<PAGE> 1
As filed with the Securities and Exchange Commission on March 22, 2000
Securities Act Registration No. __________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-effective Amendment No. ____ Post-effective Amendment No. ____
(Check appropriate box or boxes)
AIM INTERNATIONAL FUNDS, INC.
-----------------------------------------
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza
Suite 100
Houston, TX 77046
------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number: (713)626-1919
Name and Address of Agent Copy to:
for Service:
CAROL F. RELIHAN, ESQUIRE THOMAS H. DUNCAN, ESQUIRE
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza 1225 17th Street
Suite 100 Suite 2300
Houston, TX 77046 Denver, CO 80202
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective under the Securities Act of
1933.
It is proposed that this filing will become effective on April 21, 2000
pursuant to Rule 488.
The title of the securities being registered is AIM Asian Growth Fund
Class A shares, Class B shares and Class C shares. No filing fee is due in
reliance on Section 24(f) of the Securities Act of 1933.
<PAGE> 2
AIM NEW PACIFIC GROWTH FUND
a Portfolio of
AIM GROWTH SERIES
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
April 20, 2000
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your
approval of a proposed combination of AIM New Pacific Growth Fund with AIM Asian
Growth Fund. AIM New Pacific Growth Fund ("New Pacific") is an investment
portfolio of AIM Growth Series, a Delaware business trust. AIM Asian Growth Fund
("Asian Growth") is an investment portfolio of AIM International Funds, Inc., a
Maryland corporation.
The investment objectives of New Pacific and Asian Growth are identical
and the investment policies of New Pacific are similar to the investment
policies of Asian Growth. A I M Advisors, Inc. serves as the investment adviser
to New Pacific and Asian Growth. As discussed in the accompanying document,
Asian Growth has out performed New Pacific since Asian Growth commenced
operations on November 3, 1997, and Asian Growth's ratio of expenses to net
assets are lower before and will be lower than New Pacific's after the
reorganization. The accompanying document describes the proposed transaction and
compares the investment policies, operating expenses and performance history of
New Pacific and Asian Growth.
Shareholders of New Pacific are being asked to approve an Agreement and
Plan of Reorganization by and among AIM Growth Series, AIM International Funds,
Inc. and A I M Advisors, Inc., that will govern the reorganization of New
Pacific into Asian Growth. After careful consideration, the Board of Trustees of
AIM Growth Series has unanimously approved the proposal and recommends that you
read the enclosed materials carefully and then vote FOR the proposal.
Your vote is important. Please take a moment now to sign and return
your proxy card in the enclosed postage paid return envelope. If we do not hear
from you after a reasonable amount of time you may receive a telephone call from
our proxy solicitor, Shareholder Communications Corporation, reminding you to
vote your shares. You may also vote your shares on the Internet at the funds'
website at http://www.aim.com by following instructions that appear on the
enclosed proxy insert.
Sincerely,
Robert H. Graham
Chairman
<PAGE> 3
AIM NEW PACIFIC GROWTH FUND
A PORTFOLIO OF
AIM GROWTH SERIES
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 31, 2000
TO THE SHAREHOLDERS OF NEW PACIFIC:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of AIM
New Pacific Growth Fund ("New Pacific"), an investment portfolio of AIM Growth
Series ("AGS"), will be held at 11 Greenway Plaza, Suite 100, Houston, TX
77046-1173 on May 31, 2000, at [3:00 P.M.], local time, for the following
purposes:
1. To approve an Agreement and Plan of Reorganization (the
"Agreement") by and among AGS, acting on behalf of New Pacific,
AIM International Funds, Inc. ("AIF"), acting on behalf of AIM
Asian Growth Fund ("Asian Growth") and A I M Advisors, Inc. The
Agreement provides for the combination of New Pacific with Asian
Growth (the "Reorganization"). Pursuant to the Agreement, all of
the assets of New Pacific will be transferred to Asian Growth.
Asian Growth will assume all of the liabilities of New Pacific,
and AIF will issue Class A shares of Asian Growth to New
Pacific's Class A shareholders, Class B shares of Asian Growth
to New Pacific's Class B shareholders, and Class C shares of
Asian Growth to New Pacific's Class C shareholders. The value of
each New Pacific shareholder's account with Asian Growth
immediately after the Reorganization will be the same as the
value of such shareholder's account with New Pacific immediately
prior to the Reorganization. The Reorganization has been
structured as a tax-free transaction. No initial sales charge
will be imposed in connection with the Reorganization.
2. To transact any other business, not currently contemplated, that
may properly come before the Special Meeting, in the discretion
of the proxies or their substitutes.
Shareholders of record as of the close of business on April 3, 2000,
are entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE
MANAGEMENT OF AGS. YOU MAY ALSO VOTE YOUR SHARES THROUGH A WEB SITE ESTABLISHED
FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY INSERT.
YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE
OF REVOCATION TO AGS AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN
PERSON AT THE SPECIAL MEETING.
Samuel D. Sirko
Vice President and Secretary
April 20, 2000
<PAGE> 4
AIM NEW PACIFIC GROWTH FUND
A PORTFOLIO OF
AIM GROWTH SERIES
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
AIM ASIAN GROWTH FUND
A PORTFOLIO OF
AIM INTERNATIONAL FUNDS, INC.
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: April 20, 2000
This document is being furnished in connection with a special meeting
of Shareholders of AIM New Pacific Growth Fund ("New Pacific"), an investment
portfolio of AIM Growth Series ("AGS"), a Delaware business trust, to be held on
May 31, 2000 (the "Special Meeting"). At the Special Meeting, the shareholders
of New Pacific are being asked to consider and approve an Agreement and Plan of
Reorganization (the "Agreement") by and among AGS, acting on behalf of New
Pacific, AIM International Funds, Inc. ("AIF"), a Maryland corporation, acting
on behalf of AIM Asian Growth Fund ("Asian Growth"), and A I M Advisors, Inc.
("AIM Advisors"). The Agreement provides for the combination of New Pacific with
Asian Growth (the "Reorganization"). The Board of Trustees of AGS has
unanimously approved the Agreement and Reorganization as being in the best
interest of the shareholders of New Pacific.
