<PAGE> 1
ANNUAL REPORT / OCTOBER 31 1998
AIM INTERNATIONAL
EQUITY FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 2
[COVER IMAGE]
--------------------------------
HUMAN ACHIEVEMENT BY TSING-FANG CHEN FOR THIS
STUDY IN MODERN ICONOGRAPHY, TSING-FANG CHEN
CREATED A MULTICULTURAL COLLAGE OF SYMBOLS
REPRESENTING THE FINEST ACHIEVEMENTS OF
PEOPLE AROUND THE WORLD. TODAY, THE
INTERNATIONAL MARKETPLACE HELPS PUT MANY OF
THE WORLD'S GREAT IDEAS INTO ACTION-IDEAS
THAT COULD BECOME THE SYMBOLS OF HUMAN
ACHIEVEMENT FOR THE 21ST CENTURY.
--------------------------------
AIM International Equity Fund is for shareholders who seek long-term growth of
capital. The Fund invests in a diversified portfolio of international equity
securities of companies with strong earnings momentum.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM International Equity Fund's performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed at net asset
value without a sales charge.
o During the fiscal year ended 10/31/98 Class A shares paid distributions of
$0.0625 per share.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflect the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differences in sales charge structure and Fund
expenses.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the Fund's foreign holdings, differences in
accounting, political risks, and the lesser degree of public information
required to be provided by non-U.S. companies.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general. Results shown assume the reinvestment of
dividends.
o The EAFE--Registered Trademark-- (Europe, Australasia, and the Far East)
Index is a group of unmanaged foreign securities tracked by Morgan Stanley
Capital International.
o The MSCI World Index is a group of unmanaged global securities listed on
major world stock exchanges and tracked by Morgan Stanley Capital
International.
o The unmanaged Lipper International Fund Index represents an average of the
performance of the 30 largest international mutual funds. It is compiled by
Lipper Analytical Services, Inc., an independent mutual funds performance
monitor. Results shown reflect reinvestment of dividends.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
AIM INTERNATIONAL EQUITY FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
Throughout the fiscal year covered by this report, markets
[PHOTO OF worldwide vacillated between optimism that the woes in Asia
Charles T. would be contained and worry that they would become a major
Bauer, economic drag on the U.S. and the rest of the world. As a
Chairman of result, markets worldwide were especially volatile.
the Board of We understand how unnerving this year's level of
THE FUND volatility can be. Many of you undoubtedly were tempted
APPEARS HERE] simply to exit the markets completely. Our reaction, of
course, is that you should not. The abrupt reversals of
sentiment during this fiscal year reinforce our conviction
that markets are unpredictable in the short term. Since even
the best money managers cannot know when to enter and exit a
market, we think the wisest strategy is to stay fully
invested despite volatility and short-term disappointment.
MARKET RECAP
Even in a year as unsettling as this one, August was particularly difficult. A
variety of events converged to produce harsh market conditions around the globe:
the seemingly intractable downturn in Japan, Russia's default on much of its
foreign debt, and fear that Latin America could be engulfed by the world's
difficulties. Even European stocks, which had been world market leaders, were
shaken. In a global display of lost confidence, investors flocked to securities
perceived as safe and liquid. Even blue-chip stocks went out of favor.
Fortunately, the U.S. Federal Reserve Board (the Fed) intervened. For most
of the fiscal year, the Fed had focused on the potential for inflation in the
U.S. economy. Shortly before the fiscal year ended, it shifted direction,
lowering interest rates twice to pump liquidity and confidence into the markets
and demonstrate that it would intervene to forestall a recession. Numerous
interest rate cuts in other countries followed. (After the fiscal year closed,
as this report was being written, the Fed lowered rates a third time.)
Investors responded favorably. The fiscal year closed with international
equities rallying and bonds losing some of their momentum. In just the two weeks
between the Fed's second interest rate move on October 15 and the October 31
close of the fiscal year, the EAFE Index gained 5.04% and the MSCI World Index
rose 4.93%. The U.S. participated strongly in the rally, with the S&P 500 up
4.93% during the same two-week period.
However difficult this fiscal year has been, the fundamental principles of
investing remain unchanged:
o broad portfolio diversification;
o realistic expectations, recognizing
that the potential for downturns is always present; and
o as always, long-term thinking.
Your financial consultant is your best resource for helping you construct a
diversified portfolio and weather turbulent markets.
YOUR FUND MANAGERS' COMMENTS
We are pleased to send you this report on your Fund's fiscal year. On the pages
that follow, your Fund's management team offers more detailed discussion of how
markets behaved, how they managed the portfolio, and what they foresee for your
Fund and the markets where it invests. We hope you find their discussion
informative. If you have any questions or comments, please contact our Client
Services department at 800-959-4246 or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
AIM Investor Line at 800-246-5463 or on our Web site, www.aimfunds.com. We often
post market updates on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--RegisteredTrademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
------------------------
THE FISCAL YEAR
CLOSED WITH
INTERNATIONAL EQUITIES
RALLYING AND BONDS LOSING
SOME OF THEIR MOMENTUM.
------------------------
AIM INTERNATIONAL EQUITY FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
EUROPEAN STOCKS SHELTER FUND
FROM GLOBAL STORMS
GLOBAL MARKET VOLATILITY DOMINATED FINANCIAL NEWS IN 1998. HOW DID THE FUND
PERFORM IN THIS ENVIRONMENT?
International investors endured a difficult year, including a major correction
in world equity markets during August. Trouble blew in from every part of the
globe, but the Fund was able to brace itself against the storm. For the fiscal
year ended October 31, 1998, total return was 6.11% for Class A shares, 5.29%
for Class B shares, and 5.35% for Class C shares. These results outperformed the
Lipper International Fund Index, which posted a gain of 4.65%.
The overall index for international markets-the EAFE-achieved a total return
of 9.65% for the reporting period.
WHY WAS MARKET TURMOIL SO PERVASIVE?
The trouble began in Asia. Devalued currencies plus billions in bad loans
curtailed the region's ability to purchase goods and raw materials from the
world's sellers. When Asian companies flooded global commodities markets with
their inventories to produce desperately needed revenues, the combination of
oversupply and weakened demand caused prices to plummet, contributing to
worldwide deflation.
Meanwhile, investors worried over news of Russia's overwhelming government
debt and the speculative borrowing practiced by its private banks. In August,
Russia attempted to stabilize the banking system by floating the ruble and
suspending repayment of much of its foreign debt. These events spurred a global
flight to quality, resulting in a broad-based selloff.
HOW DID LATIN AMERICAN MARKETS FARE?
As the Asian and Russian crises rippled around the globe, investors began to re-
evaluate the riskiness of emerging markets, and many exited them completely. As
external capital drained away, expectations deteriorated for further growth in
places like Brazil. Latin America as a whole suffered both from investor flight
and from falling commodity prices. The risk perception for the region improved
slightly in the third quarter, thanks to Brazil's new fiscal reform package and
the expectation of aid from the International Monetary Fund (IMF).
IS THERE ANY INDICATION THAT THE ASIAN CRISIS IS ABATING?
Toward the end of the reporting period, Asian markets took an upturn. Interest
rates had fallen significantly, currencies were stabilizing, and a few
countries-notably Indonesia, Malaysia, and Thailand-expected current account
surpluses for 1998.
