336,383
- ---------------------------------------------------------------
VA Technologie A.G. (Engineering
& Construction) 7,400 1,313,075
- ---------------------------------------------------------------
2,649,458
- ---------------------------------------------------------------
BELGIUM-0.86%
Barco Industries
(Manufacturing-Diversified) 5,700 1,099,549
- ---------------------------------------------------------------
COLRUYT S.A. (Retail-Food Chains) 1,100 590,116
- ---------------------------------------------------------------
UCB S.A.
(Manufacturing-Diversified) 520 1,796,790
- ---------------------------------------------------------------
3,486,455
- ---------------------------------------------------------------
</TABLE>
FS-22
<PAGE> 129
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BRAZIL-0.88%
Companhia Energetica de Minas
Gerais (Electric Companies) 31,000 $ 1,237,244
- ---------------------------------------------------------------
Telecomunicacoes Brasileiras
S.A.-Telebras-ADR (Telephone) 7,100 720,650
- ---------------------------------------------------------------
Uniao de Bancos Brasileiros
S.A.-GDR (Banks-Regional)(a) 58,800 1,602,300
- ---------------------------------------------------------------
3,560,194
- ---------------------------------------------------------------
CANADA-1.65%
Bank of Montreal (Banks-Money Center) 20,500 885,107
- ---------------------------------------------------------------
Canadian National Railway Co.
(Railroads) 8,800 474,650
- ---------------------------------------------------------------
Canadian Natural Resources Ltd.
(Oil & Gas-Exploration & Production)(a) 48,000 1,396,388
- ---------------------------------------------------------------
Magna International, Inc.-Class A
(Machinery-Diversified) 8,750 576,773
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Communications Equipment) 4,200 376,688
- ---------------------------------------------------------------
Philip Services Corp.
(Waste Management)(a) 54,000 945,000
- ---------------------------------------------------------------
Suncor Energy, Inc.
(Oil-International Integrated) 56,000 2,016,532
- ---------------------------------------------------------------
6,671,138
- ---------------------------------------------------------------
CHILE-0.54%
Cia. de Telecomunicaciones de
Chile S.A.-ADR (Telephone) 30,600 849,150
- ---------------------------------------------------------------
Quinenco S.A.-ADR (Financial
Diversified)(a) 89,600 1,310,400
- ---------------------------------------------------------------
2,159,550
- ---------------------------------------------------------------
DENMARK-0.36%
Novo Nordisk A/S -Class B
(Health Care/Drugs-Generic & Other) 13,500 1,461,106
- ---------------------------------------------------------------
FINLAND-0.52%
Enso Oy-R Shares(Paper & Forest
Products) 96,000 911,149
- ---------------------------------------------------------------
Nokia Oy A.B.-Class A
(Telecommunications-Cellular/Wireless) 13,800 1,205,741
- ---------------------------------------------------------------
2,116,890
- ---------------------------------------------------------------
FRANCE-7.26%
Accor S.A. (Lodging-Hotels) 11,200 2,085,346
- ---------------------------------------------------------------
Alcatel Alsthom
(Manufacturing-Diversified) 17,000 2,051,229
- ---------------------------------------------------------------
AXA-UAP (Insurance-Multi-Line) 11,250 770,381
- ---------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 21,500 950,461
- ---------------------------------------------------------------
Cap Gemini Sogeti S.A.
(Computers- Software & Services) 27,000 2,143,804
- ---------------------------------------------------------------
Carrefour Supermarche S.A.
(Retail-Food Chains) 1,250 652,278
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Compagnie Francaise d'Etudes et
de Construction Technip (Oil &
Gas-Refining & Marketing 13,000 $ 1,377,021
- ---------------------------------------------------------------
Elf Aquitaine S.A. (Oil &
Gas-Refining & Marketing) 13,500 1,671,044
- ---------------------------------------------------------------
Essilor International
(Manufacturing-Specialized) 2,200 587,353
- ---------------------------------------------------------------
Etablissements Economiques du
Casino Guichard-Perrachon
(Retail-Food Chains) 33,000 1,830,711
- ---------------------------------------------------------------
Lafarge S.A. (Engineering &
Construction) 23,800 1,487,023
- ---------------------------------------------------------------
Legrand S.A. (Housewares) 5,300 986,816
- ---------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 2,900 1,326,260
- ---------------------------------------------------------------
Promodes (Retail-Food Chains) 4,800 1,562,762
- ---------------------------------------------------------------
Renault S.A. (Automobiles)(a) 40,000 1,112,989
- ---------------------------------------------------------------
Rexel S.A. (Distributors-Food & Health) 2,600 689,637
- ---------------------------------------------------------------
Rhone-Poulenc-Class A
(Chemicals-Diversified) 46,500 2,027,435
- ---------------------------------------------------------------
Schneider S.A. (Housewares) 5,500 293,677
- ---------------------------------------------------------------
Societe BIC S.A. (Office
Equipment & Supplies) 20,000 1,368,179
- ---------------------------------------------------------------
Societe Generale (Banks-Major Regional) 8,000 1,095,653
- ---------------------------------------------------------------
Sodexho S.A.
(Services-Commercial & Consumer) 1,100 548,641
- ---------------------------------------------------------------
Total S.A.-Class B (Oil &
Gas-Refining & Marketing) 13,100 1,453,474
- ---------------------------------------------------------------
Valeo S.A. (Automobile Parts & Equipment) 19,400 1,293,838
- ---------------------------------------------------------------
29,366,012
- ---------------------------------------------------------------
GERMANY-3.76%
Adidas A.G. (Footwear) 7,200 1,042,993
- ---------------------------------------------------------------
Adidas A.G. (Footwear)(b)
(Acquired 04/11/97; Cost $963,943) 9,150 1,325,471
- ---------------------------------------------------------------
Allianz A.G.
(Insurance-Multi-Line) 4,000 891,805
- ---------------------------------------------------------------
Bayerische Vereinsbank A.G.
(Banks-Major Regional) 17,000 987,024
- ---------------------------------------------------------------
Commerzbank A.G. (Banks-Major Regional) 44,000 1,494,470
- ---------------------------------------------------------------
Continental A.G. (Automobile
Parts & Equipment) 29,600 706,337
- ---------------------------------------------------------------
Deutsche Bank A.G. (Banks-Major
Regional) 29,000 1,899,266
- ---------------------------------------------------------------
Dresdner Bank A.G. (Banks-Major
Regional) 36,000 1,473,568
- ---------------------------------------------------------------
Henkel KGaA
(Chemicals-Diversified) 7,500 389,729
- ---------------------------------------------------------------
Mannesmann A.G.
(Machinery-Diversified) 2,150 908,758
- ---------------------------------------------------------------
Merck KGaA (Health
Care/Drugs-Generic & Other) 26,000 964,612
- ---------------------------------------------------------------
SAP A.G. (Computers-Software & Services) 4,600 1,320,696
- ---------------------------------------------------------------
</TABLE>
FS-23
<PAGE> 130
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY-(CONTINUED)
Schering A.G. (Health
Care/Drugs-Generic & Other) 8,000 $ 776,149
- ---------------------------------------------------------------
VEBA A.G. (Manufacturing-Diversified) 18,000 1,004,325
- ---------------------------------------------------------------
15,185,203
- ---------------------------------------------------------------
HONG KONG-2.94%
Asia Satellite
Telecommunications Holdings Ltd.-ADR(a)
(Telecommunication-Cellular/Wireless) 24,500 572,688
- ---------------------------------------------------------------
Asia Satellite
Telecommunications Holding Ltd.
(Telecommunications-Cellular/
Wireless) 232,000 558,132
- ---------------------------------------------------------------
Cheung Kong (Holdings) Ltd.
(Land Development) 86,000 597,879
- ---------------------------------------------------------------
China Telecom (Hong Kong) Ltd.-ADR
(Telecommunications-Cellular &
Wireless)(a) 31,900 1,032,763
- ---------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 1,294,000 1,506,305
- ---------------------------------------------------------------
First Pacific Company Ltd.
(Distributors-Food & Health) 1,323,000 834,201
- ---------------------------------------------------------------
Hong Kong & China Gas Co. Ltd.
(Natural Gas) 1,075,640 2,031,216
- ---------------------------------------------------------------
HSBC Holdings PLC (Banks-Major
Regional) 63,400 1,435,038
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Retail-Food Chains) 338,000 2,338,874
- ---------------------------------------------------------------
New World Infrastructure Ltd.
(Services-Commercial & Consumer)(a) 303,600 600,799
- ---------------------------------------------------------------
Sun Hung Kai Properties Ltd.
(Land Development) 53,600 395,163
- ---------------------------------------------------------------
11,903,058
- ---------------------------------------------------------------
INDONESIA-0.35%
Gulf Indonesia Resources Ltd.
(Oil-International Integrated)(a) 48,000 1,008,000
- ---------------------------------------------------------------
PT Indosat-ADR (Telephone) 9,050 214,372
- ---------------------------------------------------------------
PT Indosat (Telephone) 84,500 190,447
- ---------------------------------------------------------------
1,412,819
- ---------------------------------------------------------------
IRELAND-0.11%
Elan Corp. PLC-ADR (Health
Care/Drugs-Generic & Other)(a) 9,000 448,875
- ---------------------------------------------------------------
ISRAEL-0.17%
Teva Pharmaceutical Industries Ltd.-ADR
(Health Care/Drugs-Generic & Other) 14,500 677,875
- ---------------------------------------------------------------
ITALY-3.38%
Assicurazioni Generali
(Insurance/Multi-Line) 92,200 2,058,571
- ---------------------------------------------------------------
Credito Italiano S.p.A.
(Banks-Major Regional)(a) 1,040,000 2,783,981
- ---------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A.
(Oil & Gas-Refining & Marketing) 290,000 1,639,108
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ITALY-(CONTINUED)
Fiat S.p.A. (Automobiles) 566,500 $ 1,797,207
- ---------------------------------------------------------------
Istituto Mobiliare Italiano
S.p.A. (Banks-Major Regional) 138,000 1,249,091
- ---------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications-Cellular/Wireless) 460,000 1,698,169
- ---------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 388,888 2,432,560
- ---------------------------------------------------------------
13,658,687
- ---------------------------------------------------------------
JAPAN-9.78%
Advantest Corp.
(Electronics-Instrumentation) 20,930 1,730,399
- ---------------------------------------------------------------
Bridgestone Corp. (Automobile
Parts & Equipment) 101,000 2,181,969
- ---------------------------------------------------------------
Canon, Inc. (Office Equipment &
Supplies) 97,000 2,353,469
- ---------------------------------------------------------------
Denso Corp. (Automobile Parts &
Equipment) 48,000 1,036,975
- ---------------------------------------------------------------
Fuji Photo Film Co.(Leisure
Time-Products) 61,000 2,209,888
- ---------------------------------------------------------------
Hitachi Cable, Ltd. (Metal Fabricators) 224,000 1,488,990
- ---------------------------------------------------------------
Honda Motor Co., Ltd. (Automobiles) 73,000 2,456,585
- ---------------------------------------------------------------
Hoya Corp.(Manufacturing-Specialized) 39,000 1,354,549
- ---------------------------------------------------------------
Ibiden Co., Ltd.