Pursuant to the Agreement, all of the assets of New Pacific will be
transferred to Asian Growth, Asian Growth will assume all of the liabilities of
New Pacific, and AIF will issue Class A shares of Asian Growth to New Pacific's
Class A shareholders, Class B shares of Asian Growth to New Pacific's Class B
shareholders, and Class C shares of Asian Growth to New Pacific's Class C
shareholders. The value of each New Pacific shareholder's account with Asian
Growth immediately after the Reorganization will be the same as the value of
such shareholder's account with New Pacific immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction. No initial sales charge will be imposed in connection with the
Reorganization.
Asian Growth is a series portfolio of AIF, an open-end, series
management investment company. The investment objective of Asian Growth is
identical to the investment objective of New Pacific. Asian Growth seeks to
achieve long-term growth of capital. New Pacific also seeks long-term growth of
Capital. See "Comparison of Investment Objectives and Policies." The investment
policies of Asian Growth are similar to those of New Pacific.
<PAGE> 5
This Combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus") sets forth the information that a shareholder of New
Pacific should know before voting on the Agreement. It should be read and
retained for future reference.
The current Prospectus of New Pacific, dated May 3, 1999, as
supplemented February 11, 2000 and March 22, 2000 (the "New Pacific
Prospectus"), together with the related Statement of Additional Information also
dated May 3, 1999, as supplemented June 30, 1999, August 5, 1999, October 1,
1999, January 3, 2000, January 24, 2000 and February 11, 2000, are on file with
the Securities and Exchange Commission (the "SEC") and are incorporated by
reference herein. The Prospectus of Asian Growth dated February 28, 2000, (the
"Asian Growth Prospectus"), and the related Statement of Additional Information
also dated February 28, 2000, have been filed with the SEC and are incorporated
by reference herein. A copy of the Asian Growth Prospectus is attached as
Appendix II to this Proxy Statement/Prospectus. Such documents are available
without charge by writing to A I M Fund Services, Inc., P.O. Box 4739, Houston,
Texas 77210-4739 or by calling (800) 347-4246. The SEC maintains a Web site at
http://www.sec.gov that contains the prospectuses and statements of additional
information described above, material incorporated by reference, and other
information about AGS and AIF. Additional information about New Pacific and
Asian Growth may also be obtained on the Web at http://www.aimfunds.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION......................................................................................................1
SYNOPSIS..........................................................................................................2
The Reorganization.......................................................................................2
Background and Reasons for the Reorganization............................................................2
Comparison of Asian Growth and New Pacific...............................................................3
RISK FACTORS......................................................................................................9
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.................................................................10
Investment Objectives of Asian Growth and New Pacific...................................................10
Investment Policies of Asian Growth.....................................................................10
Portfolio Management....................................................................................11
Management Discussion and Analysis of Performance.......................................................11
FINANCIAL HIGHLIGHTS.............................................................................................11
Asian Growth............................................................................................11
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.......................................................................15
Terms of the Reorganization.............................................................................15
The Reorganization......................................................................................16
Board Considerations....................................................................................16
Other Terms.............................................................................................18
Federal Tax Consequences................................................................................19
Accounting Treatment....................................................................................21
RIGHTS OF SHAREHOLDERS...........................................................................................21
Rights of Shareholders Under Maryland Law and Delaware Law if the Redomestication is Not Approved.......21
Rights of Shareholders under Declarations of Trust of AGS and AIMF if the Redomestication is Approved...25
OWNERSHIP OF ASIAN GROWTH AND NEW PACIFIC SHARES.................................................................26
Significant Holders.....................................................................................26
Ownership of Officers and Directors/Trustees............................................................26
CAPITALIZATION...................................................................................................27
LEGAL MATTERS....................................................................................................28
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION....................................................28
ADDITIONAL INFORMATION ABOUT ASIAN GROWTH AND NEW PACIFIC........................................................28
APPENDIX I ....................................................................Agreement and Plan of Reorganization
APPENDIX II..............................................................................Prospectus of Asian Growth
APPENDIX III .....................................................Asian Growth Discussion & Analysis of Performance
</TABLE>
i
<PAGE> 7
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the
AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com,
Invest with Discipline, La Familia AIM de Fondos, La Familia AIM de Fondos and
Design and Invierta con Disciplina are registered service marks, and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks, of A I M Management Group Inc.
ii
<PAGE> 8
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Trustees of AGS from the shareholders of
New Pacific for use at the Special Meeting of Shareholders to be held at 11
Greenway Plaza, Suite 100, Houston, TX 77046 on May 31, 2000, at [3:00 P.M.],
local time (such meetings and any adjournments thereof are referred to as the
"Special Meeting").
All properly executed and unrevoked proxies received in time for the
Special Meeting will be voted in accordance with the instructions contained
therein. If no instructions are given, shares represented by proxies will be
voted FOR the proposal to approve the Agreement and in accordance with
management's recommendation on other matters. The presence in person or by proxy
of one-third of the outstanding shares of beneficial interest in New Pacific at
the Special Meeting will constitute a quorum ("Quorum"). Approval of the
Agreement by New Pacific requires the affirmative vote of a majority of the
shares cast by shareholders of New Pacific. Abstentions and broker non-votes
will be counted as shares present at the Special Meeting for quorum purposes,
but will not be considered votes cast at the Special Meeting. Broker non-votes
arise from a proxy returned by a broker holding shares for a customer which
indicates that the broker has not been authorized by the customer to vote on a
proposal. Any person giving a proxy has the power to revoke it at any time prior
to its exercise by executing a superseding proxy or by submitting a notice of
revocation to the Secretary of AGS. In addition, although mere attendance at the
Special Meeting will not revoke a proxy, a shareholder present at the Special
Meeting may withdraw his proxy and vote in person. Shareholders may also
transact any other business not currently contemplated that may properly come
before the Special Meeting in the discretion of the proxies or their
substitutes.
Shareholders of record as of the close of business on April 3, 2000
(the "Record Date"), are entitled to vote at the Special Meeting. On the Record
Date, there were __________ Class A shares, _____ Class B shares, and ________
Class C shares of New Pacific outstanding. Each share is entitled to one vote
for each full share held, and a fractional vote for a fractional share held.