However, the first hints of stabilization do not necessarily indicate
certain recovery. As October came to a close, economic conditions were still
very weak. Most countries, with the exception of China, Taiwan, Australia, and a
few others, slipped into recession this year. Poor corporate earnings and slow
reform efforts continued to send warning signs to cautious investors.
WITH MOST OF THE WORLD FACING ECONOMIC DIFFICULTY, WHY HAVE EUROPE'S MARKETS
STAYED STRONG?
Most notably, corporate earnings growth in Europe has been exceptional. European
companies are showing stronger growth than their U.S. counterparts, and
investors can get that growth at a cheaper price. Europe did suffer during the
summer's global downturn, but the major long-term themes driving growth in the
region have sheltered it somewhat from the extreme losses felt in other parts of
the world.
The expected introduction of the Economic and Monetary Union (EMU) has
forced Europe's nations to put their books in order. Investors have benefited
from a decrease in interest rates, lower inflation, and an increase in
privatization. With the introduction of a single currency (the euro), European
companies are becoming more competitive-trimming costs and developing new
products for the unified marketplace. (For more information about the euro, see
page 4.)
HOW HAVE YOU MANAGED THE PORTFOLIO IN THIS ENVIRONMENT?
We've maintained our focus on earnings growth and on diversification. The
portfolio was invested in 149 holdings, representing companies found in 24
different countries.
By the end of the reporting period, we were still finding great
opportunities in Europe, with France and the United Kingdom bringing in some of
the strongest results. A favorite was French company Cap Gemini S.A., one of
Europe's biggest information systems companies. While we had some fairly
aggressive holdings in the technology area, those were balanced by more
defensive stocks. These included steady-growth stocks like Heineken and utility
companies like Endesa S.A., Spain's biggest electricity producer.
----------------------------
EUROPEAN COMPANIES ARE SHOWING
STRONGER GROWTH THAN THEIR U.S.
COUNTERPARTS, AND INVESTORS CAN GET
THAT GROWTH AT A CHEAPER PRICE.
----------------------------
See important Fund and index disclosures inside front cover.
AIM INTERNATIONAL EQUITY FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of October 31, 1998, based on total net assets
<TABLE>
<CAPTION>
======================================================================================================
TOP 10 EQUITY HOLDINGS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit (Netherlands) 1.31%
2. Karstadt A.G. (Germany) 1.30
3. Telecom Italia S.p.A. (Italy) 1.29
4. Cap Gemini Sogeti S.A. (France) 1.27
5. Telefonica de Espana (Spain) 1.27
6. Nestle S.A. (Switzerland) 1.26
7. Telecom Italia Mobile S.p.A. (Italy) 1.17
8. Endesa S.A (Spain) 1.17
9. Pinault-Printemps-Redoute S.A. (France) 1.15
10. Allianz A.G. (Germany) 1.13
<CAPTION>
TOP 10 INDUSTRIES TOP 10 COUNTRIES
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Banks (Major Regional) 9.49% 1. United Kingdom 16.13%
2. Telephone 6.03 2. France 15.83
3. Retail (Food Chains) 5.26 3. Netherlands 6.96
4. Services (Commercial & Consumer) 4.85 4. Germany 6.94
5. Manufacturing (Diversified) 4.26 5. Italy 6.42
6. Insurance (Multi-Line) 3.88 6. Japan 5.72
7. Foods 3.62 7. Switzerland 4.76
8. Telecommunications (Cellular/Wireless) 3.47 8. Canada 4.65
9. Oil & Gas (Refining & Marketing) 3.36 9. Spain 3.69
10. Computers (Software & Services) 3.23 10. Belgium 3.22
Please keep in mind the Fund's portfolio is subject to change and there is no assurance the Fund will
continue to hold any particular security.
======================================================================================================
</TABLE>
We've drastically reduced our exposure to non-Japan Asia, focusing on the
few companies that have produced consistent earnings growth despite the
difficult operating environment. We also have limited exposure to Japan, where
many companies' earnings are not yet meeting our expectations. Many of the big
exporters like Sony and Honda are experiencing difficulties because of weak
global demand.
Our exposure to Latin America increased slightly during the third quarter.
The emphasis was on defensive names with limited dollar debt, solid cash flows,
and reliable management. In Brazil, we focused on recently privatized companies
in the utilities and telecommunications industries. For example, we liked
Companhia Energetica de Minas Gerais (CEMIG), a provider of electric power to
the Brazilian state of Minas Gerais. In Mexico we maintained a much broader
portfolio, including media, banks, and consumer products. One of our holdings in
this area was Fomento Economico Mexicano S.A. de C.V., a Mexican producer of
soft drinks and beer that exports to 63 countries around the world.
WERE THERE ANY MAJOR DISAPPOINTMENTS?
Some of our European bank holdings performed worse than expected. Even though
many companies in Europe's financial sector have great restructuring stories and
notable earnings growth, bank performance dipped during the third quarter
because of loans made to Asia or Latin America. However, we still believe there
is long-term potential in the banking industry. With the coming of EMU, we are
watching for continued merger and acquisition activity.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
Recent political changes in Europe have introduced a few uncertainties, but
overall, we're still very confident in the region. France is especially
attractive, and we expect continued strong earnings there. We also believe the
fourth quarter will bring better than expected earnings from many U.K.
companies.
Many analysts think Asia will finally hit bottom in 1999, indicating that
growth-and investor confidence-may begin to return some time next year. When and
if that happens, of course, depends on external demand and on the strength of
U.S., European, and Japanese economies. Japan may be the next great market
recovery story, but we are still in a wait-and-see mode. Plans for a Japanese
bank bailout offer some hope.
Latin America may continue to be quite volatile. We will continue to take a
defensive position until the economic environment improves significantly.
See important Fund and index disclosures inside front cover.
AIM INTERNATIONAL EQUITY FUND
3
<PAGE> 6
ANNUAL REPORT / MANAGERS' OVERVIEW
WELCOME THE EURO
Starting January 1, 1999, Europe will launch a brand new currency-the euro. At
first, only 11 countries will adopt it: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. These
countries have met the financial and economic criteria required for membership
in the European Economic and Monetary Union (EMU), and they have agreed to
follow certain monetary, exchange rate, and budgetary policies.
The changeover to euro will take place gradually. New coins and paper
currency will not be introduced until January 2002. Until then, Spanish shoppers
will still use pesetas and the French will still use francs, but these will be
thought of simply as denominations of the euro, the same way that a quarter is a
denomination of a dollar.
A NEW BUSINESS ENVIRONMENT
The euro is expected to bring greater unity to the European business world:
price comparison of goods, services, and labor across Europe may be much easier.
Because of this "price transparency," European companies may be forced to
become more competitive. An increase in merger and acquisition activity is
expected.
The equity markets are likely to become broader and more liquid, since
European companies may find it easier to attract capital across borders.
Europe's fixed-income markets could also be transformed. Since currency risk
may be reduced, Europe's investors can focus on credit risk. Eventually, the
euro-denominated debt market could be as large and liquid as that of the U.S.
The introduction of a new currency can present unique risks and
uncertainties for investors. Please see your prospectus for more information
about these risk factors.
EURO SYMBOL
------------------
The new euro symbol,
designed to suggest stability
and a unified Europe.