(Electronics-Component Distributors) 144,000 2,393,020
- ---------------------------------------------------------------
Kyocera Corp.
(Electronics-Component Distributors) 13,000 744,246
- ---------------------------------------------------------------
Matsushita Electric Industrial
Co. Ltd. (Electric Equipment) 61,000 1,023,847
- ---------------------------------------------------------------
Minebea Company Ltd.
(Electronics-Component Distributors) 193,000 1,924,387
- ---------------------------------------------------------------
Murata Manufacturing Co., Ltd.
(Electronics-Components Distributors) 46,000 1,865,227
- ---------------------------------------------------------------
Nippon Telegraph & Telephone
Corp. (Telephone) 2,500 2,118,820
- ---------------------------------------------------------------
Nippon Television Network
(Broadcasting-Television, Radio
& Cable) 2,050 729,040
- ---------------------------------------------------------------
NTT Data Communications Systems
Co. (Computers-Software & Services) 470 2,245,534
- ---------------------------------------------------------------
Ricoh Corp. Ltd. (Office
Equipment & Supplies) 124,000 1,597,009
- ---------------------------------------------------------------
Rohm Co. Ltd.
(Electronics-Component Distributors) 29,000 2,867,470
- ---------------------------------------------------------------
SMC Corp.(Machinery-Diversified) 6,800 587,620
- ---------------------------------------------------------------
Sony Corp. (Electronics-Component
Distributors) 30,000 2,490,237
- ---------------------------------------------------------------
TDK Corp. (Electronic Equipment) 31,000 2,570,669
- ---------------------------------------------------------------
Tokyo Electron Ltd. (Electronic
Semiconductors) 31,600 1,575,405
- ---------------------------------------------------------------
39,545,355
- ---------------------------------------------------------------
</TABLE>
FS-24
<PAGE> 131
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO-3.67%
Cifra S.A. de C.V.
(Retail-General Merchandise) 1,009,000 $ 1,744,842
- ---------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR
(Beverages- Non-Alcoholic) 52,400 2,263,025
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-Class B (Beverages-Alcoholic) 384,050 2,702,320
- ---------------------------------------------------------------
Grupo Industrial Maseca S.A. de
CV-Class B (Foods) 807,600 780,150
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 67,700 2,098,700
- ---------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de C.V.-
Class A (Paper & Forest Products) 483,400 2,118,658
- ---------------------------------------------------------------
Panamerican Beverages, Inc.-Class A
(Beverages-Non-Alcoholic) 86,300 2,675,300
- ---------------------------------------------------------------
TV Azteca, S.A. de C.V.-ADR
(Broadcasting-Television,
Radio & Cable)(a) 24,200 462,825
- ---------------------------------------------------------------
14,845,820
- ---------------------------------------------------------------
NETHERLANDS-4.32%
Akzo Nobel N.V.
(Chemicals-Diversified) 6,500 1,145,326
- ---------------------------------------------------------------
ASM Lithography Holding N.V.
(Machinery- Diversified)(a) 5,700 413,958
- ---------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 61,700 1,452,326
- ---------------------------------------------------------------
Getronics N.V.
(Computers-Software & Services) 41,000 1,353,644
- ---------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food Chains) 30,600 783,322
- ---------------------------------------------------------------
Koninklijke Nutricia Verenigde
Bedrijven N.V. (Foods) 26,000 743,240
- ---------------------------------------------------------------
Koninklijke Pakhoed N.V. (Shipping) 27,500 900,850
- ---------------------------------------------------------------
Oce-Van Der Grinten N.V. (Office
Equipment & Supplies) 7,000 798,609
- ---------------------------------------------------------------
Philips Electronics N.V.
(Household Furniture & Appliances)(a) 32,000 2,505,279
- ---------------------------------------------------------------
Randstad Holdings N.V.
(Services-Commercial & Consumer) 44,500 1,776,333
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.
(Oil-International Integrated) 26,400 1,396,487
- ---------------------------------------------------------------
Stork N.V.
(Manufacturing-Diversified) 24,000 1,038,372
- ---------------------------------------------------------------
Vendex International N.V.
(Retail-General Merchandise) 38,000 2,074,685
- ---------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (Publishing) 15,500 367,242
- ---------------------------------------------------------------
Wolters Kluwer N.V. (Specialty
Printing) 5,700 699,912
- ---------------------------------------------------------------
17,449,585
- ---------------------------------------------------------------
NORWAY-0.32%
Petroleum Geo-Services A.S.A.
(Oil-International Integrated)(a) 18,800 1,296,013
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PHILIPPINES-0.26%
Metro Pacific Corp.
(Manufacturing-Diversified)(a) 3,070,970 $ 204,443
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co. (Telephone) 16,460 406,276
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co.-ADR (Telephone) 17,800 431,650
- ---------------------------------------------------------------
1,042,369
- ---------------------------------------------------------------
PORTUGAL-0.64%
Electricidade de Portugal,
S.A.-ADR (Electric Companies)(a) 24,200 845,488
- ---------------------------------------------------------------
Portugal Telecom S.A. (Telephone) 42,000 1,723,230
- ---------------------------------------------------------------
2,568,718
- ---------------------------------------------------------------
SINGAPORE-0.47%
City Developments Ltd. (Land
Development) 129,000 540,571
- ---------------------------------------------------------------
DBS Land Ltd. (Land Development) 507,000 862,705
- ---------------------------------------------------------------
Overseas Union Bank Ltd.
(Banks-Major Regional) 150,000 500,000
- ---------------------------------------------------------------
1,903,276
- ---------------------------------------------------------------
SPAIN-1.42%
Banco Bilbao Vizcaya, S.A.
(Banks-Major Regional) 73,500 1,965,457
- ---------------------------------------------------------------
Endesa S.A. (Electric Companies) 73,200 1,378,758
- ---------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 60,000 717,674
- ---------------------------------------------------------------
Telefonica de Espana (Telephone) 62,000 1,692,033
- ---------------------------------------------------------------
5,753,922
- ---------------------------------------------------------------
SWEDEN-1.44%
Electrolux A.B. (Household
Furniture & Appliances)(a) 27,000 2,235,010
- ---------------------------------------------------------------
Hennes & Mauritz A.B.-Class B
(Retail-Specialty-Apparel) 51,500 2,107,471
- ---------------------------------------------------------------
Sparbanken Sverige A.B.-Class A
(Banks-Major Regional) 46,000 1,044,073
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 10,000 442,500
- ---------------------------------------------------------------
5,829,054
- ---------------------------------------------------------------
SWITZERLAND-2.59%
Adecco S.A. (Services-Commercial
& Consumer) 5,000 1,589,002
- ---------------------------------------------------------------
Ciba Specialty Chemicals A.G.
(Chemicals-Specialty)(a) 11,000 1,080,164
- ---------------------------------------------------------------
Clariant A.G. (Chemicals-Specialty) 1,650 1,269,095
- ---------------------------------------------------------------
Credit Suisse Group (Banks-Major
Regional) 14,500 2,042,582
- ---------------------------------------------------------------
Holderbank Financiere Glarus
A.G.-Class B
(Construction-Cement & Aggregates) 1,050 845,099
- ---------------------------------------------------------------
Nestle S.A. (Foods) 680 958,143
- ---------------------------------------------------------------
Novartis A.G. (Health Care-Diversified) 1,060 1,660,118
- ---------------------------------------------------------------
</TABLE>
FS-25
<PAGE> 132
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWITZERLAND-(CONTINUED)
Zurich Versicherungs-Gesellschaft
(Insurance-Multi-Line) 2,500 $ 1,031,958
- ---------------------------------------------------------------
10,476,161
- ---------------------------------------------------------------
UNITED KINGDOM-9.50%
Airtours PLC (Services-Commercial &
Consumer) 71,900 1,423,437
- ---------------------------------------------------------------
Barclays PLC (Banks-Major Regional) 18,500 463,403
- ---------------------------------------------------------------
Blue Circle Industries PLC
(Construction-Cement & Aggregates) 55,000 322,967
- ---------------------------------------------------------------
Bodycote International PLC
(Chemicals-Specialty) 71,000 1,230,512
- ---------------------------------------------------------------
British Aerospace PLC
(Aerospace/Defense) 64,000 1,698,688
- ---------------------------------------------------------------
British Petroleum Co. PLC (Oil &
Gas-Refining & Marketing) 62,000 911,220
- ---------------------------------------------------------------
Compass Group PLC (Services
Commercial & Consumer) 59,200 631,196
- ---------------------------------------------------------------
Dixons Group PLC
(Retail-Specialty) 200,000 2,338,784
- ---------------------------------------------------------------
EMAP PLC (Publishing) 51,000 732,011
- ---------------------------------------------------------------
General Electric Co. PLC
(Manufacturing-Diversified) 316,500 2,021,812
- ---------------------------------------------------------------
GKN PLC (Manufacturing-Diversified) 39,000 874,829
- ---------------------------------------------------------------
Granada Group PLC (Leisure Time-
Products) 61,400 846,774
- ---------------------------------------------------------------
Hays PLC (Services Commercial &
Consumer) 178,000 2,090,477
- ---------------------------------------------------------------
Kingfisher PLC
(Retail-Department Stores) 140,000 2,015,313
- ---------------------------------------------------------------
Ladbroke Group PLC (Leisure
Time-Products) 382,000 1,711,204
- ---------------------------------------------------------------
Lloyds TSB Group PLC
(Banks-Major Regional) 96,000 1,199,927
- ---------------------------------------------------------------
Misys PLC (Services-Commercial &
Consumer) 45,000 1,134,369
- ---------------------------------------------------------------
Next PLC (Retail-General Merchandise) 77,000 917,226
- ---------------------------------------------------------------
Nycomed Amersham PLC (Health
Care/Drugs-Generic & Other) 37,000 1,423,109
- ---------------------------------------------------------------
Pearson PLC (Specialty Printing) 70,000 916,051
- ---------------------------------------------------------------
Provident Financial PLC
(Consumer Finance) 137,400 1,590,608
- ---------------------------------------------------------------
Railtrack Group PLC (Shipping) 100,000 1,598,896
- ---------------------------------------------------------------
Rentokil Initial PLC
(Services-Commercial & Consumer) 240,000 966,384
- ---------------------------------------------------------------
Royal & Sun Alliance Insurance
Group PLC (Insurance-Multi-Line) 50,000 479,417
- ---------------------------------------------------------------
Siebe PLC (Electronics-Component
Distributors) 75,000 1,440,768
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care/Drugs-Major
Pharmaceuticals) 13,000 619,125
- ---------------------------------------------------------------
Smiths Industries PLC
(Machinery- Diversified) 30,000 435,376
- ---------------------------------------------------------------
Tarmac PLC (Engineering &
Construction) 1,244,000 2,421,060
- ---------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Unilever PLC (Foods) 224,000 $ 1,668,623
- ---------------------------------------------------------------
Vodafone Group PLC
(Telecommunications-Cellular/Wireless) 150,000 817,903
- ---------------------------------------------------------------
WPP Group PLC
(Services-Advertising/Marketing) 316,000 1,444,711
- ---------------------------------------------------------------
38,386,180
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 243,909,235
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
DOMESTIC CONVERTIBLE PREFERRED
STOCKS-0.27%
FINANCIAL (DIVERSIFIED)-0.27%
MGIC Investment Corp.-$3.12
Conv. Pfd. 7,000 714,000
- ---------------------------------------------------------------
SunAmerica, Inc.-Series E, $3.10
Conv. Pfd. 3,300 384,450
- ---------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks 1,098,450
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE PREFERRED STOCKS-1.03%
BRAZIL-0.69%
Petroleo Brasileiro S.A.-Petrobras
(Oil & Gas-Exploration & Production) 5,416 1,007,009
- ---------------------------------------------------------------
Telecomunicacoes de Sao Paulo
S.A.-TELESP (Telephone) 6,900 1,802,531
- ---------------------------------------------------------------
2,809,540
- ---------------------------------------------------------------
GERMANY-0.34%
SAP A.G. (Computers-Software & Services) 4,600 1,371,440
- ---------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Preferred Stocks 4,180,980
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(c)
<S> <C> <C>
U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES-0.46%
GERMANY-0.39%
Volkswagen International Finance
N.V., (Automobiles) Conv. Gtd.