AGS has engaged the services of Shareholder Communications Corporation
("SCC") to assist it in the solicitation of proxies for the Special Meeting. AGS
expects to solicit proxies principally by mail, but AGS or SCC may also solicit
proxies by telephone, facsimile or personal interview. AGS's officers will not
receive any additional or special compensation for any such solicitation. The
cost of shareholder solicitation is anticipated to be approximately $______. New
Pacific and Asian Growth will bear their own costs and expenses incurred in
connection with the Reorganization.
AGS intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about April 24, 2000.
1
<PAGE> 9
SYNOPSIS
THE REORGANIZATION
The Reorganization will result in the combination of New Pacific with
Asian Growth. New Pacific is a portfolio of AGS, a Delaware business trust.
Asian Growth is a portfolio of AIF, a Maryland corporation.
If shareholders of New Pacific approve the Agreement and other closing
conditions are satisfied, all of the assets of New Pacific will be transferred
to Asian Growth, Asian Growth will assume all of the liabilities of New Pacific,
and AIF will issue Class A shares of Asian Growth to New Pacific's Class A
shareholders, Class B shares of Asian Growth to New Pacific's Class B
shareholders and Class C shares of Asian Growth to New Pacific's Class C
shareholders. The shares of Asian Growth issued in the Reorganization will have
an aggregate net asset value equal to the value of New Pacific's net assets
transferred to Asian Growth. Shareholders will not pay any initial sales charge
for shares of Asian Growth received in connection with the Reorganization. The
value of each shareholder's account with Asian Growth immediately after the
Reorganization will be the same as the value of such shareholder's account with
New Pacific immediately prior to the Reorganization. A copy of the Agreement is
attached as Appendix I to this Proxy Statement/ Prospectus. See "Additional
Information About the Agreement" below.
New Pacific will receive an opinion of Ballard Spahr Andrews &
Ingersoll, LLP, to the effect that the Reorganization will constitute a tax-free
reorganization for Federal income tax purposes. Thus, shareholders will not have
to pay Federal income taxes as a result of the Reorganization. See "Additional
Information About the Agreement - Federal Tax Consequences" below.
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Board of Trustees of AGS, including the independent trustees, has
determined that the reorganization of New Pacific into Asian Growth is in the
best interests of New Pacific and its shareholders and that the interests of the
shareholders of New Pacific will not be diluted as a result of the
Reorganization.
In making its determination, the Board of Trustees noted that the two
funds have the same investment objective, and follow similar policies to achieve
that objective. The assets of the combined two funds should provide AIM Advisors
with a more stable base for investment management.
The Board of Trustees also noted that Asian Growth has outperformed New
Pacific, providing a better total return to shareholders. Although the total
operating expenses of Asian Growth, expressed as a percentage of assets, are
slightly higher for its Class B and Class C shares than those of New Pacific,
the combined assets of the two funds will create economies of scale so that
after the Reorganization Asian Growth's expense ratios will be lower for all
Classes of shares than those of New Pacific. Although past performance does not
guarantee future results, the
2
<PAGE> 10
combination of better performance and lower expenses should make Asian Growth a
better investment for New Pacific shareholders.
COMPARISON OF ASIAN GROWTH AND NEW PACIFIC
Investment Objective and Policies
The investment objective of Asian Growth is identical to the investment
objective of New Pacific and the investment policies of Asian Growth are similar
to the investment policies of New Pacific.
Asian Growth seeks to provide long-term growth of capital by investing,
normally, at least 65% of its assets in marketable equity securities issued by
Asian companies (except Japanese companies) including companies with market
capitalizations of less than $1 billion. New Pacific seeks to provide long-term
growth of capital by investing, normally, at least 65% of its total assets in
equity securities of issuers domiciled in twelve countries, other than Japan,
located in the Pacific region, including developing countries.
Investment Advisory Services
AIM Advisors serves as investment adviser, and INVESCO Asia Limited
serves as sub-adviser, to New Pacific. AIM Advisors also serves as investment
adviser to Asian Growth. INVESCO Global Asset Management Limited ("IGAM") serves
as sub-adviser and INVESCO Asia Limited ("IAL") serves as sub-sub-adviser to
Asian Growth. The sub-advisory agreement and the sub-sub-advisory agreement for
Asian Growth will terminate on May 22, 2000. Thus, the Reorganization will end
IGAM's and IAL's roles as consultants to AIM Advisors regarding management of
New Pacific's assets. The portfolio management team of Asian Growth will not
change.
Performance
Average annual total returns for the periods indicated for Class A
shares of Asian Growth and New Pacific, including sales charges, are shown
below. Past performance cannot guarantee comparable future results.
3
<PAGE> 11
<TABLE>
<CAPTION>
Asian Growth New Pacific
Class A Class A
Shares Shares
------ ------
<S> <C> <C>
1 Year Ended December 31, 1999 58.70% 37.48%
3 Years Ended December 31, 1999 N/A (14.73%)
5 Years Ended December 31, 1999 N/A (4.37%)
Since Inception* 11.14% 9.55%
</TABLE>
- ----------
* Inception dates for Asian Growth and New Pacific are November 3, 1997 and
January 19, 1977, respectively
Expenses
A comparison of annual operating expenses as a percentage of net assets
("Expense Ratio"), based on the fiscal year ended December 31, 1999 for the
Class A, Class B and Class C shares of New Pacific and for the fiscal year ended
October 31, 1999 for the Class A, Class B and Class C shares of Asian Growth are
shown below. Pro forma estimated Expense Ratios of Asian Growth giving effect to
the Reorganization are also provided.