------------------
AIM INTERNATIONAL EQUITY FUND AND THE EURO
The chart below left shows where the portfolio was invested as of 10/31/98. The
second chart translates that into "euro," showing what percentage of the
portfolio was invested in the 11 Euroland countries. Keep in mind that the Fund
selects stocks on the basis of earnings. We do not rely on pre-determined
allocations to particular countries. Also remember that the portfolio's
composition is subject to change.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PIE CHARTS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
IRELAND 2.04% OTHER EUROPE 7.18%
PORTUGAL 2.78% EUROLAND 48.93%
BELGIUM 3.22% UK 16.13%
SPAIN 3.69% OTHER 27.76%
OTHER EUROPE 7.18%
ITALY 6.42%
GERMANY 6.94%
NETHERLANDS 6.96%
FINLAND 1.05%
UK 16.13%
FRANCE 15.83%
OTHER 27.76%
- -------------------------------------------------------------------------------
</TABLE>
AIM INTERNATIONAL EQUITY FUND
4
<PAGE> 7
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM INTERNATIONAL EQUITY FUND VS. BENCHMARK INDEXES
4/7/92-10/31/98
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AIM
International Lipper
Equity Fund, International
Class A EAFE Fund Index
- -------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
4/92 9454 10000 10000
9/92 9784 9893 10385
3/93 10534 10608 11201
9/93 12431 12264 13163
3/94 13537 13453 13759
9/94 14210 14099 14495
3/95 13717 13163 14635
9/95 15501 14588 15380
3/96 16938 15506 16490
9/96 17914 16152 16755
3/97 18964 17415 16779
9/97 21748 19736 18848
3/98 22982 20944 19955
9/98 20283 17777 17324
10/98 22306 19085 19135
Past performance is no guarantee of comparable future results.
===============================================================================
</TABLE>
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98
CLASS A SHARES
Inception (4/7/92) 12.02%
5 years 8.60
1 year 0.27*
CLASS B SHARES
Inception (9/15/94) 8.18%
1 year 0.29**
CLASS C SHARES
Inception (8/4/97) -2.29%
1 year 4.35***
*6.11%, excluding sales charges
**5.29%, excluding sales charges
***5.35%, excluding sales charges
===============================================================================
Source: Towers Data System HYPO--Registered Trademark--
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of the Fund's Class B and Class C shares will differ from
Class A shares due to differing fees and expenses. For Fund performance
calculations and descriptions of indexes cited on this page, please refer to the
inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
ABOUT THIS CHART
The chart above compares your Fund's Class A shares to benchmark indexes. It is
important to understand the differences between your Fund and these indexes. An
index measures performance of a hypothetical portfolio. A market index such as
the MSCI Europe, Australasia, Far East (EAFE) Index is not managed, and incurs
no sales charges, expenses, or fees. If you could buy all the securities that
make up a market index, you would incur expenses that would affect your
investment's return.
An index of funds such as the Lipper International Fund Index includes a
number of mutual funds grouped by investment objective. Each of those funds
interprets that objective differently, and each employs a different management
style and investment strategy. Use of these indexes is intended to give you a
general idea of how your Fund performed compared to these benchmarks.
Please note that performance results for the indexes above are for the
period March 31, 1992 to October 31, 1998.
AIM INTERNATIONAL EQUITY FUND
5
<PAGE> 8
ANNUAL REPORT / FOR CONSIDERATION
WHY STAYING FULLY INVESTED
HAS BEEN THE WISEST COURSE
When the stock market turns volatile, many investors feel the impulse to pull
their money out of mutual funds. The question then becomes when to get back in.
Trying to guess the answer could be very costly.
No one, not even expert market watchers, can consistently predict what the
market will do next. That's why AIM funds stay fully invested even in a down
market, and we encourage investors to do the same.
For long-term investing, the stock market historically has offered the
highest returns. For example, the Standard & Poor's Composite Index of 500
Stocks (S&P 500) has reported an annualized total return of 13.15% for the 50
years ending October 31, 1998. Those were five decades of wars, recessions, and
political upheaval.
If you pull your money out whenever markets decline, you could miss some of
the market's best days. In August 1998, investors withdrew $11 billion from U.S.
mutual funds. Chances are, many of those investors did not put their money back
into the market in time for the October rally. In fact, October 1998 turned out
to be the strongest month for the Dow Jones Industrial Average in 11 years.
For international investors, here's another way to look at market timing: If
you had invested a hypothetical $10,000 in the Europe, Australasia, and Far East
Index tracked by Morgan Stanley Capital International on October 31, 1978, your
money would have grown to $103,110 by October 31, 1998. That's an average annual
total return of 12.37%. But suppose that during that 20-year period, there were
times when you decided to get out of the market. If you missed the market's two
best months, your return would have fallen to 10.83%, and your investment would
be worth $78,214. If you had missed the market's five best months, your return
would have dropped to 9.01% and your investment would be worth $56,149.
The more you try to time the market, the greater your chances of missing its
biggest single-day gains. Keep focused on your financial goals and remember that
time, not timing, is key to successful investing. Now may be a good time to
visit your financial adviser to talk about your portfolio. Remember:
o think long-term
o diversify your investments
o avoid market timing
o maintain realistic expectations
PENALTY FOR MISSING THE MARKET
MSCI EAFE INDEX
Average annual total returns, 20 years ended 10/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
12.37% 10.83% 9.01% 7.89% 6.81% 4.38%
FULLY MISS THE
INVENTED MISS THE 2 MISS THE 5 MISS THE 7 MISS THE 9 14 BEST
240 MONTHS BEST MONTHS BEST MONTHS BEST MONTHS BEST MONTHS MONTHS
</TABLE>
The EAFE--Registered Trademark-- (Europe, Australasia, and the Far East) Index
is a group of unmanaged foreign securities. The index is compiled by Morgan
Stanley Capital International. Source: Lipper Analytical Services, Inc.
See important Fund and index disclosures inside front cover.
AIM INTERNATIONAL EQUITY FUND
6
<PAGE> 9
SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-89.07%
ARGENTINA-1.24%
Telefonica de Argentina S.A.-ADR
(Telephone) 317,500 $ 10,497,344
- ---------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Oil-International Integrated) 718,400 20,788,700
- ---------------------------------------------------------------
31,286,044
- ---------------------------------------------------------------
AUSTRALIA-0.60%
AMP Ltd.
(Insurance-Life/Health)(a) 1,275,500 15,172,869
- ---------------------------------------------------------------
BELGIUM-3.22%
Barco N.V.
(Manufacturing-Diversified) 41,000 10,934,133
- ---------------------------------------------------------------
Colruyt N.V. (Retail-Food
Chains) 29,200 24,425,937
- ---------------------------------------------------------------
Delhaize-Le Lion, S.A.
(Retail-Food & Drug)(a) 326,000 27,866,510
- ---------------------------------------------------------------
UCB S.A.
(Manufacturing-Diversified) 3,100 18,109,046
- ---------------------------------------------------------------
81,335,626
- ---------------------------------------------------------------
BRAZIL-1.52%
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar-Pfd. (Retail-Food
Chain) 294,900 4,755,263
- ---------------------------------------------------------------
Companhia Energetica de Minas
Gerais (Electric Companies) 211,712 4,117,809
- ---------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 30,271 3,806,765
- ---------------------------------------------------------------
Telecomunicacoes Brasileiras
S.A.-ADR
(Telecommunications-Cellular/
Wireless) 150,200 11,405,813
- ---------------------------------------------------------------
Telecomunicacoes de Sao Paulo
S.A.-TELESP-Pfd. (Telephone) 59,100 9,909,457
- ---------------------------------------------------------------
Telerj Celular S.A.