Notes, 3.00%, 01/24/02 $ 1,330,000 1,566,075
- ---------------------------------------------------------------
HONG KONG-0.07%
New World Infrastructure Ltd.
(Services-Commercial &
Consumer), Conv. Bonds 5.00%,
07/15/01 100,000 94,500
- ---------------------------------------------------------------
New World Infrastructure Ltd.
(Services-Commercial & Consumer),
Conv. Bonds 5.00%, 07/15/01(b)
(Acquired 4/10/97-4/11/97; Cost
$234,938) 200,000 189,000
- ---------------------------------------------------------------
283,500
- ---------------------------------------------------------------
Total U.S. Dollar
Denominated Foreign Bonds & Notes 1,849,575
- ---------------------------------------------------------------
</TABLE>
FS-26
<PAGE> 133
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(c) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
FOREIGN BONDS & NOTES-0.74%
FRANCE-0.18%
AXA-UAP (Insurance-Multi-Line),
Conv. Sr. Deb., 4.50%,
01/01/99 FRF $ 2,835,000 $ 750,741
- ---------------------------------------------------------------
ITALY-0.38%
Pirelli S.p.A., (Electrical
Equipment), Conv. Bonds,
4.375%, 12/31/98 ITL 1,591,686,200 1,527,756
- ---------------------------------------------------------------
JAPAN-0.18%
Ricoh Co., Ltd. (Office
Equipment & Supplies), Conv.
Bonds, 0.35%, 03/31/03 JPY 65,000,000 715,621
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Foreign Bonds
& Notes 2,994,118
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(c) VALUE
<S> <C> <C>
U.S. TREASURY BILLS-2.95%(d)
5.093%, 01/02/1998 $ 12,000,000(e)$ 11,904,240
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-0.10%(f)
Sanua Securities (USA) L.P.,
5.73%, 11/03/97(g) 398,411 398,411
- ---------------------------------------------------------------
TOTAL INVESTMENTS-95.87% 387,536,280
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-4.13% 16,704,462
- ---------------------------------------------------------------
NET ASSETS-100.00% $404,240,742
===============================================================
</TABLE>
Abbreviations:
ADR -- American Depository Receipt
Conv. -- Convertible
Deb. -- Debentures
FRF -- French Franc
GDR -- Global Depository Receipt
Gtd. -- Guaranteed
ITL -- Italian Lire
JPY -- Japanese Yen
Pfd. -- Preferred
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 the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of the securities at 10/31/97 was $1,514,471 which
represented 0.37% of the Fund's net assets.
(c) Principal in U. S. Dollars unless otherwise indicated.
(d) U.S. Treasury Bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(e) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investment in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or it affiliates.
(g) Joint repurchase agreement entered into 10/31/97 with a maturing value of
$200,095,500. Collateralized by $201,314,000 U.S. Government obligations, 0%
to 8.875% due 11/03/97 to 08/15/27 with an aggregate market value at
10/31/97 of $204,000,545.
See Notes to Financial Statements.
FS-27
<PAGE> 134
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$327,440,754) $ 387,536,280
- --------------------------------------------------------
Foreign currencies, at market value
(cost $7,633,284) 7,667,754
- --------------------------------------------------------
Receivables for:
Investments sold 12,950,025
- --------------------------------------------------------
Capital stock sold 4,700,631
- --------------------------------------------------------
Dividends and interest 668,936
- --------------------------------------------------------
Variation margin 271,700
- --------------------------------------------------------
Investment for deferred compensation
plan 11,215
- --------------------------------------------------------
Other assets 23,824
- --------------------------------------------------------
Total assets 413,830,365
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 6,828,079
- --------------------------------------------------------
Capital stock reacquired 1,962,826
- --------------------------------------------------------
Deferred compensation 11,215
- --------------------------------------------------------
Accrued advisory fees 308,513
- --------------------------------------------------------
Accrued administrative services fees 9,966
- --------------------------------------------------------
Accrued distribution fees 281,782
- --------------------------------------------------------
Accrued transfer agent fees 70,776
- --------------------------------------------------------
Accrued operating expenses 116,466
- --------------------------------------------------------
Total liabilities 9,589,623
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 404,240,742
========================================================
NET ASSETS:
Class A $ 178,916,560
========================================================
Class B $ 224,224,631
========================================================
Class C $ 1,099,551
========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 10,747,564
========================================================
Class B:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 13,684,612
========================================================
Class C:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 67,094
========================================================
Class A:
Net asset value and redemption price
per share $ 16.65
========================================================
Offering price per share:
(Net asset value $16.65
divided by 95.25%) $ 17.48
========================================================
Class B:
Net asset value and offering price per
share $ 16.39
========================================================
Class C:
Net asset value and offering price per
share $ 16.39
========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $505,201 foreign
withholding tax) $ 4,455,134
- --------------------------------------------------------
Interest 506,016
- --------------------------------------------------------
Total investment income 4,961,150
- --------------------------------------------------------
EXPENSES:
Advisory fees 2,895,282
- --------------------------------------------------------
Administrative services fees 87,673
- --------------------------------------------------------
Custodian fees 284,017
- --------------------------------------------------------
Directors' fees 10,557
- --------------------------------------------------------
Distribution fees -- Class A 778,588
- --------------------------------------------------------
Distribution fees -- Class B 1,847,507
- --------------------------------------------------------
Distribution fees -- Class C 1,532
- --------------------------------------------------------
Transfer agent fees -- Class A 334,050
- --------------------------------------------------------
Transfer agent fees -- Class B 480,075
- --------------------------------------------------------
Transfer agent fees -- Class C 343
- --------------------------------------------------------
Other 263,588
- --------------------------------------------------------
Total expenses 6,983,212
- --------------------------------------------------------
Less: Expenses paid indirectly (8,327)
- --------------------------------------------------------
Net expenses 6,974,885
- --------------------------------------------------------
Net investment income (loss) (2,013,735)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 12,314,226
- --------------------------------------------------------
Foreign currencies (418,972)
- --------------------------------------------------------
11,895,254
- --------------------------------------------------------
Net unrealized appreciation of:
Investment securities 37,009,027
- --------------------------------------------------------
Foreign currencies 12,676
- --------------------------------------------------------
Futures contracts 51,000
- --------------------------------------------------------
37,072,703
- --------------------------------------------------------
Net gain on investment securities, foreign
currencies and futures contracts 48,967,957
- --------------------------------------------------------
Net increase in net assets resulting from
operations $46,954,222
========================================================
</TABLE>
See Notes to Financial Statements.
FS-28
<PAGE> 135
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 (loss) $ (2,013,735) $ (548,400)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities
and foreign currencies 11,895,254 (604,088)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and futures contracts 37,072,703 20,032,132
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 46,954,222 18,879,644
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A - (516,173)
- -------------------------------------------------------------------------------------------
Class B - (413,018)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 41,376,928 81,693,730
- -------------------------------------------------------------------------------------------
Class B 77,933,131 96,263,897
- -------------------------------------------------------------------------------------------
Class C 1,157,289 -
- -------------------------------------------------------------------------------------------
Net increase in net assets 167,421,570 195,908,080
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 236,819,172 40,911,092
- -------------------------------------------------------------------------------------------
End of period $404,240,742 $ 236,819,172
===========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $334,919,809 $ 214,452,461
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (14,582) 7,538
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities, foreign currencies and futures
contracts 9,241,432 (662,207)
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 60,094,083 23,021,380
- -------------------------------------------------------------------------------------------
$404,240,742 $ 236,819,172
===========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Growth Fund (the "Fund") is an investment portfolio of AIM
International Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company consisting of four operating
series portfolios: AIM Global Growth Fund, AIM Global Aggressive Growth Fund,
AIM Global Income Fund and AIM International Equity 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
shares and Class C shares are sold with a contingent deferred sales charge.
Class C shares commenced sales on 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 objectives by
investing in a portfolio of global equity securities of selected companies which
are considered by AIM to have strong earnings momentum.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at the last sales price on the exchange where
the security is principally traded or, lacking any sales, at the mean between
the closing bid and asked prices on the day of valuation. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Securities traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) are valued at the mean between the closing bid and asked prices on
valuation date.
FS-29
<PAGE> 136
Securities reported on the NASDAQ National Market System are valued at the
last sales price on the valuation date or, absent a last sales price, at the
mean of the closing bid and asked prices. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by an independent 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 will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distribu-
tions--Securities transactions are accounted for on a trade date basis.