4
<PAGE> 12
<TABLE>
<CAPTION>
AIM NEW PACIFIC AIM ASIAN GROWTH FUND
GROWTH FUND AIM ASIAN GROWTH FUND PRO FORMA ESTIMATED
-------------------------------- ------------------------------------------- --------------------------------
Class A Class B Class C Class A Class B Class C Class A Class B Class C
- -
Shares Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION EXPENSES
Maximum sales load
imposed on purchase 5.50% none none 5.50% none none 5.50% none none
of shares (as a
percentage of
offering price)
Deferred Sales Load
(as a percentage of
original purchase
price or redemption None(1) 5.00% 1.00% none(1) 5.00% 1.00% None(1) 5.00% 1.00%
proceeds, as
applicable)
ANNUAL OPERATING
EXPENSES (AS A % OF
NET ASSETS)
Management fees........... 0.98% 0.98% 0.98% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95%
Distribution and/or
Service (12b-1) Fees...... 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other expenses............ 0.90% 0.90% 0.90% 1.42% 1.64% 1.64% 0.96% 1.00% 1.00%
Interest expense.......... 0.06% 0.06% 0.06% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total other expenses...... 0.96% 0.96% 0.96% 1.42% 1.64% 1.64% 0.96% 1.00% 1.00%
Total fund operating
expenses.................. 2.29% 2.94% 2.94% 2.72% 3.59% 3.59% 2.26% 2.95% 2.95%
---- ---- ---- ---- ---- ---- ---- ---- ----
Fee waiver(2)............. (0.23)% (0.23)% (0.23)% (0.80)% (0.80)% (0.80)% (0.34)% (0.34)% (0.34)%
Net expenses.............. 2.06% 2.71% 2.71% 1.92% 2.79% 2.79% 1.92% 2.61% 2.61%
</TABLE>
5
<PAGE> 13
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares
within 18 months of purchase, you may pay a 1% contingent deferred sales
charge at the time of redemption.
(2) AIM Advisors has contractually agreed to limit total fund operating
expenses (excluding interest, taxes, brokerage commissions and
extraordinary items) on Class A, Class B and Class C shares of New Pacific
to 2.00%, 2.75% and 2.75% respectively. AIM Advisors and its affiliates
have contractually committed to waive fees and reimburse expenses for Asian
Growth Class A, Class B and Class C shares to the extent necessary to limit
the total operating expenses of Class A shares to 1.92% until June 30,
2001.
6
<PAGE> 14
Hypothetical Example of Effect of Expenses
An investor would have directly or indirectly paid the following
expenses on a $10,000 investment under the existing and estimated fees and
expenses stated above, assuming a 5% annual return.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS(3)
---- ----- ----- --------
AIM NEW PACIFIC GROWTH FUND
<S> <C> <C> <C> <C>
Class A shares (1)....................... $769 $1,226 $1,708 $3,031
Class B shares:
Assuming complete redemption at end
of period (2)...................... $797 $1,210 $1,748 $3,109
Assuming no redemption................ $297 $910 $1,548 $3,109
Class C shares..........................
Assuming complete redemption at end
of period (2)...................... $397 $910 $1,548 $3,261
Assuming no redemption................ $297 $910 $1,548 $3,261
AIM ASIAN GROWTH FUND
Class A shares........................... $810 $1,348 $1,910 $3,433
Class B shares:
Assuming complete redemption at end
of period (1)(2).................. $862 $1,400 $2,059 $3,662
Assuming no redemption (2)............ $362 $1,100 $1,859 $3,662
Class C shares...........................
Assuming complete redemption at end
of period (1)(2).................. $462 $1,100 $1,859 $3,854
Assuming no redemption (2)............ $362 $1,100 $1,859 $3,854
COMBINED FUND
Class A shares........................... $767 $1,217 $1,693 $3,002
Class B shares:
Assuming complete redemption at end
of period (l)(2)................... $798 $1,213 $1,752 $3,109
Assuming no redemption (2)............ $298 $913 $1,552 $3,109
Class C shares...........................
Assuming complete redemption at end
of period (l)(2)................... $398 $913 $1,552 $3,271
Assuming no redemption (2)............ $298 $913 $1,552 $3,271
</TABLE>
- ------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) For Class B shares, this number reflects the conversion to Class A
shares eight years following the end of the calendar month in which the
purchase was made.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE FUNDS' ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. TO THE EXTENT FUND EXPENSES ARE
WAIVED OR REIMBURSED THE AMOUNT THE INVESTOR WOULD PAY WILL BE LOWER. THE TABLE
AND THE ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY
REGULATIONS OF THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS
NOT A PREDICTION OF AND DOES NOT REPRESENT THE FUNDS' PROJECTED OR ACTUAL
PERFORMANCE.
The actual expenses attributable to each class of a fund's shares will
depend upon, among other things, the level of average net assets and the extent
to which a fund incurs variable expenses, such as transfer agency costs.
7
<PAGE> 15
Sales Charges
No sales charges are applicable to shares of Asian Growth received in
connection with the Reorganization.
Asian Growth Class A shares, which will be issued to New Pacific Class
A shareholders pursuant to the Agreement, are sold at net asset value plus an
initial sales charge of 5.50%. Asian Growth Class B Shares are offered at net
asset value, without an initial sales charge, and are subject to a maximum
contingent deferred sales charge of 5% on certain redemptions made within six
years from the date such shares were purchased. Asian Growth Class C Shares are
offered at net asset value, without an initial sales charge, and are subject to
maximum contingent deferred sales charge of 1% on certain redemptions made
within one year from the date such shares were purchased.
Asian Growth pays a fee in the amount of 0.35% of the average daily net
assets of Class A shares to A I M Distributors, Inc. ("AIM Distributors") for
distribution services. Asian Growth pays AIM Distributors fees at an annual rate
of 1.00% of the average daily net assets attributable to the Class B shares and
Class C shares for distribution services. For more information, see the
discussion under the heading "Shareholder Information-Distribution and Service
(12b-1) Fees" in the Asian Growth Prospectus attached as Appendix II to this
Proxy Statement/Prospectus.
The Class A shares of New Pacific are sold at net asset value plus an
initial sales charge of 5.50%. New Pacific Class B shares are offered at net
asset value without an initial sales charge and are subject to a maximum
contingent deferred sales charge of 5% on certain redemptions made within six
years from the date such shares were purchased. New Pacific Class C shares are
offered at net asset value, without an initial sales charge, and are subject to
a maximum contingent deferred sales charge of 1% on certain redemptions made
within one year from the date such shares were purchased.
New Pacific pays a fee in the amount of 0.35% of average daily net
assets of the Class A shares to AIM Distributors for distribution services. New
Pacific pays AIM Distributors at an annual rate of 1.00% of the average daily
net assets attributable to the Class B shares and Class C shares for
distribution services.
Distribution; Purchase, Exchange and Redemption
Shares of Asian Growth and New Pacific are both distributed by AIM
Distributors. Purchase and redemption procedures are the same for Asian Growth
and New Pacific. Shares of Asian Growth and New Pacific may be exchanged for
shares of other funds within The AIM Family of Funds-- Registered Trademark --
of the same class.