(Telecommunications-
Cellular/Wireless)(a) 44,988 1,395,503
- ---------------------------------------------------------------
Telesp Celular S.A.
(Telecommunications-
Cellular/Wireless)(a) 59,100 2,923,290
- ---------------------------------------------------------------
38,313,900
- ---------------------------------------------------------------
CANADA-4.65%
ATI Technologies, Inc.
(Computers-Hardware)(a) 471,400 3,820,097
- ---------------------------------------------------------------
Bank of Montreal (Banks-Major
Regional) 126,000 5,154,360
- ---------------------------------------------------------------
BCE Inc.
(Telecommunications-Cellular/
Wireless) 353,600 11,989,161
- ---------------------------------------------------------------
Bombardier Inc.
(Aerospace/Defense) 1,510,000 17,865,478
- ---------------------------------------------------------------
Canadian National Railway Co.
(Railroads) 50,000 2,521,875
- ---------------------------------------------------------------
Imasco Ltd.
(Manufacturing-Diversified) 1,038,200 19,518,833
- ---------------------------------------------------------------
Mitel Corp. (Communications
Equipment)(a) 253,100 2,042,849
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Northern Telecom Ltd.-ADR
(Communications Equipment) 179,557 $ 7,687,284
- ---------------------------------------------------------------
Royal Bank of Canada
(Banks-Major Regional) 355,000 16,363,372
- ---------------------------------------------------------------
Suncor Energy, Inc.
(Oil-International Integrated) 380,000 12,071,311
- ---------------------------------------------------------------
Teleglobe, Inc.
(Telecommunications) 532,000 14,554,554
- ---------------------------------------------------------------
Toronto-Dominion Bank
(Banks-Regional) 136,000 4,046,937
- ---------------------------------------------------------------
117,636,111
- ---------------------------------------------------------------
CROATIA-0.22%
Pliva DD-GDR 144A (Health
Care-Drugs-Major
Pharmaceutical), (Acquired
05/13/98-05/20/98; Cost
$6,368,075)(b) 379,000 5,571,300
- ---------------------------------------------------------------
FINLAND-1.05%
Nokia Oyj A.B.-Class A
(Communications Equipment) 291,600 26,596,006
- ---------------------------------------------------------------
FRANCE-15.23%
Accor S.A. (Lodging-Hotels) 91,000 19,121,847
- ---------------------------------------------------------------
Altran Technologies, S.A.
(Services-Commercial &
Consumer) 41,000 8,024,740
- ---------------------------------------------------------------
AXA S.A. (Insurance-Multi-Line) 132,000 14,926,265
- ---------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 147,200 9,327,058
- ---------------------------------------------------------------
Cap Gemini Sogeti S.A.
(Computers-Software &
Services) 213,500 32,099,771
- ---------------------------------------------------------------
Danone (Foods) 89,000 23,541,243
- ---------------------------------------------------------------
Elf Aquitaine S.A. (Oil &
Gas-Refining & Marketing) 205,500 23,792,517
- ---------------------------------------------------------------
Essilor International S.A.
(Manufacturing-Specialized) 24,940 10,104,075
- ---------------------------------------------------------------
Etablissements Economiques du
Casino Guichard-Perrachon
(Retail-Food Chains)(a) 232,400 23,140,825
- ---------------------------------------------------------------
Legrand S.A. (Housewares) 75,000 19,122,387
- ---------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 174,000 29,137,332
- ---------------------------------------------------------------
Promodes (Retail-Food Chains) 41,100 25,894,251
- ---------------------------------------------------------------
PSA Peugeot Citreon
(Automobiles) 73,000 12,184,850
- ---------------------------------------------------------------
Renault S.A. (Automobiles) 522,000 22,322,956
- ---------------------------------------------------------------
Rexal S.A. (Distributors-Food &
Health) 148,000 13,590,938
- ---------------------------------------------------------------
Rhone-Poulenc-Class A
(Chemicals-Diversified) 264,500 12,096,980
- ---------------------------------------------------------------
Societe Generale (Banks-Major
Regional) 107,800 14,266,705
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Societe Television Francaise 1
(Broadcasting-Television,
Radio & Cable) 70,000 $ 11,570,665
- ---------------------------------------------------------------
Suez Lyonnaise des Eaux
(Manufacturing-Diversified) 125,000 22,394,980
- ---------------------------------------------------------------
Total S.A.-Class B (Oil &
Gas-Refining & Marketing) 213,000 24,584,151
- ---------------------------------------------------------------
Valeo S.A. (Auto Parts &
Equipment) 161,000 13,944,037
- ---------------------------------------------------------------
385,188,573
- ---------------------------------------------------------------
GERMANY-6.86%
Allianz A.G.
(Insurance-Multi-Line) 83,600 28,689,989
- ---------------------------------------------------------------
Bayerische Vereinsbank A.G.
(Banks-Major Regional) 355,000 28,205,244
- ---------------------------------------------------------------
BHF-Bank A.G. (Banks-Major
Regional) 158,000 6,085,736
- ---------------------------------------------------------------
Continental A.G. (Auto Parts &
Equipment) 311,450 8,279,741
- ---------------------------------------------------------------
Daimler-Benz A.G. (Automobiles) 139,900 10,861,670
- ---------------------------------------------------------------
Dresdner Bank A.G. (Banks-Major
Regional) 641,100 24,983,959
- ---------------------------------------------------------------
Henkel KGaA
(Chemicals-Diversified) 323,500 27,657,090
- ---------------------------------------------------------------
Karstadt A.G. (Retail-Department
Stores) 64,450 32,904,507
- ---------------------------------------------------------------
Porsche A.G. (Automobiles) 3,300 5,841,943
- ---------------------------------------------------------------
173,509,879
- ---------------------------------------------------------------
HONG KONG-1.92%
China Telecom Ltd.
(Telecommunications-
Cellular/Wireless)(a) 6,564,000 12,332,132
- ---------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 27,852,000 13,666,163
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Retail-Food Chains) 2,552,000 18,288,592
- ---------------------------------------------------------------
Ng Fung Hong Ltd. (Foods) 4,986,000 4,410,111
- ---------------------------------------------------------------
48,696,998
- ---------------------------------------------------------------
INDONESIA-0.53%
Gulf Indonesia Resources Ltd.
(Oil-International
Integrated)(a) 1,353,700 13,367,788
- ---------------------------------------------------------------
IRELAND-2.04%
Allied Irish Banks PLC
(Banks-Regional) 1,865,000 26,772,125
- ---------------------------------------------------------------
Bank of Ireland (Banks-Major
Regional) 1,103,400 20,269,920
- ---------------------------------------------------------------
Elan Corp. PLC-ADR (Health
Care-Drugs-Generic & Other)(a) 63,800 4,469,989
- ---------------------------------------------------------------
51,512,034
- ---------------------------------------------------------------
ITALY-6.42%
Assicurazioni Generali
(Insurance- Multi-Line) 508,500 18,137,121
- ---------------------------------------------------------------
Banca Commerciale Italiana
(Banks-Major Regional) 1,168,000 7,221,919
- ---------------------------------------------------------------
Banca di Roma (Banks-Major
Regional)(a) 10,797,000 18,832,130
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ITALY-(CONTINUED)
Credito Italiano S.p.A.