Realized gains or losses are computed on the basis of specific identification
of the securities sold. Interest income is recorded as earned from settlement
date and is recorded on an accrual basis. Dividend income and distributions
to shareholders are recorded on the ex-dividend date. On October 31, 1997,
undistributed net investment income was increased by $1,991,615 and
undistributed net realized gains was decreased by $1,991,615 in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
E. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
F. Stock Index Futures Contracts--The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
G. Expenses - 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 0.85% of
the first $1 billion of the Fund's average daily net assets, plus 0.80% of the
Fund's average daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1997, AIM was
reimbursed $87,673 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1997, AFS was paid
$479,472 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 (the "Class A Plan"), the Fund's Class B shares (the "Class B Plan"),
and the Fund's Class C shares (the "Class C Plan") (collectively, the "Plans").
The Fund, pursuant to the Plan, pays AIM Distribu-
FS-30
<PAGE> 137
tors compensation at the annual rate of 0.50% of the average daily net assets of
Class A shares and 1.00% of the average daily net assets of Class C shares. The
Plan is designed to compensate AIM Distributors for certain promotional and
other sales related costs, and to implement a dealer incentive program which
provides for periodic payments to selected dealers who furnish continuing
personal shareholder services to their customers who purchase and own Class A or
Class C shares of the Fund. The Fund, pursuant to the Class B Plan, pays AIM
Distributors at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of this amount, the Fund pays a service fee
of 0.25% of the average daily net assets of the Class B shares to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class B shares of the Fund. Any
amounts not paid as a service fee under such Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer or pledge to
one or more designees, its rights to all or a designated portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges received by AIM Distributors
related to the Class B shares. During the year ended October 31, 1997 for the
Class A shares and Class B shares and the period August 4, 1997 (date sales
commenced) through October 31, 1997, the respective classes paid AIM
Distributors $778,588, $1,847,507 and $1,532, as compensation under the Plans.
AIM Distributors received commissions of $286,414 from the 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 $25,870 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 $4,793
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 which reduced the
Fund's expenses by $1,382 during the year ended October 31, 1997. The Fund also
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $4,390 and $2,555, respectively, under expense
offset arrangements. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $8,327 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 lessor 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
$410,474,400 and $315,085,765, 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 $ 72,845,545
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (13,799,402)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 59,046,143
- ---------------------------------------------------------
</TABLE>
Cost of investments for tax purposes is $328,490,137.
NOTE 7-FUTURES CONTRACTS
On October 31, 1997, $506,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
-------- --------- ---------- ------------
<S> <C> <C> <C>
S&P 500 Index 26 Dec. '97 $ 51,000
</TABLE>
FS-31
<PAGE> 138
NOTE 8-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 6,399,974 $103,567,757 7,117,057 $ 94,636,553
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
Class B 6,303,261 98,414,198 7,683,810 101,786,913
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
Class C* 67,094 1,157,289 - -
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
Issued as reinvestment of distributions:
Class A - - 36,930 453,130
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
Class B - - 31,124 379,711
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
Reacquired:
Class A (3,750,438) (62,190,829) (983,830) (13,395,953)
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
Class B (1,291,769) (20,481,067) (441,521) (5,902,727)
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
Class C* - - - -
- ------------------------------------------------------------ ---------- ------------ ----------- ------------
7,728,122 $120,467,348 13,443,570 $177,957,627
============================================================ ========== ============ =========== ============
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
and a share of Class B capital stock outstanding during each of the years in the
three-year period ended October 31, 1997 and the period September 15, 1994 (date
operations commenced) through October 31, 1994 and for a share of Class C
capital stock outstanding during the period August 4, 1997 (date sales
commenced) through October 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994
-------- --------- -------- --------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 14.20 $ 12.32 $ 10.23 $ 10.00
- ------------------------------------------------------------ -------- --------- -------- --------
Income from investment operations:
Net investment income (loss) (0.04) (0.01) (0.02) -
- ------------------------------------------------------------ -------- --------- -------- --------
Net gains on securities (both realized and unrealized) 2.49 2.11 2.11 0.23
- ------------------------------------------------------------ -------- --------- -------- --------
Total from investment operations 2.45 2.10 2.09 0.23
- ------------------------------------------------------------ -------- --------- -------- --------
Less distributions:
Dividends from net investment income - - (0.004) -
- ------------------------------------------------------------ -------- --------- -------- --------
Distributions from net realized gains - (0.22) - -
- ------------------------------------------------------------ -------- --------- -------- --------
Total distributions - (0.22) (0.004) -
- ------------------------------------------------------------ -------- --------- -------- --------
Net asset value, end of period $ 16.65 $ 14.20 $ 12.32 $ 10.23
============================================================ ======== ========= ======== ========
Total return(a) 17.25% 17.26% 20.48% 2.30%
============================================================ ======== ========= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $178,917 $ 114,971 $ 23,754 $ 3,093
============================================================ ======== ========= ======== ========
Ratio of expenses to average net assets(b) 1.76%(c)(d) 1.93% 2.12% 1.95%(e)
============================================================ ======== ========= ======== ========
Ratio of net investment income (loss) to average net
assets(f) (0.30)%(c) (0.13)% (0.28)% 0.10%(e)
============================================================ ======== ========= ======== ========
Portfolio turnover rate 96% 82% 79% 6%
============================================================ ======== ========= ======== ========
Average brokerage commission rate paid(g) $ 0.0239 $ 0.0234 N/A N/A
============================================================ ======== ========= ======== ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.94%, 2.98% and 5.67% (annualized) for the periods 1996-1994, respectively.
(c) Ratios are based on average net assets of $155,717,515.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.14)%, (1.14)% and (3.63)% (annualized) for the
periods 1996-1994, respectively.
(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.
FS-32
<PAGE> 139
<TABLE>
<CAPTION>
1997 1996 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 14.05 $ 12.26 $ 10.22 $ 10.00
- ------------------------------------------------------------ --------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.11) (0.05) (0.04) -
- ------------------------------------------------------------ --------- -------- -------- --------
Net gains on securities (both realized and unrealized) 2.45 2.06 2.08 0.22
- ------------------------------------------------------------ --------- -------- -------- --------
Total from investment operations 2.34 2.01 2.04 0.22
- ------------------------------------------------------------ --------- -------- -------- --------
Less distributions:
Distributions from net realized gains - (0.22) - -
- ------------------------------------------------------------ --------- -------- -------- --------
Total distributions - (0.22) - -
- ------------------------------------------------------------ --------- -------- -------- --------
Net asset value, end of period $ 16.39 $ 14.05 $ 12.26 $ 10.22
=========================================================== ========= ======== ======== ========
Total return(a) 16.65% 16.60% 19.96% 2.20%
=========================================================== ========= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 224,225 $121,848 $ 17,157 $ 1,277
=========================================================== ========= ======== ======== ========
Ratio of expenses to average net assets(b) 2.29%(c)(d) 2.48% 2.64% 2.51%(e)
=========================================================== ========= ======== ======== ========
Ratio of net investment income (loss) to average net
assets(f) (0.83)%(c) (0.69)% (0.79)% (0.47)%(e)
=========================================================== ========= ======== ======== ========
Portfolio turnover rate 96% 82% 79% 6%
=========================================================== ========= ======== ======== ========
Average brokerage commission rate paid(g) $ 0.0239 $ 0.0234 N/A N/A
=========================================================== ========= ======== ======== ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.49%, 3.38% and 6.20% (annualized) for the periods 1996-1994, respectively.
(c) Ratios are based on average net assets of $184,750,715.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.69)%, (1.54)% and (4.16)% (annualized) for the
periods 1996-1994, respectively.
(g) 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
CLASS C: -------
<S> <C>
Net asset value, beginning of period $ 17.39
- ------------------------------------------------------------ -------
Income from investment operations:
Net investment income (loss) (0.03)
- ------------------------------------------------------------ -------
Net gains (losses) on securities (both realized and
unrealized) (0.97)
- ------------------------------------------------------------ -------
Total from investment operations (1.00)
- ------------------------------------------------------------ -------
Net asset value, end of period $ 16.39
============================================================ =======
Total return(a) (5.75)%
============================================================ =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 1,100
============================================================ =======
Ratio of expenses to average net assets(b) 2.29%(c)
============================================================ =======
Ratio of net investment income (loss) to average net
assets(b) (0.83)%
============================================================ =======
Portfolio turnover rate 96%
============================================================ =======
Average brokerage commission rate paid(d) $0.0239
============================================================ =======
</TABLE>
(a) Does not deduct sales charges and periods for less than one year,
total returns are not annualized.
(b) Ratios are annualized and based on average net assets of $628,292.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have
been the same.
(d) 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.