8
<PAGE> 16
RISK FACTORS
Asian Growth and New Pacific are subject to substantially similar
investment risks. The principal investment risks for Asian Growth are described
below.
Asian Growth invests primarily in equity securities. The prices of
equity securities change in response to many factors, including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market liquidity.
This is especially true with respect to equity securities of small and micro-cap
companies (i.e. companies with market capitalizations of less than $1 billion),
whose prices may go up and down more than the prices of equity securities of
larger, more established companies. Also, since equity securities of small and
micro-cap companies may not be traded as often as equity securities of larger,
more established companies, it may be difficult or impossible for the fund to
sell securities at a desired price. Asian Growth invests in securities of
foreign companies, which generally involves greater risks than investing in
securities of domestic companies. The prices of foreign securities may be
further affected by other factors, including:
CURRENCY EXCHANGE RATES. The dollar value of Asian Growth's foreign
investments will be affected by changes in the exchange rates between the dollar
and the currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS. The value of Asian Growth's foreign
investments may be adversely affected by political and social instability in
their home countries and by changes in economic or taxation policies in those
countries.
REGULATIONS. Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS. The securities markets of other countries are smaller than
U.S. securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign
companies located in developing countries more than those in countries with
mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
9
<PAGE> 17
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES OF ASIAN GROWTH AND NEW PACIFIC
The investment objective of Asian Growth is long-term growth of
capital. The investment objective of New Pacific is long-term growth of capital.
INVESTMENT POLICIES OF ASIAN GROWTH
Asian Growth seeks to meet its investment objective by investing,
normally, at least 65% of its assets in marketable equity securities issued by
Asian companies (except Japanese companies), including companies with market
capitalizations of less than $1 billion. The fund considers Asian companies to
be those (1) organized under the laws of a country in Asia and having a
principal office in a country in Asia; (2) that derive 50% or more of their
total revenues from business in Asia; or (3) whose equity securities are traded
principally on the stock exchange, or in an over-the-counter market, in Asia.
Asian Growth may invest up to 20% of its total assets in securities
exchangeable for or convertible into equity securities of Asian companies. The
fund may also invest up to 35% of its total assets in securities of non-Asian
companies. The fund may also invest up to 20% of its total assets in high-grade
short-term securities and debt securities, including U.S. Government
obligations, investment grade corporate bonds or taxable municipal securities,
whether denominated in U.S. dollars or foreign currencies.
Asian Growth will normally invest in companies located in at least
three countries, including countries in Asia as well as Australia and New
Zealand. The fund may also invest up to 100% of its total assets in companies in
developing countries, i.e., those that are in the initial stages of their
industrial cycles.
The portfolio managers focus on companies that have experienced
above-average long-term growth in earnings and have strong prospects for future
growth. In selecting countries in which Asian Growth will invest, the portfolio
managers also consider such factors as the prospect for relative economic growth
among countries or regions, economic or political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
INVESTMENT POLICIES OF NEW PACIFIC
New Pacific seeks to meet its investment objective by investing,
normally, at least 65% of its total assets in equity securities of issuers
domiciled in twelve countries, other than Japan, located in the Pacific region,
including developing countries, i.e., those that are in the initial stages of
their industrial cycles. These countries are designated as the Fund's primary
investment area, and the list of countries may be revised with the approval of
the Fund's Board of Trustees. New Pacific typically considers a company to be
domiciled in a particular country if it (1) is organized under the laws of
10
<PAGE> 18
a particular country or has a principal office in a particular country; or (2)
derives 50% or more of its total revenues from business in that country,
provided that, in the view of the portfolio managers, the value of the issuers'
securities tend to reflect such country's development to a greater extent than
developments elsewhere.
New Pacific may invest up to 35% of its total assets in equity
securities of issuers domiciled outside of its primary investment area,
including developing countries. The Fund may also invest up to 35% of its total
assets in U.S. and foreign investment-grade debt securities, or securities
deemed by the portfolio managers to be of comparable quality. The Fund may
invest in securities of issuers located in developing countries, i.e., those
that are in the initial stages of their industrial cycle.
In selecting investments, New Pacific's portfolio managers seek to
identify those countries and industries where political and economic factors,
including currency movements, are likely to produce above-average growth rates.
The portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The portfolio managers allocate
investments among fixed-income securities based on their views as to the best
values then available in the marketplace. The portfolio managers consider
whether to sell a particular security when any of those factors materially
changes.
PORTFOLIO MANAGEMENT
Shuxin Cao, A. Dale Griffin, III and Barret K. Sides are primarily
responsible for the day to day management of Asian Growth. Each of Messrs. Cao,
Griffin and Sides is an officer of A I M Capital Management, Inc. ("AIM
Capital"), an indirect wholly owned subsidiary of A I M Management Group Inc.
("AIM"). Mr. Cao has been responsible for Asian Growth since 1999 and has been
associated with AIM Advisors and/or its affiliates since 1997. Prior to 1997,
Mr. Cao was an international equity analyst for Boatmen's Trust Company. Mr.
Griffin has been responsible for Asian Growth since its inception in 1997 and
has been associated with AIM Advisors and/or its affiliates since 1989. Mr.
Sides has been responsible for Asian Growth since its inception in 1997 and has
been associated with AIM Advisors and/or its affiliates since 1990.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of Asian Growth for the fiscal year
ended October 31, 1999, is set forth in Appendix III to this Proxy
Statement/Prospectus.
FINANCIAL HIGHLIGHTS
ASIAN GROWTH
Shown below are financial highlights for a Class A share, Class B share
and Class C share of Asian Growth outstanding during the year ended October 31,
1999 and the period November 3, 1997 (inception date), through October 31, 1998.
This information has been audited by AIF's
11
<PAGE> 19
independent accountants whose unqualified report on the financial statements of
Asian Growth are included in its annual report to shareholders for the fiscal
year ended October 31, 1999. Asian Growth's annual report to shareholders dated
October 31, 1999, is available without charge upon request made to AIF at the
address or telephone number appearing on the cover page of this Proxy
Statement/Prospectus.