(Banks-Major Regional) 3,596,300 $ 19,369,083
- ---------------------------------------------------------------
Ente Nazionale Idrocarburi
S.p.A. (Oil & Gas-Refining &
Marketing) 3,003,000 17,909,833
- ---------------------------------------------------------------
Istituto Mobiliare Italiano
S.p.A. (Banks-Major
Regional)(a) 1,220,700 18,759,133
- ---------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telephone) 5,100,000 29,637,913
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 4,494,000 32,500,565
- ---------------------------------------------------------------
162,367,697
- ---------------------------------------------------------------
JAPAN-5.72%
Advantest Corp. (Electronics-
Instrumentation)(a) 186,000 11,748,883
- ---------------------------------------------------------------
Bridgestone Corp. (Auto Parts &
Equipment) 968,000 21,338,261
- ---------------------------------------------------------------
Fuji Photo Film
Co.(Photography/Imaging) 278,000 10,201,616
- ---------------------------------------------------------------
Nippon Telegraph & Telephone
Corp. (Telephone) 15,790 12,375,799
- ---------------------------------------------------------------
Nippon Television Network Corp.
(Broadcasting-Television,
Radio & Cable) 26,530 8,287,775
- ---------------------------------------------------------------
NTT Data Corp.
(Computers-Software &
Services)(a) 4,163 17,638,011
- ---------------------------------------------------------------
Okuma Corp. (Machine Tools)(a) 191,000 984,875
- ---------------------------------------------------------------
Rohm Co. (Electronics-Component
Distributors) 176,000 15,579,237
- ---------------------------------------------------------------
SMC Corp.
(Machinery-Diversified) 171,000 12,917,583
- ---------------------------------------------------------------
Sony Corp.
(Electronics-Component
Distributors) 149,600 9,513,922
- ---------------------------------------------------------------
Takeda Chemical Industries
(Health Care-Drugs-Generic &
Other) 378,000 12,311,963
- ---------------------------------------------------------------
Tokyo Electron Ltd.
(Electronics-Semiconductors)(a) 359,000 11,693,107
- ---------------------------------------------------------------
144,591,032
- ---------------------------------------------------------------
MEXICO-1.99%
Coca-Cola Femsa S.A.-ADR
(Beverages- Non-Alcoholic) 428,400 7,068,600
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V. ADR
(Beverages-Alcoholic) 711,670 18,547,899
- ---------------------------------------------------------------
Grupo Financiero Banamex
Accival, S.A. de C.V.
(Financial-Diversified)(a) 4,317,000 4,529,368
- ---------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series
C (Beverages-Alcoholic) 4,850,000 10,225,180
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 371,500 10,076,938
- ---------------------------------------------------------------
50,447,985
- ---------------------------------------------------------------
NETHERLANDS-6.96%
DE Boer Unigro (Retail-General
Merchandise)(a) 256,970 6,466,211
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Getronics N.V.
(Computers-Software &
Services) 417,000 $ 17,302,442
- ---------------------------------------------------------------
Heineken N.V.
(Beverages-Alcoholic) 528,000 28,127,208
- ---------------------------------------------------------------
IHC Caland N.V.
(Manufacturing-Specialized) 121,000 5,474,087
- ---------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food Chains) 796,000 26,465,146
- ---------------------------------------------------------------
Koninklijke Numico N.V. (Foods) 277,000 10,900,257
- ---------------------------------------------------------------
Randstad Holdings N.V.
(Services-Commercial &
Consumer) 137,000 7,334,833
- ---------------------------------------------------------------
Vedior N.V.
(Services-Employment)(a) 212,162 5,406,848
- ---------------------------------------------------------------
Vendex N.V. (Retail-General
Merchandise) 367,100 9,335,717
- ---------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (Publishing) 955,300 33,040,143
- ---------------------------------------------------------------
Wolters Kluwer N.V. (Specialty
Printing)(a) 134,500 26,067,566
- ---------------------------------------------------------------
175,920,458
- ---------------------------------------------------------------
NORWAY-0.19%
Merkantildata A.S.A
(Services-Commercial &
Consumer) 480,000 4,828,055
- ---------------------------------------------------------------
PHILIPPINES-0.28%
Philippine Long Distance
Telephone Co. (Telephone) 168,960 4,055,881
- ---------------------------------------------------------------
Philippine Long Distance
Telephone Co.-ADR (Telephone) 119,200 2,905,500
- ---------------------------------------------------------------
6,961,381
- ---------------------------------------------------------------
PORTUGAL-2.78%
Banco Comercial Portugues, S.A.
(Banks-Major Regional) 720,000 22,548,752
- ---------------------------------------------------------------
Electricidade de Portugal, S.A.
(Electric Companies) 480,000 12,070,655
- ---------------------------------------------------------------
Electricidade de Portugal,
S.A.-ADR (Electric Companies) 140,800 7,040,000
- ---------------------------------------------------------------
Portugal Telecom S.A.
(Telephone) 390,600 18,513,483
- ---------------------------------------------------------------
Telecel-Comunicacaoes Pessoais,
S.A.
(Telecommunications-Cellular/
Wireless) 55,000 10,136,010
- ---------------------------------------------------------------
70,308,900
- ---------------------------------------------------------------
SPAIN-3.69%
Corp. Financiera Reunida, S.A.
(Investment Management)(a) 525,000 6,301,044
- ---------------------------------------------------------------
Endesa S.A. (Electric Companies) 1,171,000 29,522,406
- ---------------------------------------------------------------
Iberdrola S.A. (Electric
Companies) 1,566,000 25,301,115
- ---------------------------------------------------------------
Telefonica de Espana (Telephone) 710,000 32,068,745
- ---------------------------------------------------------------
93,193,310
- ---------------------------------------------------------------
SWEDEN-0.96%
Hennes & Mauritz A.B.-Class B
(Retail-Specialty-Apparel) 228,992 16,148,942
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWEDEN-(CONTINUED)
WM-Data A.B. (Computers-Software
& Services) 220,000 $ 8,011,284
- ---------------------------------------------------------------
24,160,226
- ---------------------------------------------------------------
SWITZERLAND-4.76%
Adecco S.A. (Services-Commercial
& Consumer)(a) 27,500 10,962,646
- ---------------------------------------------------------------
Julius Baer Holding A.G.
(Banks-Major Regional)(a) 2,500 7,659,088
- ---------------------------------------------------------------
Nestle S.A. (Foods) 15,000 31,891,333
- ---------------------------------------------------------------
Novartis A.G. (Health
Care-Diversified) 15,300 27,559,427
- ---------------------------------------------------------------
UBS A.G. (Banks-Major
Regional)(a) 76,461 20,969,483
- ---------------------------------------------------------------
Zurich Allied A.G.