FS-33
<PAGE> 140
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Global Income Fund (a portfolio of
AIM International Funds, Inc.), including the schedule of
investments, as of October 31, 1997, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and the financial
highlights for each of the years or periods in the
three-year period then ended, and for the period
September 15, 1994 (date operations commenced) through
October 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 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
Global Income 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 or periods in the three-year period then
ended and for the period September 15, 1994 (date
operations commenced) through October 31, 1994, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
FS-34
<PAGE> 141
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-50.55%
AGRICULTURAL PRODUCTS-0.20%
Hines Horticulture, Inc.,
Series B Sr. Gtd. Sub. Notes,
11.75%, 10/15/05 $ 100,000 $ 110,750
- --------------------------------------------------------------
AIRLINES-3.32%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 230,000 263,495
- --------------------------------------------------------------
America West Airlines, Inc.,
Pass Thru Certificates, 6.86%,
07/02/04 587,999 591,675
- --------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 550,000 652,636
- --------------------------------------------------------------
United Air Lines, Inc.,
Pass Thru Certificates, 9.56%,
10/19/18 300,000 362,391
- --------------------------------------------------------------
1,870,197
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.25%
First Union Bancorp,
Sub. Deb., 7.50%, 04/15/35 200,000 220,060
- --------------------------------------------------------------
Royal Bank of Scotland PLC (United
Kingdom),
Yankee Sub. Notes, 6.375%,
02/01/11 500,000 481,780
- --------------------------------------------------------------
701,840
- --------------------------------------------------------------
BANKS (MONEY CENTER)-2.08%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 400,000 409,974
- --------------------------------------------------------------
Deutsche Bank Financial,
Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 760,808
- --------------------------------------------------------------
1,170,782
- --------------------------------------------------------------
BANKS (REGIONAL)-1.86%
Mercantile Bancorp Inc.,
Unsec. Sub. Notes, 7.30%,
06/15/07 1,000,000 1,046,320
- --------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-1.13%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.15%, 06/20/20(b) 3,113,000 635,301
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-4.44%
Capstar Broadcasting Partners,
Sr. Disc. Notes, 12.75%,
02/01/09(c) 390,000 278,850
- --------------------------------------------------------------
Comcast Cable Communications,
Notes, 8.50%, 05/01/27
(acquired 04/24/97; cost
$499,145)(d) 500,000 572,980
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-(CONTINUED)
Diamond Cable Communications PLC
(United Kingdom), Sr. Yankee
Disc. Notes, 10.75%, 02/15/07(c) $ 870,000 $ 567,675
- --------------------------------------------------------------
Echostar DBS Corp.,
Sr. Sec. Gtd. Notes, 12.50%,
07/01/02
(acquired 06/20/97; cost
$320,000)(d) 320,000 340,800
- --------------------------------------------------------------
Kabelmedia Holdings GmbH (Germany),
Sr. Yankee Unsec. Disc. Notes,
13.625%, 08/01/06(c) 200,000 146,000
- --------------------------------------------------------------
Rifkin Acquisition Partners L.L.P.,
Sr. Sub. Notes, 11.125%, 01/15/06 40,000 43,500
- --------------------------------------------------------------
TCI Communications Inc.,
Sr. Notes, 8.00%, 08/01/05 150,000 157,845
- --------------------------------------------------------------
TeleWest Communications PLC
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%, 10/01/07(c) 300,000 226,500
- --------------------------------------------------------------
United International Holdings,
Inc.,
Sr. Sec. Disc. Notes, 10.28%,
11/15/99(b) 200,000 163,000
- --------------------------------------------------------------
2,497,150
- --------------------------------------------------------------
CHEMICALS-1.40%
Nova Chemicals Ltd. (Canada),
Yankee Deb., 7.00%, 08/15/26 600,000 620,898
- --------------------------------------------------------------
Sterling Chemicals, Inc.,
Sr. Unsec. Sub. Notes, 11.75%,
08/15/06 150,000 167,250
- --------------------------------------------------------------
788,148
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.08%
Crain Industries, Inc.,
Sr. Sub. Notes, 13.50%, 08/15/05 40,000 45,800
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.48%
ProNet, Inc.,
Sr. Sub. Notes, 11.875%, 06/15/05 250,000 271,250
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.15%
Commemorative Brands,
Sr. Sub. Notes, 11.00%, 01/15/07 85,000 86,488
- --------------------------------------------------------------
CONSUMER FINANCE-1.28%
Household Finance Corp.,
Notes, 7.125%, 09/01/05 700,000 720,076
- --------------------------------------------------------------
CONTAINERS & PACKAGING
(PAPER)-0.77%
BPC Holding Corp.,
Series B Sr. Notes, 12.50%,
06/15/06 100,000 110,500
- --------------------------------------------------------------
</TABLE>
FS-35
<PAGE> 142
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CONTAINERS & PACKAGING (PAPER)-(CONTINUED)
MVE Inc.,
Sr. Sec. Notes, 12.50%, 02/15/02 $ 100,000 $ 101,500
- --------------------------------------------------------------
Tekni-Plex Inc.,
Sr. Sub. Notes, 11.25%, 04/01/07 200,000 219,500
- --------------------------------------------------------------
431,500
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.45%
AmeriServ Food Co.,
Sr. Sub. Notes, 10.125%, 07/15/07
(acquired 07/09/97; cost
$240,000)(d) 240,000 250,800
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.99%
El Paso Electric Co.,
Series D Sec. 1st Mortgage Bonds,
8.90%, 02/01/06 250,000 272,545
- --------------------------------------------------------------
Series E Sec. 1st Mortgage Bonds,
9.40%, 05/01/11 250,000 283,700
- --------------------------------------------------------------
556,245
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.54%
Electronic Retailing Systems
International, Inc.,
Sr. Disc. Notes, 13.25%,
02/01/04(c) 440,000 305,800
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.58%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%, 08/01/03 110,000 119,213
- --------------------------------------------------------------
Panda Funding Corp.,
Series A-1 Pooled Project Bonds,
11.625%, 08/20/12 199,591 208,573
- --------------------------------------------------------------
327,786
- --------------------------------------------------------------
ENTERTAINMENT-1.83%
Time Warner, Inc.
Deb., 9.125%, 01/15/13 500,000 582,845
- --------------------------------------------------------------
Notes, 8.18%, 08/15/07 200,000 218,086
- --------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 125,000 126,673
- --------------------------------------------------------------
Viacom, Inc.,
Sr. Notes, 7.75%, 06/01/05 100,000 101,629
- --------------------------------------------------------------
1,029,233
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.13%
Associates Corp. of North America,
Series B Sr. Deb., 7.95%,
02/15/10 100,000 111,814
- --------------------------------------------------------------
Finova Capital Corp.,
Unsec. Notes, 7.40%, 05/06/06 500,000 524,850
- --------------------------------------------------------------
636,664
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
FOODS-2.34%
ConAgra Inc.,
Sr. Unsec. Notes, 7.125%,
10/01/26 $ 900,000 $ 952,389
- --------------------------------------------------------------
Del Monte Corp./Foods Co.,
Sr. Unsec. Sub. Notes, 12.25%,
04/15/07 260,000 288,600
- --------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%, 08/01/03 70,000 73,850
- --------------------------------------------------------------
1,314,839
- --------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES-0.21%
Showboat Marina Casino Partnership
&
Showboat Marina Financial Corp.,
Series B Sec. 1st Mortgage Notes,
13.50%, 03/15/03 100,000 115,500
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.90%
Tenet Healthcare Corp., Sr. Notes,
8.00%, 01/15/05 500,000 507,500
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.81%
Sun Healthcare Group, Inc.,
Sr. Sub. Notes, 9.50%, 07/01/07
(acquired 07/01/97; cost
$448,200)(d) 450,000 455,625
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.56%
Alaris Medical Systems,
Sr. Unsec. Gtd. Sub. Deb., 9.75%,
12/01/06 200,000 205,000
- --------------------------------------------------------------
Dade International Inc.,
Series B Sr. Sub. Notes, 11.125%,
05/01/06 100,000 111,500
- --------------------------------------------------------------
316,500
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.15%
Dynacare Inc. (Canada),
Sr. Yankee Notes, 10.75%,
01/15/06 80,000 84,200
- --------------------------------------------------------------
HOMEBUILDING-0.10%
Continental Homes Holdings Corp.,
Sr. Unsec. Gtd. Notes, 10.00%,
04/15/06 55,000 58,025
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.40%
Torchmark Corp.,
Notes, 7.875%, 05/15/23 750,000 790,035
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.54%
Travelcenters of America Inc.,
Sr. Gtd. Unsec. Sub. Deb.,
10.25%, 04/01/07 290,000 303,050
- --------------------------------------------------------------
IRON & STEEL-0.15%
GS Industries, Inc.,
Sr. Gtd. Notes, 12.00%, 09/01/04 75,000 81,937
- --------------------------------------------------------------
</TABLE>
FS-36
<PAGE> 143
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
LODGING-HOTELS-0.59%
Coast Hotels & Casinos Inc.,
Series B Sec. 1st Mortgage Gtd.
Notes, 13.00%, 12/15/02 $ 70,000 $ 78,750
- --------------------------------------------------------------
ITT Corp.,
Unsec. Gtd. Deb., 7.375%,
11/15/15 150,000 151,119
- --------------------------------------------------------------
John Q. Hammons Hotels Inc.,
Sec. 1st Mortgage Notes, 9.75%,
10/01/05 100,000 104,750
- --------------------------------------------------------------
334,619
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.10%
Fairfield Manufacturing Co., Inc.,
Sr. Sub. Notes, 11.375%, 07/01/01 50,000 53,500
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.51%
MMI Products Inc.,
Sr. Unsec. Sub. Notes, 11.25%,
04/15/07 260,000 284,700
- --------------------------------------------------------------
METAL FABRICATORS-0.11%
Gulf States Steel Corp.,
1st Mortgage Notes, 13.50%,
04/15/03 60,000 61,950
- --------------------------------------------------------------
METALS MINING-0.23%
Rio Algom Ltd. (Canada),
Yankee Unsec. Deb., 7.05%,
11/01/05 130,000 131,940
- --------------------------------------------------------------
NATURAL GAS-0.56%
Ferrellgas Partners,
Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 300,000 316,500
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.24%
United Stationer Supply, Sr. Sub.
Notes, 12.75%, 05/01/05 120,000 135,900
- --------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-1.08%
Gulf Canada Resources, Ltd.