12
<PAGE> 20
AIM ASIAN GROWTH FUND CLASS A SHARES
<TABLE>
<CAPTION>
Year Ended Period November 3, 1997
October 31, through
1999(a) October 31, 1998
---- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 7.69 $ 10.00
Income from investment operations:
Net investment income (loss) ........... (0.03) 0.05
Net gains (losses) on securities 3.14 (2.36)
(both realized and unrealized)
Total from investment
Operations ............................. 3.11 (2.31)
Less distributions:
Dividends from net investment
Income ................................. (0.04) --
Net asset value, end of period ............ $ 10.76 $ 7.69
Total return(b) ........................... 40.66% (23.10)%
Ratios/supplemental data:
Net assets, end of period (000's
omitted) ............................... $ 25,420 $ 7,716
Ratio of expenses to average
net assets(c) .......................... 1.92%(d) 1.92%(e)
Ratio of net investment income (loss)
to average net assets(f) ............... (0.50)%(d) 0.70%(e)
Portfolio turnover rate ................ 142%(g) 79%
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct 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 2.72% and 4.88% (annualized) for Class A for 1999-1998.
(d) Ratios are based on average net assets of $17,430,236.
(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 (1.30)% and (2.27)% (annualized) for
Class A for 1999-1998.
(g) AIM Advisors has engaged in active trading of securities held by Asian
Growth during the year ended October 31, 1999. Frequent trading of fund
securities increases the expenses of the fund as a consequence of
trading costs and can result in distributions of gains to shareholders
that are subject to tax.
13
<PAGE> 21
AIM ASIAN GROWTH FUND CLASS B SHARES
<TABLE>
<CAPTION>
Year Ended Period November 3, 1997
October 31, through
1999(a) October 31, 1998
---- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 7.63 $ 10.00
Income from investment operations:
Net investment income (loss) ....................... (0.13) (0.01)
Net gains (losses) on securities
(both realized and unrealized) 3.16 (2.36)
Total from investment
Operations ......................................... 3.03 (2.37)
Less distributions:
Dividends from net investment
Income ............................................. (0.01) --
Net asset value, end of period ........................ $ 10.65 $ 7.63
Total return(b) ....................................... 39.76% (23.70)%
Ratios/supplemental data:
Net assets, end of period (000's
omitted) ........................................... $ 12,070 $ 3,030
Ratio of expenses to average
net assets(c) ...................................... 2.79%(d) 2.80%(e)
Ratio of net investment income (loss)
to average net assets(f) ........................... (1.37)%(d) (0.18%)(e)
Portfolio turnover rate ............................ 142%(g) 79%
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct 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 3.59% and 5.75% (annualized) for Class B for 1999-1998.
(d) Ratios are based on average net assets of $6,408,688.
(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 (2.17)% and (3.15)% (annualized) for
Class B for 1999-1998.
(g) AIM Advisors has engaged in active trading of securities held by Asian
Growth during the year ended October 31, 1999. Frequent trading of fund
securities increases the expenses of the fund as a consequence of
trading costs and can result in distributions of gains to shareholders
that are subject to tax.
14
<PAGE> 22
AIM ASIAN GROWTH FUND CLASS C SHARES
<TABLE>
<CAPTION>
Year Ended Period November 3, 1997
October 31, through
1999(a) October 31, 1998
---- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 7.61 $ 10.00
Income from investment operations:
Net investment income (loss) ............ (0.13) (0.01)
Net gains (losses) on securities
(both realized and unrealized) 3.16 (2.38)
Total from investment
operations .............................. 3.03 (2.39)
Less distributions:
Dividends from net investment
income .................................. (0.01) --
Net asset value, end of period ............. $ 10.63 $ 7.61
Total return(b) ............................ 39.86% (23.90)%
Ratios/supplemental data:
Net assets, end of period (000's
omitted) ................................ $ 5,008 $ 686
Ratio of expenses to average
net assets(c) ........................... 2.79%(d) 2.80%(e)
Ratio of net investment income (loss)
to average net assets(f) ................ (1.37)%(d) (0.18)%(e)
Portfolio turnover rate ................. 142%(g) 79%
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges 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 3.59% and 5.75% (annualized) for Class C for 1999-1998.
(d) Ratios are based on average net assets of $2,061,860.
(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 (2.17)% and (3.15)% (annualized) for
Class C for 1999-1998.
(g) AIM Advisors has engaged in active trading of securities held by Asian
Growth during the year ended October 31, 1999. Frequent trading of fund
securities increases the expenses of the fund as a consequence of
trading costs and can result in distributions of gains to shareholders
that are subject to tax.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be
consummated are set forth in the Agreement. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as Appendix
I to this Proxy Statement/Prospectus.
15
<PAGE> 23
THE REORGANIZATION
Asian Growth will acquire all of the assets of New Pacific in exchange
for shares of Asian Growth and the assumption by Asian Growth of the liabilities
of New Pacific. Consummation of the Reorganization (the "Closing") is expected
to occur on June 12, 2000, at 8:00 a.m. Eastern Time (the "Effective Time") on
the basis of values calculated as of the close of regular trading on the NYSE on
June 9, 2000.
At the Effective Time, all of the assets of New Pacific shall be
delivered to the Custodian for the account of Asian Growth in exchange for the
assumption by Asian Growth of all of the liabilities of any kind of New Pacific
and delivery by AIF directly to (i) New Pacific Class A shareholders of a number
of Asian Growth Class A shares (including, if applicable, fractional shares
rounded to the nearest thousandth) and to (ii) New Pacific Class B shareholders
of a number of Asian Growth Class B shares (including, if applicable, fractional
shares rounded to the nearest thousandth) and to (iii) New Pacific Class C
shareholders of a number of Asian Growth Class C shares (including, if
applicable, fractional shares rounded to the nearest thousandth), having an
aggregate net asset value equal to the net value of the assets of New Pacific
transferred.
BOARD CONSIDERATIONS
The Board of Trustees of AGS has determined that the Reorganization of
New Pacific is in the best interests of the shareholders of New Pacific and
recommended approval of the Agreement by the shareholders of New Pacific at the
Special Meeting. A summary of the information that was presented to, and
considered by, the Board of Trustees in making its determination is provided
below.