(Insurance-Multi-Line) 35,000 21,264,580
- ---------------------------------------------------------------
120,306,557
- ---------------------------------------------------------------
TAIWAN-0.11%
Taiwan Semiconductor
Manufacturing Co.-ADR
(Electronics-Semiconductors) 190,385 2,843,876
- ---------------------------------------------------------------
UNITED KINGDOM-16.13%
Airtours PLC
(Services-Commercial &
Consumer) 1,399,350 7,843,103
- ---------------------------------------------------------------
Bodycote International PLC
(Chemicals-Specialty) 410,000 5,864,982
- ---------------------------------------------------------------
British Aerospace PLC
(Aerospace/Defense) 2,503,000 18,614,413
- ---------------------------------------------------------------
British Petroleum Co. PLC (Oil &
Gas-Refining & Marketing) 1,265,200 18,564,169
- ---------------------------------------------------------------
Cable & Wireless PLC
(Telecommunications-Cellular/
Wireless) 1,128,850 12,653,998
- ---------------------------------------------------------------
Compass Group PLC
(Services-Commercial &
Consumer) 1,940,000 19,636,941
- ---------------------------------------------------------------
EMAP PLC (Publishing) 1,360,000 23,208,967
- ---------------------------------------------------------------
General Electric Co. PLC
(Manufacturing-Diversified) 2,984,800 23,845,440
- ---------------------------------------------------------------
GKN PLC
(Manufacturing-Diversified) 1,060,000 12,875,355
- ---------------------------------------------------------------
Hays PLC (Services-Commercial &
Consumer) 1,885,000 27,768,821
- ---------------------------------------------------------------
Kingfisher PLC
(Retail-Department Stores) 2,859,600 25,093,863
- ---------------------------------------------------------------
Ladbroke Group PLC (Leisure
Time-Products) 2,500,000 9,149,657
- ---------------------------------------------------------------
Logica PLC (Computer
Software/Services) 195,000 6,582,106
- ---------------------------------------------------------------
Misys PLC (Services-Commercial &
Consumer) 1,375,000 9,639,033
- ---------------------------------------------------------------
Orange PLC
(Telecommunications)(a) 2,977,000 27,668,119
- ---------------------------------------------------------------
Pearson PLC (Specialty Printing) 1,165,000 20,310,021
- ---------------------------------------------------------------
Provident Financial PLC
(Consumer Finance) 909,333 13,646,841
- ---------------------------------------------------------------
Railtrack Group PLC (Shipping) 874,448 23,481,496
- ---------------------------------------------------------------
Rentokil Initial PLC
(Services-Commercial &
Consumer) 4,240,000 26,531,035
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Somerfield PLC (Retail-Food
Chains) 1,565,000 $ 10,054,542
- ---------------------------------------------------------------
Stagecoach Holdings PLC
(Shipping) 1,600,000 6,210,473
- ---------------------------------------------------------------
Unilever PLC (Foods) 2,064,000 20,719,424
- ---------------------------------------------------------------
Vodafone Group PLC
(Telecommunications-Cellular/
Wireless) 1,865,000 24,962,356
- ---------------------------------------------------------------
WPP Group PLC
(Services-Advertising/
Marketing) 2,575,000 12,795,298
- ---------------------------------------------------------------
407,720,453
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests
(Cost $1,842,926,995) 2,251,837,058
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS-0.68%
FRANCE-0.60%
AXA-UAP (Insurance-Multi-Line),
Conv. Sr. Deb., 4.50%,
01/01/99(c) FRF 33,885,000 $ 15,140,165
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GERMANY-0.08%
Cosco Treasury Co. Ltd.
(Financial - Diversified),
Conv. Bond, 1.00%, 03/13/03 $ 2,754,000 $ 1,920,915
- ---------------------------------------------------------------
Total Foreign Convertible
Bonds (Cost $10,626,776) 17,061,080
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-8.95%(D)
Credit Suisse First Boston Corp.,
5.55%, 11/02/98(e) 96,315,287 96,315,287
- ---------------------------------------------------------------
Salomon Smith Barney, Inc.,
5.55%(f) 130,000,000 130,000,000
- ---------------------------------------------------------------
Total Repurchase Agreements
(Cost $226,315,287) 226,315,287
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.70% 2,495,213,425
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.30% 32,987,628
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,528,201,053
===============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv.- Convertible
Deb. - Debenture
FRF - French Franc
GDR - Global Depositary Receipt
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 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 10/31/98 represented 0.22% 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 agreements. The collateral is marked to market
daily to ensure its market value is at least 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 advisors or its affiliates.
(e) Joint repurchase agreement entered into 10/30/98 with a maturing value of
$430,198,875. Collateralized by $401,863,000 U.S. Government obligations, 0%
to 8.75% due 05/14/99 to 08/15/21 with an aggregate market value at 10/31/98
of $443,969,550.
(f) Open joint repurchase agreement. Either party may terminate the agreement
upon demand. Interest rates are redetermined daily. Collateralized by
$1,159,504,000 U.S. Government obligations, 0% to 10.70% due 11/01/98 to
07/15/45 with an aggregate market value at 10/31/98 of $1,020,000,062.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,079,869,058) $2,495,213,425
- ------------------------------------------------------------
Foreign currencies, at value (cost
$32,786,516) 32,398,133
- ------------------------------------------------------------
Receivables for:
Investments sold 36,987,068
- ------------------------------------------------------------
Capital stock sold 21,209,509
- ------------------------------------------------------------
Dividends and interest 5,974,580
- ------------------------------------------------------------
Investment for deferred compensation plan 37,882
- ------------------------------------------------------------
Other assets 83,182
- ------------------------------------------------------------
Total assets 2,591,903,779
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 35,523,592
- ------------------------------------------------------------
Capital stock reacquired 24,005,546
- ------------------------------------------------------------
Deferred compensation 37,882
- ------------------------------------------------------------
Accrued advisory fees 1,748,863
- ------------------------------------------------------------
Accrued administrative services fees 10,255
- ------------------------------------------------------------
Accrued custodian fees 293,268
- ------------------------------------------------------------
Accrued directors' fees 2,202
- ------------------------------------------------------------
Accrued distribution fees 1,542,267
- ------------------------------------------------------------
Accrued transfer agent fees 379,635
- ------------------------------------------------------------
Accrued operating expenses 159,216
- ------------------------------------------------------------
Total liabilities 63,702,726
- ------------------------------------------------------------
Net assets applicable to shares outstanding $2,528,201,053
- ------------------------------------------------------------
NET ASSETS:
Class A $1,724,635,296
============================================================
Class B $ 744,987,253
============================================================
Class C $ 58,578,504
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 98,040,506
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 43,489,979
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 3,417,727
============================================================
Class A:
Net asset value and redemption price per
share $ 17.59
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $17.59
divided by 94.50%) $ 18.61
============================================================
Class B:
Net asset value and offering price per
share $ 17.13
============================================================
Class C:
Net asset value and offering price per
share $ 17.14
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $4,618,535 foreign
withholding tax) $ 33,187,086
- -----------------------------------------------------------
Interest 9,416,642
- -----------------------------------------------------------
Total investment income 42,603,728
- -----------------------------------------------------------
EXPENSES:
Advisory fees 22,606,968
- -----------------------------------------------------------
Administrative services fees 115,146
- -----------------------------------------------------------
Custodian fees 1,835,260
- -----------------------------------------------------------
Directors' fees 23,005
- -----------------------------------------------------------
Distribution fees-Class A 4,979,983
- -----------------------------------------------------------
Distribution fees-Class B 7,603,662
- -----------------------------------------------------------
Distribution fees-Class C 359,693
- -----------------------------------------------------------
Transfer agent fees-Class A 2,671,327
- -----------------------------------------------------------
Transfer agent fees-Class B 1,808,765
- -----------------------------------------------------------
Transfer agent fees-Class C 84,236
- -----------------------------------------------------------
Other 726,409
- -----------------------------------------------------------
Total expenses 42,814,454
- -----------------------------------------------------------
Less: Fees waived by advisor (978,165)
- -----------------------------------------------------------
Expenses paid indirectly (28,939)
- -----------------------------------------------------------
Net expenses 41,807,350
- -----------------------------------------------------------
Net investment income 796,378
============================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 126,350,199
- -----------------------------------------------------------
Foreign currencies 6,376,716
- -----------------------------------------------------------
132,726,915
- -----------------------------------------------------------
Net unrealized appreciation of:
Investment securities 27,656,071
- -----------------------------------------------------------
Foreign currencies 444,889
- -----------------------------------------------------------
28,100,960
- -----------------------------------------------------------
Net gain from investment securities and
foreign
currencies 160,827,875
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $161,624,253
============================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 796,378 $ 328,254
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 132,726,915 (16,556,015)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 28,100,960 193,195,060
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 161,624,253 176,967,299
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (5,803,939) (1,250,230)
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (31,812,536)
- -----------------------------------------------------------------------------------------------
Class B -- (11,361,858)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 22,585,920 363,888,653
- -----------------------------------------------------------------------------------------------
Class B 35,370,772 282,384,176
- -----------------------------------------------------------------------------------------------
Class C 45,396,283 13,462,792
- -----------------------------------------------------------------------------------------------
Net increase in net assets 259,173,289 792,278,296
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,269,027,764 1,476,749,468
- -----------------------------------------------------------------------------------------------
End of period $2,528,201,053 $2,269,027,764
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,001,298,592 $1,897,861,942
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (315,829) 5,863,515
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies 111,361,504 (22,453,519)
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 415,856,786 387,755,826
- -----------------------------------------------------------------------------------------------
$2,528,201,053 $2,269,027,764
===============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
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 series management investment company consisting of six
separate portfolios: AIM International Equity Fund, AIM Asian Growth Fund, AIM
European Development 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. 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 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. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) is valued at 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 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
12
<PAGE> 15
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 foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses 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, 1998,
undistributed net investment income was decreased by $1,171,783,
undistributed net realized gains increased by $1,088,108 and paid-in capital
increased by $83,675 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 among the
classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 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, 1998, AIM waived fees of $978,165.