(Canada),
Sr. Yankee Unsec. Notes, 8.35%,
08/01/06 550,000 607,189
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.04%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 20,000 21,050
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.64%
Abraxas Petroleum Corp.,
Series B Sr. Notes, 11.50%,
11/01/04 95,000 104,500
- --------------------------------------------------------------
Talisman Energy, Inc. (Canada),
Yankee Deb., 7.125%, 06/01/07 250,000 256,875
- --------------------------------------------------------------
361,375
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS-1.15%
Indah Kiat Fin Mauritius,
Sr. Gtd. Unsec. Notes, 10.00%,
07/01/07
(acquired 06/26/97; cost
$466,931)(d) $ 470,000 $ 434,750
- --------------------------------------------------------------
National Fiberstock Corp.,
Series B Sr. Notes, 11.625%,
06/15/02 200,000 210,500
- --------------------------------------------------------------
645,250
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.52%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 250,000 291,293
- --------------------------------------------------------------
RAILROADS-0.84%
Norfolk Southern Corp.,
Bonds, 7.05%, 05/01/37 450,000 474,638
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.18%
Loehmann's Holdings, Inc.,
Sr. Unsec. Notes, 11.875%,
05/15/03 100,000 102,500
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.78%
Carr-Gottstein Foods Co.,
Sr. Sub. Notes, 12.00%, 11/15/05 100,000 110,500
- --------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc. (Canada),
Yankee Gtd. Notes, 7.78%,
11/01/00
(acquired 10/18/95; cost
$100,000)(d) 100,000 103,642
- --------------------------------------------------------------
Jitney-Jungle Stores of America
Inc., Sr. Gtd. Notes, 12.00%,
03/01/06 200,000 225,500
- --------------------------------------------------------------
439,642
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.80%
CSK Auto Inc.,
Sr. Gtd. Sub. Deb., 11.00%,
11/01/06 60,000 64,500
- --------------------------------------------------------------
Icon Health & Fitness,
Series B Sr. Sub. Notes, 13.00%,
07/15/02 70,000 78,750
- --------------------------------------------------------------
United Auto Group, Inc.,
Sr. Sub. Notes, 11.00%, 07/15/07
(acquired 07/22/97; cost
$197,500)(d) 200,000 206,000
- --------------------------------------------------------------
Wilsons The Leather Experts Inc.,
Sr. Notes, 11.25%, 08/15/04
(acquired 08/14/97; cost
$100,000)(d) 100,000 99,250
- --------------------------------------------------------------
448,500
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.47%
Sovereign Bancorp, Inc.,
Sub. Notes, 8.00%, 03/15/03 250,000 263,523
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.38%
MDC Communications Corp.(Canada),
Sr. Yankee Unsec. Sub. Notes,
10.50%, 12/01/06 200,000 215,500
- --------------------------------------------------------------
</TABLE>
FS-37
<PAGE> 144
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SHIPPING-0.99%
Hutchison Whampoa Ltd. (Cayman
Islands),
Series D Sr. Yankee Gtd. Unsec. Unsub. Deb.,
6.988%, 08/01/37
(acquired 10/02/97; cost
$502,005)(d) $ 500,000 $ 467,595
- --------------------------------------------------------------
Stena A.B. (Sweden),
Sr. Yankee Unsec. Notes, 10.50%,
12/15/05 80,000 87,400
- --------------------------------------------------------------
554,995
- --------------------------------------------------------------
SOVEREIGN DEBT-0.59%
Province of Manitoba (Canada),
Yankee Bonds, 7.75%, 07/17/16 300,000 334,791
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-3.96%
Celcaribe S.A.,
Sr. Secured Notes, 13.50%,
03/15/04(c) 500,000 502,500
- --------------------------------------------------------------
GST Equipment Funding,
Sr. Sec. Notes, 13.25%, 05/01/07
(acquired 05/08/97; cost
$200,000)(d) 200,000 225,500
- --------------------------------------------------------------
ICG Holdings Inc.,
Gtd. Unsec. Sr. Disc. Notes,
11.625%,
03/15/07(c) 290,000 194,300
- --------------------------------------------------------------
Orion Network Systems, Inc.,
Sr. Notes, 11.25%, 01/15/07(e) 420,000 476,700
- --------------------------------------------------------------
Pricellular Wireless Corp.,
Sr. Notes, 10.75%, 11/01/04 130,000 141,050
- --------------------------------------------------------------
Sygnet Wireless Inc.,
Sr. Unsec. Notes, 11.50%,
10/01/06 160,000 173,600
- --------------------------------------------------------------
360 Communications Co.,
Sr. Unsec. Notes, 7.50%, 03/01/06 500,000 516,700
- --------------------------------------------------------------
2,230,350
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.00%
MCI Communications Corp.,
Putable Deb., 7.125%, 06/15/27 450,000 480,402
- --------------------------------------------------------------
PhoneTel Technologies, Inc.,
Sr. Gtd. Unsec. Notes, 12.00%,
12/15/06 80,000 82,600
- --------------------------------------------------------------
563,002
- --------------------------------------------------------------
TELEPHONE-0.70%
Esat Holdings Ltd. (Ireland),
Sr. Yankee Notes, 12.50%,
02/01/07(c) 350,000 243,250
- --------------------------------------------------------------
Hermes Europe Railtel BV,
Sr. Notes, 11.50%, 08/15/07
(acquired 08/14/97; cost
$142,413)(d) 140,000 153,300
- --------------------------------------------------------------
396,550
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TRUCKERS-0.56%
AmeriTruck Distribution Corp.,
Series B Sr. Sub. Notes, 12.25%,
11/15/05 $ 300,000 $ 318,000
- --------------------------------------------------------------
TRUCKS & PARTS-0.15%
Blue Bird Body Co.,
Series B Sr. Sub. Notes, 10.75%,
11/15/06 80,000 84,500
- --------------------------------------------------------------
WASTE MANAGEMENT-2.26%
Allied Waste Industries, Inc.,
Sr. Disc. Notes, 11.30%, 06/01/07
(acquired 05/01/97; cost
$356,103)(c)(d) 620,000 424,700
- --------------------------------------------------------------
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes, 13.00%,
11/15/05 150,000 172,875
- --------------------------------------------------------------
WMX Technologies, Inc.,
Unsec. Notes, 7.10%, 08/01/26 650,000 677,417
- --------------------------------------------------------------
1,274,992
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 28,456,090
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES(F)-14.34%
CANADA-7.21%
Bank of Montreal (Banks-Money
Center),
Sub. Deb., 7.92%, 07/31/12 CAD 300,000 $ 242,897
- --------------------------------------------------------------
Bell Canada (Telephone),
Unsec. Deb., 10.875, 10/11/04 250,000 228,786
- --------------------------------------------------------------
Bell Mobility Cellular
(Telecommunications-Cellular/Wireless),
Bonds, 6.55%, 06/02/08 750,000 540,042
- --------------------------------------------------------------
Canadian Oil Debco Inc.
(Oil & Gas-Exploration &
Production),
Deb., 11.00%, 10/31/00 250,000 203,876
- --------------------------------------------------------------
Clearnet Communications
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.75%, 08/13/07
(acquired 07/31/97; cost
$347,582)(c)(d) 850,000 366,392
- --------------------------------------------------------------
NAV Canada (Services-Commercial &
Consumer), Bonds, 7.40%, 06/01/27 1,000,000 800,731
- --------------------------------------------------------------
Telegobe Canada, Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 650,000 523,496
- --------------------------------------------------------------
Trans-Canada Pipelines
(Oil & Gas-Exploration &
Production),
Series Q Deb., 10.625%, 10/20/09 375,000 365,477
- --------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 500,000 417,784
- --------------------------------------------------------------
</TABLE>
FS-38
<PAGE> 145
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Westcoast Energy, Inc. (Oil & Gas-
Exploration & Production), Deb.,
6.45%, 12/18/06
(acquired 12/03/96; cost
$369,632)(d) CAD 500,000 $ 368,955
- --------------------------------------------------------------
4,058,436
- --------------------------------------------------------------
FRANCE-0.26%
Credit Foncier de France
(Financial-Diversified)
Sr. Unsec. Unsub. Eurobonds,
6.50%, 02/22/99 SEK 750,000 101,061
- --------------------------------------------------------------
Sr. Unsec. Unsub. Eurobonds,
6.00%, 11/15/01 FRF 250,000 44,838
- --------------------------------------------------------------
145,899
- --------------------------------------------------------------
GERMANY-2.36%
Daimler-Benz A.G. (Automobiles),
Gtd. Unsub. Eurobonds, 4.125%,
07/05/03 DEM 430,000 314,258
- --------------------------------------------------------------
International Bank for
Reconstruction &
Development (Banks-Money Center),
Unsec. Global Bonds, 7.125%,
04/12/05 475,000 301,434
- --------------------------------------------------------------
LKB Global (Financial-Diversified),
Gtd. Notes, 6.00%, 01/25/06 1,200,000 712,120
- --------------------------------------------------------------
1,327,812
- --------------------------------------------------------------
ITALY-1.33%
KFW International Finance Inc.
(Investment Banking/Brokerage),
Gtd. Eurobonds, 11.625%,
11/27/98 ITL 1,200,000,000 749,592
- --------------------------------------------------------------
NEW ZEALAND-0.44%
International Bank for
Reconstruction &
Development (Banks-Money Center),
Bonds, 6.63%, 08/20/07(b) NZD 750,000 245,869
- --------------------------------------------------------------
SWEDEN-0.78%
Swedish Export Credit
(Financial-Diversified),
Unsec. Unsub. Eurobonds, 11.70%,
12/04/98 ITL 700,000,000 437,965
- --------------------------------------------------------------
UNITED KINGDOM-1.96%
Ford Credit Europe PLC
(Financial-Diversified),
Deb., 6.00%, 03/30/99 DEM 200,000 118,298
- --------------------------------------------------------------
KFW International Finance
(Investment Banking/Brokerage),
Gtd. Eurobonds, 10.625%,
09/03/01 GBP 100,000 186,255
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Sutton Bridge
(Financial-Diversified),
Gtd. Eurobonds, 8.625%, 06/30/22
(acquired 05/29/97; cost
$733,585)(d) GBP 450,000 $ 800,287
- --------------------------------------------------------------
1,104,840
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated
Non-Convertible Bonds & Notes 8,070,413
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS &
NOTES(F)-2.58%
FRANCE-0.08%
Societe Generale (Banks-Money
Center),
Conv. Deb., 3.50%, 01/01/00 FRF 231,000 48,841
- --------------------------------------------------------------
JAPAN-0.64%
Glaxo Wellcome PLC
(Financial-Diversified),
Conv. Unsub. Notes, 4.30%,
09/28/98 JPY 4,000,000 55,708
- --------------------------------------------------------------
Sony Corp. (Electronic Equipment),
Conv. Deb., 1.40%, 03/31/05 8,000,000 87,744
- --------------------------------------------------------------
Toyota Motor Corp. (Automobiles),
Conv. Bonds, 1.20%, 01/28/98 15,000,000 215,060
- --------------------------------------------------------------
358,512
- --------------------------------------------------------------
SWITZERLAND-0.38%
Yamada Denki Co. Ltd. (Retail-
Computers & Electronics), Unsec.
Conv. Notes, 0.25%, 03/31/00 CHF 300,000 212,105
- --------------------------------------------------------------
UNITED KINGDOM-1.48%
British Airport Authority
(Airlines),
Eurobonds, 5.75%, 03/29/06 GBP 450,000 834,261
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible Bonds
& Notes 1,453,719
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS &
NOTES(F)-20.94%
CANADA-3.21%
B.C. Generic Residual,
Deb., 13.88%, 06/21/04(b) CAD 150,000 74,269
- --------------------------------------------------------------
Canadian Government,
Bonds, 7.00%, 12/01/06 1,000,000 787,824
- --------------------------------------------------------------
</TABLE>
FS-39
<PAGE> 146
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
Municipal Finance Authority of
British Columbia,
Bonds, 7.75%, 12/01/05 CAD 500,000 $ 404,842
- --------------------------------------------------------------
Ontario Province,
Sr. Unsec. Unsub. Deb.,
6.875%, 09/15/00 GBP 35,000 58,193
- --------------------------------------------------------------
Sr. Unsec. Unsub. Global Bonds,
8.00%, 03/11/03 CAD 600,000 480,021
- --------------------------------------------------------------
1,805,149
- --------------------------------------------------------------
FRANCE-1.09%
French Treasury Bill,
Notes, 5.75%, 11/12/98 FRF 3,500,000 617,085
- --------------------------------------------------------------
GERMANY-1.29%
Bundesrepublik Deutschland,
Bonds, 6.75%, 07/15/04 DEM 750,000 471,006
- --------------------------------------------------------------
Bonds, 6.875%, 05/12/05 400,000 252,736
- --------------------------------------------------------------
723,742
- --------------------------------------------------------------
ITALY-0.48%
Republic of Italy,
Conv. Bonds, 6.50%, 06/28/01 ITL 400,000,000 273,172
- --------------------------------------------------------------
NEW ZEALAND-4.73%
Federal National Mortgage
Association,
Notes, 7.25%, 06/20/02 NZD 750,000 469,042
- --------------------------------------------------------------
New Zealand Government,
Bonds, 8.00%, 02/15/01 1,000,000 644,440
- --------------------------------------------------------------
Bonds, 10.00%, 03/15/02 1,500,000 1,047,453
- --------------------------------------------------------------
Bonds, 8.00%, 04/15/04 750,000 500,116
- --------------------------------------------------------------
2,661,051
- --------------------------------------------------------------
SWEDEN-4.19%
Swedish Government,
Bonds, 13.00%, 06/15/01 SEK 3,000,000 492,824
- --------------------------------------------------------------
Bonds, 10.25%, 05/05/03 5,000,000 797,374
- --------------------------------------------------------------
Bonds, 6.00%, 02/09/05 4,000,000 527,110
- --------------------------------------------------------------
Bonds, 6.50%, 10/25/06 4,000,000 539,527
- --------------------------------------------------------------
2,356,835
- --------------------------------------------------------------
UNITED KINGDOM-5.95%
Federal National Mortgage
Association,
Sr. Unsec. Notes, 6.875%,
06/07/02 GBP 350,000 585,451
- --------------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 350,000 606,708
- --------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 800,000 1,354,548
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Bonds, 7.50%, 12/07/06 GBP 450,000 $ 801,823
- --------------------------------------------------------------
3,348,530
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government Bonds
& Notes 11,785,564
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCK-0.03%
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.03%
Nextel Communications, Inc.(g) 557 $ 14,621
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-2.16%
BANKS (REGIONAL)-0.88%
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 16,000 496,000
- --------------------------------------------------------------
ENTERTAINMENT-0.00%
Time Warner Inc.-Series M,
$102.50 PIK Conv. Pfd. 1 1,165
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.08%
Conseco Inc.-$4.278 Conv. PRIDES 4,000 608,000
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.20%
Citizens Utilities Co.-$2.50 Conv.