At a meeting of the Board of Trustees held on March 22, 2000, AIM
Advisors proposed that the Board of Trustees approve the Reorganization of New
Pacific into Asian Growth. The Trustees received from AIM Advisors written
materials that contained information concerning New Pacific and Asian Growth,
including comparative total return and fee and expense information, a comparison
of the investment objectives of New Pacific and Asian Growth and pro forma
expense ratios of Asian Growth. AIM Advisors also provided the trustees with
written materials concerning the structure of the proposed Reorganization and
the Federal tax consequences of the Reorganization.
In considering the Reorganization, the Board of Trustees noted that New
Pacific and Asian Growth have identical investment objectives and similar
investment policies and restrictions. Both funds seek to provide long-term
growth of capital. Asian Growth seeks to achieve that objective by investing 65%
of its assets in marketable equity securities issued by Asian companies (other
than Japanese companies). New Pacific seeks to achieve its objective by
investing at least 65% of its assets in equity securities of issuers domiciled
in twelve countries located in the Pacific region, other than Japan.
The Board of Trustees also considered the performance of New Pacific in
relation to the performance of Asian Growth noting that Asian Growth has
provided a higher return to its
16
<PAGE> 24
shareholders. As of December 31, 1999, the Lipper Inc. rankings for Asian Growth
and New Pacific were as follows:
LIPPER RANK (Percentile) (1)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Asian Growth 58% N/A% N/A% N/A
New Pacific 92% 92% 94% 100%
</TABLE>
- -----------
(1) Under the Lipper ranking system, the lower the percentile rank, the
better the performance.
The Board considered the expenses incurred by the two funds. The total
operating expenses of New Pacific under its contractual arrangements, expressed
as a percentage of average daily net assets, are slightly lower for its Class B
and Class C shares than the total operating expenses of Asian Growth for its
Class B and Class C shares under its contractual arrangements. However, the
combined assets of the two funds will create economies of scale so that after
the Reorganization Asian Growth's expense ratios will be lower than those of New
Pacific. The Board also noted that AIM Advisors and its affiliates have
contractually committed to waive fees and reimburse expenses for the Class A,
Class B and Class C shares of Asian Growth to the extent necessary to limit the
total operating expenses of the Class A shares to 1.92% until June 30, 2001.
AIM Advisors noted that Asian Growth's better performance and lower
expense ratio should make Asian Growth a better investment for shareholders than
New Pacific.
AIM Advisors also noted that the combined assets of the two funds
should provide a more stable base for management because daily purchases and
redemptions of shares should have a less significant impact on the size of the
combined fund.
The Reorganization may result in reduced revenues for AIM Advisors,
since AIM Advisors receives slightly lower management fees on the assets
presently held by Asian Growth. However, AIM Advisors could also benefit in the
future if the assets of the combined fund grow faster than the assets of the
individual funds would have grown in the absence of the Reorganization. AIM
Advisors noted that the operating expenses of New Pacific already exceed the
2.00% operating expense cap contractually agreed to by AIM Advisors and,
therefore, any expenses incurred by New Pacific in connection with the
Reorganization will, in effect, be borne by AIM Advisors.
In addition, the Board of Trustees noted that no initial sales or other
charges would be imposed on any of the shares of Asian Growth issued to the
shareholders of New Pacific in connection with the Reorganization. Finally, the
Board of Trustees reviewed the principal terms of the Agreement. The Board of
Trustees noted that New Pacific would be provided with an opinion of counsel
that the Reorganization would be tax-free as to New Pacific and its
shareholders.
17
<PAGE> 25
Based on the foregoing, and the information presented to them, the
Board of Trustees determined that the Reorganization will not dilute the
interests of the shareholders of New Pacific and is in the best interest of the
New Pacific Shareholders in view of the better performance and lower operating
expenses of Asian Growth. Therefore, the Board of Trustees recommended the
approval of the Reorganization by the shareholders of New Pacific.
OTHER TERMS
The Agreement may be amended without shareholder approval by mutual
agreement of AGS and AIF. If any amendment is made to the Agreement which would
have a material adverse effect on shareholders, such change will be submitted to
the affected shareholders for their approval.
Each of AGS and AIF has made representations and warranties in the
Agreement that are customary in matters such as the Reorganization. The
obligations of AGS and AIF pursuant to the Agreement with respect to New Pacific
or Asian Growth are subject to various conditions, including the following:
o the assets of New Pacific shall constitute at least 90% of the
fair market value of the net assets and at least 70% of the
fair market value of the gross assets held by New Pacific
immediately prior to the Reorganization;
o AIF's Registration Statement on Form N-14 under the Securities
Act of 1933 (the "1933 Act") shall have been filed with the
SEC and such Registration Statement shall have become
effective, and no stop-order suspending the effectiveness of
the Registration Statement shall have been issued, and no
proceeding for that purpose shall have been initiated or
threatened by the SEC (and not withdrawn or terminated);
o the shareholders of New Pacific shall have approved the
Agreement; and
o AGS and AIF shall have received an opinion from Ballard Spahr
Andrews & Ingersoll, LLP, that the Reorganization will not
result in the recognition of gain or loss for Federal income
tax purposes for New Pacific, Asian Growth or their
shareholders.
New Pacific and Asian Growth have agreed to bear their own expenses in
connection with the Reorganization. However, because AIM Advisors has
contractually agreed to waive fees and reimburse expenses in excess of 1.92%
until June 30, 2000 and because the expenses of both New Pacific and Asian
Growth currently exceed 1.92%, any expenses incurred in connection with the
reorganization will, effectively, be borne by AIM Advisors.
The Board of Trustees of AGS may waive without shareholder approval any
default by AIF or any failure by AIF to satisfy any of the conditions to AGS's
obligations as long as such a waiver will not have a material adverse effect on
the benefits intended under the Agreement for the shareholders of New Pacific.
The Agreement may be terminated and the Reorganization may be abandoned by
either AGS or AIF at any time by mutual agreement of AGS and AIF, or by either
party in the event that New Pacific shareholders do not approve the Agreement or
if the Closing does not occur on or before December 31, 2000.