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, 1998, AIM was
reimbursed $115,146 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, 1998,
AFS was paid $2,126,489 for such services.
The Company has entered into master distribution agreements 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 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 Fund, pursuant to the
Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00% of
the average daily net assets of the Class B shares. Of these amounts, the Fund
may pay a service fee of 0.25% of the average daily net assets of the Class A,
Class B or C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a
13
<PAGE> 16
service fee under the Plans would constitute an asset-based sales charge. The
Plans also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by the respective classes. During the year ended
October 31, 1998, the Class A and Class B and Class C shares paid AIM
Distributors $4,979,983, $7,603,662 and $359,693, respectively, as compensation
under the Plans.
AIM Distributors received commissions of $592,247 from sales of the Class A
shares of the Fund during the year ended October 31, 1998. 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, 1998,
AIM Distributors received commissions of $208,603 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, 1998, the Fund incurred legal fees of $8,119
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
During the year ended October 31, 1998, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$25,598 and $3,341, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $28,939 during the year ended October 31, 1998.
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) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended October 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 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, 1998 was
$1,769,749,615 and $1,766,689,469, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of October 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $485,440,811
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (83,541,494)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $401,899,317
=========================================================
Cost of investments for tax purposes is $2,093,314,108.
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 255,642,183 $ 4,635,171,469 105,291,824 $ 1,764,668,535
- ----------------------------------------------------------------------------------------
Class B 12,193,983 217,550,365 21,599,075 352,871,134
- ----------------------------------------------------------------------------------------
Class C* 25,679,581 472,331,833 1,372,281 23,795,456
- ----------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Class A 332,423 5,441,633 2,035,986 31,231,975
- ----------------------------------------------------------------------------------------
Class B -- -- 707,879 10,688,975
- ----------------------------------------------------------------------------------------
Reacquired:
Class A (252,737,021) (4,618,027,182) (84,633,652) (1,432,011,857)
- ----------------------------------------------------------------------------------------
Class B (10,435,828) (182,179,593) (4,913,096) (81,175,933)
- ----------------------------------------------------------------------------------------
Class C* (23,050,474) (426,935,550) (583,661) (10,332,664)
- ----------------------------------------------------------------------------------------
7,624,847 $ 103,352,975 40,876,636 $ 659,735,621
========================================================================================
</TABLE>
* Class C commenced sales on August 4, 1997.
14
<PAGE> 17
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1998, for a share of Class B capital stock outstanding during each of the years
in the four-year period ended October 31, 1998 and the period September 15, 1994
(date sales commenced) through October 31, 1994, and for a share of Class C
capital stock outstanding during the year ended October 31, 1998 and the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.64 $ 15.37 $ 13.65 $ 13.50 $ 12.18
- ------------------------------------------------------------ ---------- ---------- ----------- --------- ---------
Income from investment operations:
Net investment income (loss) 0.05(a) 0.04(a) 0.04(a) 0.01 0.02
- ------------------------------------------------------------ ---------- ---------- ----------- --------- ---------
Net gains on securities (both realized and unrealized) 0.96 1.68 2.07 0.62 1.31
- ------------------------------------------------------------ ---------- ---------- ----------- --------- ---------
Total from investment operations 1.01 1.72 2.11 0.63 1.33
- ------------------------------------------------------------ ---------- ---------- ----------- --------- ---------
Less distributions:
Dividends from net investment income (0.06) (0.02) (0.01) (0.04) (0.01)
- ------------------------------------------------------------ ---------- ---------- ----------- --------- ---------
Distributions from net realized gains -- (0.43) (0.38) (0.44) --
- ------------------------------------------------------------ ---------- ---------- ----------- --------- ---------
Total distributions (0.06) (0.45) (0.39) (0.48) (0.01)
- ------------------------------------------------------------ ---------- ---------- ----------- --------- ---------
Net asset value, end of period $ 17.59 $ 16.64 $ 15.37 $ 13.65 $ 13.50
============================================================ ========== ========== =========== ========= =========
Total return(b) 6.11% 11.43% 15.79% 5.24% 10.94%
============================================================ ========== ========== =========== ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,724,635 $1,577,390 $ 1,108,395 $ 654,764 $ 708,159
============================================================ ========== ========== =========== ========= =========
Ratio of expenses to average net assets(c) 1.45%(d) 1.47% 1.58% 1.67% 1.64%
============================================================ ========== ========== =========== ========= =========
Ratio of net investment income (loss) to average net
assets(e) 0.28%(d) 0.24% 0.25% 0.10% 0.22%
============================================================ ========== ========== =========== ========= =========
Portfolio turnover rate 78% 50% 66% 68% 67%
============================================================ ========== ========== =========== ========= =========
</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 were
1.49%, 1.51%, 1.60% and 1.68% for 1998-1995.
(d) Ratios are based on average net assets of $1,659,994,249.