Pfd. 2,300 109,681
- --------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks 1,214,846
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-2.20%
UNITED KINGDOM-2.20%
J Sainsbury PLC (Retail-Food
Chains)(g) 148,367 1,238,390
- --------------------------------------------------------------
WARRANTS-0.09%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
Wireless One, Inc., expiring
10/19/00(h) 150 0
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.04%
Electronic Retailing Systems,
expiring 01/24/98(h) 440 22,000
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.01%
MVE Inc., expiring 02/15/02(h) 100 3,000
- --------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel Corp.,
expiring 04/15/03(h) 60 270
- --------------------------------------------------------------
PERSONAL CARE-0.01%
IHF Capital Inc., expiring
11/14/99(h)
(acquired 11/04/94-12/07/94; cost
$0)(d) 70 3,465
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.01%
Clearnet Communications Inc.,
expiring 09/15/05(h) 330 2,970
- --------------------------------------------------------------
</TABLE>
FS-40
<PAGE> 147
<TABLE>
<CAPTION>
MARKET
WARRANTS-(CONTINUED) SHARES VALUE
<S> <C> <C>
Orion Network Systems, Inc.,
expiring 01/15/07(h) 420 $ 5,880
- --------------------------------------------------------------
8,850
- --------------------------------------------------------------
TELEPHONE-0.02%
ESAT Holdings Ltd., expiring
02/01/07(h)
(acquired 06/16/97; cost $0)(d) 350 1,137
- --------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(h) 150 10,500
- --------------------------------------------------------------
11,637
- --------------------------------------------------------------
Total Warrants 49,222
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-1.65%
Notes, 6.50%, 05/31/01 $ 400,000 $ 409,844
- --------------------------------------------------------------
Notes, 6.625%, 02/15/27 100,000 106,047
- --------------------------------------------------------------
Notes, 6.375%, 08/15/27 400,000 412,360
- --------------------------------------------------------------
Total U.S. Treasury Securities 928,251
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-0.73%
Tennessee Valley Authority, Bonds,
5.98%, 04/01/36 400,000 410,280
- --------------------------------------------------------------
REPURCHASE AGREEMENT(i)-2.13%
Sanwa Securities (U.S.A.) Co., L.P.
5.73%, 11/03/97(j) 1,201,988 1,201,988
- --------------------------------------------------------------
TOTAL INVESTMENTS-97.40% 54,823,384
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.60% 1,463,735
- --------------------------------------------------------------
NET ASSETS-100.00% $ 56,287,119
- --------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by
note (f).
(b) Zero coupon bond issued at a discount. The interest rate
shown represents the rate of original issue discount.
(c) Discounted bond at purchase. Interest rate shown represents
the coupon rate at which the bond will accrue at a specified
future date.
(d) Restricted Security. May be resold to qualified
institutional buyers in accordance with the provisions of
Rule 144A under the Securities Act of 1933, as amended. The
valuation of these securities has been determined in
accordance with procedures established by the Board of
Directors. The aggregate market value of these securities at
10/31/97 was $5,275,178 which represented 9.37% of the
Fund's net assets.
(e) Issued as a unit. Each unit consists of $1,000 Sr. notes
plus warrants to purchase 0.8463 shares of common stock.
(f) Foreign denominated security. Par value and coupon are
denominated in currency of country indicated.
(g) Non-income producing security.
(h) Non-income producing security acquired as part of a unit
with or in exchange for other securities.
(i) Collateral on repurchase agreements, including the Fund's
pro-rata interest in joint repurchase agreements, is taken
into possession by the Fund upon entering into the
repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint
accounts with other mutual funds, private accounts, and
certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 10/31/97 with a
maturing value of $200,095,500. Collateralized by
$201,314,000 U.S. Government obligations, 0% to 8.875% due
11/15/97 to 08/15/27 with an aggregate market value at
10/31/97 of $204,000,545.
Abbreviations:
<TABLE>
<S> <C>
CAD - Canadian Dollar Pfd. - Preferred
CHF - Swiss Franc PIK - Payment in Kind
Conv. - Convertible PRIDES - Preferred Redemption
Deb. - Debentures Increased Dividend Equity Securities
DEM - German Deutschemark Sec. - Secured
Disc. - Discounted SEK - Swedish Krona
FRF - French Franc Sr. - Senior
GBP - British Pound Sterling STRYPES - Structured Yield Product
Gtd. - Guaranteed Exchangeable for Stock
ITL - Italian Lire Sub. - Subordinated
JPY - Japanese Yen Unsec. - Unsecured
NZD - New Zealand Dollar Unsub. - Unsubordinated
</TABLE>
See Notes to Financial Statements.
FS-41
<PAGE> 148
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$53,006,761) $54,823,384
- -----------------------------------------------------------
Foreign currencies, at market value (cost
$57,610) 57,391
- -----------------------------------------------------------
Receivables for:
Capital stock sold 349,669
- -----------------------------------------------------------
Dividends and interest 1,249,220
- -----------------------------------------------------------
Investment for deferred compensation plan 10,356
- -----------------------------------------------------------
Other assets 17,042
- -----------------------------------------------------------
Total assets 56,507,062
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 34,206
- -----------------------------------------------------------
Forward contracts 47,608
- -----------------------------------------------------------
Dividends 63,819
- -----------------------------------------------------------
Deferred compensation plan 10,356
- -----------------------------------------------------------
Accrued advisory fees 7,612
- -----------------------------------------------------------
Accrued administrative service fees 2,604
- -----------------------------------------------------------
Accrued distribution fees 34,324
- -----------------------------------------------------------
Accrued transfer agent fees 9,826
- -----------------------------------------------------------
Accrued operating expenses 9,588
- -----------------------------------------------------------
Total liabilities 219,943
- -----------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $56,287,119
===========================================================
NET ASSETS:
Class A $30,924,029
===========================================================
Class B $25,120,996
===========================================================
Class C $ 242,094
===========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
CLASS A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,830,028
===========================================================
CLASS B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,300,947
===========================================================
CLASS C:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 22,178
===========================================================
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 10.93
===========================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.93 divided
by 95.25%) $ 11.48
===========================================================
CLASS B:
NET ASSET VALUE AND OFFERING PRICE PER SHARE $ 10.92
===========================================================
CLASS C:
NET ASSET VALUE AND OFFERING PRICE PER SHARE $ 10.92
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $3,826,335
- -----------------------------------------------------------
Dividends 31,675
- -----------------------------------------------------------
Total investment income 3,858,010
- -----------------------------------------------------------
EXPENSES:
Advisory fees 346,653
- -----------------------------------------------------------
Administrative service fees 74,031
- -----------------------------------------------------------
Directors' fees 8,735
- -----------------------------------------------------------
Distribution fees-Class A 137,912
- -----------------------------------------------------------
Distribution fees-Class B 219,155
- -----------------------------------------------------------
Distribution fees-Class C 240
- -----------------------------------------------------------
Custodian fees 25,984
- -----------------------------------------------------------
Transfer agent fees-Class A 62,912
- -----------------------------------------------------------
Transfer agent fees-Class B 54,149
- -----------------------------------------------------------
Transfer agent fees-Class C 59
- -----------------------------------------------------------
Other 103,320
- -----------------------------------------------------------
Total expenses 1,033,150
- -----------------------------------------------------------
Less: Fees waived by advisor (302,278)
- -----------------------------------------------------------
Expenses paid indirectly (2,232)
- -----------------------------------------------------------
Net expenses 728,640
- -----------------------------------------------------------
Net investment income 3,129,370
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES AND
FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 109,553
- -----------------------------------------------------------
Foreign currencies (101,917)
- -----------------------------------------------------------
Forward currency contracts 389,609
- -----------------------------------------------------------
397,245
- -----------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 884,081
- -----------------------------------------------------------
Foreign currencies (1,291)
- -----------------------------------------------------------
Forward currency contracts (88,451)
- -----------------------------------------------------------
794,339
- -----------------------------------------------------------
Net gain from investment securities, foreign
currencies and forward currency contracts. 1,191,584
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $4,320,954
===========================================================
</TABLE>
See Notes to Financial Statements.
FS-42
<PAGE> 149
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 $ 3,129,370 $ 1,844,305
- -----------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and forward currency contracts 397,245 418,371
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 794,339 543,300
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,320,954 2,805,976
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (1,835,866) (1,175,361)
- -----------------------------------------------------------------------------------------
Class B (1,337,369) (705,239)
- -----------------------------------------------------------------------------------------
Class C (767) --
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (311,081) (122,866)
- -----------------------------------------------------------------------------------------
Class B (242,850) (57,565)
- -----------------------------------------------------------------------------------------
Class C (605) --
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 8,692,165 11,543,105
- -----------------------------------------------------------------------------------------
Class B 8,049,066 12,214,514
- -----------------------------------------------------------------------------------------
Class C 239,702
- -----------------------------------------------------------------------------------------
Net increase in net assets 17,573,349 24,502,564
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 38,713,770 14,211,206
- -----------------------------------------------------------------------------------------
End of period $56,287,119 $ 38,713,770
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $54,262,086 $ 37,281,153
- -----------------------------------------------------------------------------------------
Undistributed net investment income (10,921) 123,655
- -----------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies and forward currency
contracts 263,067 330,414
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward currency contracts 1,772,887 978,548
- -----------------------------------------------------------------------------------------
$56,287,119 $ 38,713,770
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Income Fund (the "Fund") is an investment portfolio of AIM
International Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company consisting of four operating
series portfolios: AIM Global Income Fund, AIM Global Aggressive Growth Fund,
AIM Global Growth Fund and AIM International Equity 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 on 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 the financial statements pertains only to
the Fund. The Fund's investment objective is to provide high current income.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations-Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as institution-
size trading in similar groups of securities, developments
FS-43
<PAGE> 150
related to special securities, yield, quality, coupon rate, maturity, type of
issue, individual trading characteristics and other market data. Investment
securities for which prices are not provided by the pricing service and which
are listed or traded on an exchange (except convertible bonds) are valued at
the last sales price on the exchange where the security is principally traded
or, lacking any sales on a particular day, at the mean between the closing
bid and asked prices on that day unless the Board of Directors, or persons
designated by the Board of Directors, determines that the over-the-counter
quotations more closely reflect the current market value of the security.
Securities traded in the over-the-counter market, except (i) securities
priced by the pricing service, (ii) securities for which representative
exchange prices are available, and (iii) securities reported in the NASDAQ
National Market System, are valued at the mean between representative last
bid and asked prices obtained from an electronic quotation reporting system,
if such prices are available, or from established market makers. Each
security reported in the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
between the closing bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in accordance with methods which are specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value. Generally, trading in foreign securities, as well as corporate bonds
and U.S. Government securities, is substantially completed each day at
various times prior to the close of the New York Stock Exchange. The values
of such securities used in computing the net asset value of a Fund's shares
are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which would not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities and exchange rates occur during such period, then
these securities and exchange rates will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts-A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding contracts at October 31, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO APPRECIATION
DATE DELIVER VALUE RECEIVE (DEPRECIATION)
---------- ------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
11/18/97 NZD 3,580,000 $ 2,229,087 $ 2,279,923 $ 50,836
11/20/97 DEM 1,400,000 812,843 763,734 (49,109)
12/05/97 JPY 41,000,000 340,690 352,536 11,846
12/10/97 CHF 300,000 215,180 204,026 (11,154)
12/19/97 NZD 1,000,000 623,387 633,000 9,613
01/14/97 DEM 570,000 332,383 327,210 (5,173)
01/28/98 DEM 1,850,000 1,079,618 1,046,380 (33,238)
01/29/98 SEK 18,000,000 2,410,316 2,420,005 9,689
01/30/98 GBP 1,200,000 2,035,398 2,004,480 (30,918)
----------- ----------- --------
$10,078,902 $10,031,294 $(47,608)
=========== =========== ========
</TABLE>
D. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date. It is the policy of the Fund to declare daily dividends from net
investment income. Such dividends are paid annually. On October 31, 1997,
undistributed net investment income was decreased by $89,944 and
undistributed net realized gains increased by $89,944 in order to comply with
the requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
F. Expenses-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 0.70% of
the first $1 billion of the Fund's average daily net assets, plus 0.65% of the
Fund's average daily net assets in excess of $1 billion. During the year ended
October 31, 1997, AIM waived fees of $302,278.
The Fund, pursuant to a master administrative services agreement, has agreed
to reimburse AIM for administrative costs incurred in providing accounting
services to the Fund. During the year ended October 31, 1997, AIM was reimbursed
$74,031 for such services.
FS-44
<PAGE> 151
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1997, the Fund paid AFS
$72,578 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 (the "Class A Plan"), the Fund's Class B shares (the "Class B Plan"),
and the Fund's Class C shares (the "Class C Plan") (collectively, the "Plans").
The Fund, pursuant to the Plan, pays AIM Distributors compensation at the annual
rate of 0.50% of the average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class C shares. The Plan is designed to compensate
AIM Distributors for certain promotional and other sales related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of the Fund. The Fund,
pursuant to the Class B Plan, pays AIM Distributors at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more designees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) any contingent deferred sales charges received by
AIM Distributors related to the Class B shares. During the year ended October
31, 1997 for the Class A shares and Class B shares and the period August 4, 1997
(date sales commenced) through October 31, 1997, the Class C shares paid AIM
Distributors $137,912, $219,155 and $240, respectively, as compensation under
the Plans.
AIM Distributors received commissions of $59,763 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 $3,397 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 $3,931
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 which reduced the
Fund's expenses by $190 during the year ended October 31, 1997. The Fund also
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $649 and $1,393, respectively, under expense
offset arrangements. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $2,232 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 lessor 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
$45,325,570 and $28,881,069, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1997, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 2,907,693
- ------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,091,792)
- ------------------------------------------------------
Net unrealized appreciation
(depreciation) of investment securities $ 1,815,901
======================================================
Cost of investments for tax purposes is $53,007,483.
</TABLE>
FS-45
<PAGE> 152
NOTE 7-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the year 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 1,677,097 $17,985,938 1,609,644 $17,019,341
- ----------------------------------------------------------------------------------------------------------------
Class B 1,244,806 13,337,043 1,313,279 13,876,204
- ----------------------------------------------------------------------------------------------------------------
Class C* 23,915 258,631 -- --
- ----------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 168,472 1,809,673 92,969 985,383
- ----------------------------------------------------------------------------------------------------------------
Class B 118,888 1,275,952 58,431 618,362
- ----------------------------------------------------------------------------------------------------------------
Class C* 71 779 -- --
- ----------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,035,690) (11,103,446) (613,922) (6,461,619)
- ----------------------------------------------------------------------------------------------------------------
Class B (610,857) (6,563,929) (215,814) (2,280,052)
- ----------------------------------------------------------------------------------------------------------------
Class C* (1,808) (19,708) -- --
- ----------------------------------------------------------------------------------------------------------------
1,584,894 $16,980,933 2,244,587 $23,757,619
================================================================================================================
</TABLE>
* Class C Shares commenced sales on August 4, 1997.
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
and a share of Class B capital stock outstanding during each of the years in the
three-year period ended October 31, 1997 and the period September 15, 1994
(dates operations commenced) through October 31, 1994 and for a share of Class C
capital stock outstanding during the period August 4, 1997 (date sales
commenced) through October 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994
---------- ------- ------- ------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 10.85 $10.74 $10.02 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.72 0.79(a) 0.79 0.08
- -----------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.21 0.25 0.75 0.01
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 0.93 1.04 1.54 0.09
- -----------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from investment income (0.72) (0.81) (0.82) (0.07)
- -----------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.13) (0.12) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (0.85) (0.93) (0.82) (0.07)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.93 $10.85 $10.74 $10.02
===========================================================================================================
Total return(b) 9.05% 10.22% 16.07% 0.93%
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,924 $21,926 $10,004 $2,661
===========================================================================================================
Ratio of expenses to average net assets(c) 1.25%(d)(e) 1.25% 1.25% 1.25%(f)
===========================================================================================================
Ratio of net investment income to average net assets(g) 6.54%(d) 7.27% 7.38% 6.01%(f)
===========================================================================================================
Portfolio turnover rate 61% 83% 128% 6%
===========================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.86%, 2.02%, 3.03% and 5.61% (annualized) for the periods 1997-1994,
respectively.
(d) Ratios are based on average net assets of $27,582,444.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been 1.24%.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. The ratios of net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 5.93%, 6.51%, 5.59% and 1.65% (annualized) for the
periods 1997-1994, respectively.
FS-46
<PAGE> 153
<TABLE>
<CAPTION>
1997 1996 1995 1994
---------- ------- ------ ------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 10.84 $10.73 $10.01 $10.00
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.67 0.74(a) 0.74 0.07
- -------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.21 0.24 0.75 0.01
- -------------------------------------------------------------------------------------------------------
Total from investment operations 0.88 0.98 1.49 0.08
- -------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from investment income (0.67) (0.75) (0.77) (0.07)
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.13) (0.12) -- --
- -------------------------------------------------------------------------------------------------------
Total distributions (0.80) (0.87) (0.77) (0.07)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.92 $10.84 $10.73 $10.01
=======================================================================================================
Total return(b) 8.48% 9.66% 15.56% 0.79%
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,121 $16,787 $4,207 $362
=======================================================================================================
Ratio of expenses to average net assets(c) 1.76%(d)(e) 1.75% 1.74% 1.73%(f)
=======================================================================================================
Ratio of net investment income to average net assets(g) 6.03%(d) 6.77% 6.88% 3.59%(f)
=======================================================================================================
Portfolio turnover rate 61% 83% 128% 6%
=======================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.37%, 2.53%, 3.57% and 22.09% (annualized) for the periods 1997-1994,
respectively.
(d) Ratios are based on average net assets of $21,915,481.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have remained the same.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were 5.42%, 6.00%, 5.05% and (16.77)% (annualized)
for the periods 1997-1994, respectively.
<TABLE>
<CAPTION>
1997
CLASS C: ----------
<S> <C>
Net asset value, beginning of period $10.76
- ------------------------------------------------------------ ------
Income from investment operations:
Net investment income 0.15(a)
- ------------------------------------------------------------ ------
Net gains on securities (both realized and unrealized) 0.17
- ------------------------------------------------------------ ------
Total from investment operations 0.32
- ------------------------------------------------------------ ------
Less distributions:
Dividends from net investment income (0.13)
- ------------------------------------------------------------ ------
Distributions from net realized gains (0.03)
- ------------------------------------------------------------ ------
Total distributions (0.16)
- ------------------------------------------------------------ ------
Net asset value, end of period $10.92
============================================================ ======
Total return(b) 2.99%
============================================================ ======
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 242
============================================================ ======
Ratio of expenses to average net assets(c) 1.76%(e)(d)
============================================================ ======
Ratio of net investment income (loss) to average net
assets(f) 6.03%(c)(d)
============================================================ ======
Portfolio turnover rate 61%
============================================================ ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and periods for less than one year,
total returns are 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 was 2.37% (annualized).
(d) Ratios are annualized and based on average net assets of $98,262.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have
remained the same.
(f) After fee waivers and/or expense reimbursements. Ratio of net
investment income to average net assets prior to fee waivers and/or
expense reimbursements was 5.42% (annualized).
FS-47
<PAGE> 154
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
FS-48
<PAGE> 155
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>
FS-49
<PAGE> 156
<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>
FS-50
<PAGE> 157
<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>
FS-51
<PAGE> 158
<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.
FS-52
<PAGE> 159
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.
FS-53
<PAGE> 160
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
FS-54
<PAGE> 161
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
FS-55
<PAGE> 162
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.
FS-56
<PAGE> 163
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.
FS-57
<PAGE> 164
<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.
FS-58