(e) 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 0.24%, 0.20%, 0.22% and 0.09% for 1998-1995.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.27 $ 15.13 $ 13.54 $ 13.49 $13.42
- --------------------------------------------- -------- -------- -------- ------- ------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.09)(a) (0.07)(a) (0.09) (0.01)
- --------------------------------------------- -------- -------- -------- ------- ------
Net gains (losses) on securities
(both realized and unrealized) 0.95 1.66 2.04 0.61 0.08
- --------------------------------------------- -------- -------- -------- ------- ------
Total from investment operations 0.86 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 $ 17.13 $ 16.27 $ 15.13 $ 13.54 $13.49
============================================= ======== ======== ======== ======= ======
Total return(b) 5.29% 10.61% 14.88% 4.35% 0.52%
============================================= ======== ======== ======== ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $744,987 $678,809 $368,355 $51,964 $4,833
============================================= ======== ======== ======== ======= ======
Ratio of expenses to average net assets(c) 2.22%(d) 2.25% 2.35% 2.55% 2.53%(e)
============================================= ======== ======== ======== ======= ======
Ratio of net investment income (loss) to
average net assets(f) (0.49)%(d) (0.53)% (0.53)% (0.78)% (0.67)%(e)
============================================= ======== ======== ======== ======= ======
Portfolio turnover rate 78% 50% 66% 68% 67%
============================================= ======== ======== ======== ======= ======
<CAPTION>
CLASS C
----------------------
1998 1997
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 16.27 $ 17.64
- --------------------------------------------- ------- -------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.02)(a)
- --------------------------------------------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 0.96 (1.35)
- --------------------------------------------- ------- -------
Total from investment operations 0.87 (1.37)
- --------------------------------------------- ------- -------
Less distributions:
Dividends from net investment income -- --
- --------------------------------------------- ------- -------
Distributions from net realized gains -- --
- --------------------------------------------- ------- -------
Total distributions -- --
- --------------------------------------------- ------- -------
Net asset value, end of period $ 17.14 $ 16.27
============================================= ======= =======
Total return(b) 5.35% (7.77)%
============================================= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,579 $12,829
============================================= ======= =======
Ratio of expenses to average net assets(c) 2.22%(d) 2.27%(e)
============================================= ======= =======
Ratio of net investment income (loss) to
average net assets(f) (0.49)%(d) (0.55)%(e)
============================================= ======= =======
Portfolio turnover rate 78% 50%
============================================= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.26%, 2.28%, 2.37% and 2.56% for 1998-1995 for Class B and 2.26% and 2.30%
(annualized) for 1998-1997 for Class C.
(d) Ratios are based on average net assets of $760,366,177 and $35,969,348 for
Class B and Class C, respectively.
(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 (0.53)%, (0.57)%, (0.55)% and (0.79)%, for 1998-1995
for Class B and (0.53)% and (0.57)% (annualized) for 1998-1997 for Class C.
15
<PAGE> 18
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, 1998, the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and financial
highlights for each of the years in the 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. Our procedures included confirmation of
securities owned as of October 31, 1998, 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, 1998, the
results of its operations for the year then ended, the
changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights
for each of the years in the five-year period then ended,
in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
December 4, 1998
16
<PAGE> 19
BOARD OF DIRECTORS
Charles T. Bauer
Chairman
A I M Management Group Inc.
Bruce L. Crockett
Director
ACE Limited;
Formerly Director, President, and
Chief Executive Officer
COMSAT Corporation
Owen Daly II
Director
Cortland Trust Inc.
Edward K. Dunn Jr.
Chairman, Mercantile Mortgage Corp.;
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares
Jack Fields
Chief Executive Officer
Texana Global, Inc.;
Formerly Member
of the U.S. House of Representatives
Carl Frischling
Partner
Kramer, Levin, Naftalis & Frankel
Robert H. Graham
President and Chief Executive Officer
A I M Management Group Inc.
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.;
Commissioner, New York City Dept. for the
Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of
New York State
Lewis F. Pennock
Attorney
Ian W. Robinson
Consultant; Formerly Executive
Vice President and
Chief Financial Officer
Bell Atlantic Management
Services, Inc.
Louis S. Sklar
Executive Vice President
Hines Interests
Limited Partnership
OFFICERS
Charles T. Bauer
Chairman
Robert H. Graham
President
John J. Arthur
Senior Vice President and Treasurer
Carol F. Relihan
Senior Vice President and Secretary
Gary T. Crum
Senior Vice President
Dana R. Sutton
Vice President and Assistant Treasurer
Robert G. Alley
Vice President
Melville B. Cox
Vice President
Jonathan C. Schoolar
Vice President
Renee A. Friedli
Assistant Secretary
P. Michelle Grace
Assistant Secretary
Jeffrey H. Kupor
Assistant Secretary
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
OFFICE OF THE FUND
11 Greenway Plaza
Suite 100
Houston, TX 77046
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
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
COUNSEL TO THE FUND
Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE DIRECTORS
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
AUDITORS
KPMG Peat Marwick LLP
700 Louisiana
Houston, TX 77002
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM International Equity Fund paid ordinary dividends in the amount of $0.0625
per share to shareholders of Class A shares during its tax year ended October
31, 1998.
Of this amount, 0% is eligible for the dividends received deduction for
corporations. The Fund also distributed long-term capital gains of $0.6363 per
share during the Fund's tax year ended October 31, 1998.
<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund A I M Management Group Inc.
AIM Blue Chip Fund AIM Asian Growth Fund has provided leadership in the
AIM Capital Development Fund AIM Developing Markets Fund(2) mutual fund industry since
AIM Constellation Fund AIM Emerging Markets Fund(2) 1976 and managed approximately
AIM Mid Cap Equity Fund(2), (A) AIM Europe Growth Fund(2) $91 billion in assets for more
AIM Select Growth Fund(3) AIM European Development Fund than 5.5 million shareholders,
AIM Small Cap Growth Fund(2), (B) AIM International Equity Fund including individual
AIM Small Cap Opportunities Fund AIM International Growth Fund(2) investors, corporate clients,
AIM Value Fund AIM Japan Growth Fund(2) and Financial institutions, as
AIM Weingarten Fund AIM Latin American Growth Fund(2) of September 30, 1998.
AIM New Pacific Growth Fund(2) The AIM Family of
GROWTH & INCOME FUNDS Funds--Registered Trademark--
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS is distributed nationwide, and
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund AIM today is the 11th-largest
AIM Advisor MultiFlex Fund AIM Global Growth Fund mutual fund complex in the
AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(2) U.S. in assets under
AIM Balanced Fund management, according to
AIM Basic Value Fund(2), (C) GLOBAL GROWTH & INCOME FUNDS Strategic Insight, an
AIM Charter Fund AIM Global Growth & Income Fund(2) independent mutual fund
AIM Global Utilities Fund monitor.
INCOME FUNDS
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund II AIM Global Government Income Fund(2)
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund(2)
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund(2)
AIM High Income Municipal Fund AIM Global Financial Services Fund(2)
AIM Municipal Bond Fund AIM Global Health Care Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
MONEY MARKET FUNDS AIM Global Trends Fund(2), (E)
AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed
AIM Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your Financial consultant or securities dealer for a free prospectus(es).
Please read the prospectus(es) carefully before you invest or send money.
- -------------------------------------------
A I M Management Group Inc. has provided
leadership in the mutual fund industry
since 1976 and managed approximately $91
billion in assets for more than 5.5 million
shareholders, including individual investors,
corporate clients, and financial institutions,
as of September 30, 1998.
The AIM Family of Funds--Registered
Trademark-- is distributed nationwide, and
AIM today is the 11th-largest mutual fund
complex in the U.S. in assets under management,
according to Strategic Insight, an independent
mutual fund monitor.