18
<PAGE> 26
FEDERAL TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the existing
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and judicial decisions, all of which are subject to
change. The principal Federal income tax consequences that are expected to
result from the Reorganization, under currently applicable law, are as follows:
o the Reorganization will qualify as a "reorganization" within
the meaning of Section 368(a) of the Code;
o no gain or loss will be recognized by New Pacific upon the
transfer of its assets to Asian Growth;
o no gain or loss will be recognized by any shareholder of
New Pacific upon the exchange of shares of New Pacific solely
for shares of Asian Growth;
o the tax basis of the shares of Asian Growth to be received by
a shareholder of New Pacific will be the same as the tax basis
of the shares of New Pacific surrendered in exchange therefor;
o the holding period of the shares of Asian Growth to be
received by a shareholder of New Pacific will include the
holding period for which such shareholder held the shares of
New Pacific exchanged therefor, provided that such shares of
New Pacific are capital assets in the hands of such
shareholder as of the Closing;
o no gain or loss will be recognized by Asian Growth on the
receipt of assets of New Pacific in exchange for shares of
Asian Growth and Asian Growth's assumption of New Pacific's
liabilities;
o the tax basis of the assets of New Pacific in the hands of
Asian Growth will be the same as the tax basis of such assets
in the hands of New Pacific immediately prior to the
Reorganization; and
o the holding period of the assets of New Pacific to be received
by Asian Growth will include the holding period of such assets
in the hands of New Pacific immediately prior to the
Reorganization.
As a condition to Closing, Ballard Spahr Andrews & Ingersoll, LLP will
render a favorable opinion to AGS and AIF as to the foregoing Federal income tax
consequences of the Reorganization, which opinion will be conditioned upon the
accuracy, as of the date of Closing, of certain representations of AGS and AIF
upon which Ballard Spahr Andrews & Ingersoll, LLP will rely in rendering its
opinion, which representations include, but are not limited to, the following
(taking into account for purposes thereof any events that are part of the plan
of reorganization):
o there is no plan or intention by the shareholders of New
Pacific to redeem a number of shares of Asian Growth received
in the Reorganization that would reduce New Pacific
shareholders' ownership of Asian Growth shares to a number of
shares having
19
<PAGE> 27
a value, as of the Closing Date, of less than 50% of the value
of all of the formerly outstanding shares of New Pacific as of
the Closing Date;
o following the Reorganization, Asian Growth will continue the
historic business of New Pacific (for this purpose "historic
business" shall mean the business most recently conducted by
New Pacific which was not entered into in connection with the
Reorganization) or use a significant portion of New Pacific's
historic business assets in its business;
o at the direction of New Pacific, Asian Growth will issue
directly to each New Pacific shareholder pro rata the shares
of Asian Growth that New Pacific constructively receives in
the Reorganization and New Pacific will distribute its other
properties (if any) to its shareholders on, or as promptly as
practicable after, the Closing;
o Asian Growth has no plan or intention to reacquire any of its
shares issued in the Reorganization, except to the extent that
Asian Growth is required by the Investment Company Act of 1940
(the "1940 Act") to redeem any of its shares presented for
redemption;
o Asian Growth does not plan or intend to sell or otherwise
dispose of any of the assets of New Pacific acquired in the
Reorganization, except for dispositions made in the ordinary
course of its business or dispositions necessary to maintain
its status as a "regulated investment company" ("RIC") under
the Code;
o Asian Growth, New Pacific and the shareholders of New Pacific
will pay their respective expenses, if any, incurred in
connection with the Reorganization;
o Asian Growth will acquire at least 90 percent of the fair
market value of the net assets, and at least 70% of the fair
market value of the gross assets, held by New Pacific
immediately before the Reorganization, including for this
purpose any amounts used by New Pacific to pay its
reorganization expenses and all redemptions and distributions
made by New Pacific immediately before the Reorganization
(other than redemptions pursuant to a demand of a shareholder
in the ordinary course of New Pacific's business as an
open-end diversified management investment company under the
1940 Act and regular, normal dividends not in excess of the
requirements of Section 852 of the Code); and
o Asian Growth and New Pacific have each elected to be taxed as
a RIC under Section 851 of the Code and will each have
qualified for the special Federal tax treatment afforded RICs
under the Code for all taxable periods (including the last
short taxable period of New Pacific ending on the Closing and
the taxable year of Asian Growth that includes the Closing).
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF NEW PACIFIC. NEW PACIFIC SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE
REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS.
20
<PAGE> 28
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Asian Growth of the assets of New Pacific
will be the same as the book cost basis of such assets to New Pacific.
RIGHTS OF SHAREHOLDERS
Currently, the Board of Directors of AIF is soliciting proxies from its
shareholders to vote on various proposals, including approving a change in its
domicile (the "Redomestication") pursuant to an Agreement and Plan of
Reorganization, under which AIF, which is currently a Maryland corporation, will
reorganize as a Delaware business trust and change its name to AIM International
Mutual Funds (AIMF). These proposals are expected to be approved by AIF
shareholders at a special meeting of shareholders to be held on May 3, 2000. If
the Redomestication is not approved, AIF will continue as a Maryland
corporation. The following discussion provides information with respect to the
differences in the rights of shareholders under Maryland law and Delaware law in
the event that the Redomestication is not approved, and information regarding
the differences between the rights of shareholders under the Agreement and
Declaration of Trust of AGS and the Agreement and Declaration of Trust of AIMF
assuming the Redomestication is approved.
RIGHTS OF SHAREHOLDERS UNDER MARYLAND LAW AND DELAWARE LAW IF THE
REDOMESTICATION IS NOT APPROVED
General
Currently, AIF is a Maryland corporation and AGS is a Delaware business
trust. There is much that is similar between the two forms of organization. For
example, the responsibilities, powers and fiduciary duties of the trustees of
the AGS are substantially the same as those of the directors of AIF.
There are, however, certain differences between the two forms of
organization. The operations of AIF, as a Maryland corporation, are governed by
its Articles of Incorporation, and amendments and supplements thereto, and
applicable Maryland law. The operations of AGS, as a Delaware business trust,
are governed by its Agreement and Declaration of Trust, as amended (the
"Declaration of Trust") and Delaware law.
21
<PAGE> 29
Liability of Shareholders
The Delaware Business Trust Act provides that shareholders of a
Delaware business trust shall be entitled to the same limitations of liability
extended to shareholders of private for-profit corporations. There is, however,
a remote possibility that, under certain circumstances, shareholders of a
Delaware business trust might be held personally liable for the trust's
obligations to the extent the courts of another state that does not recognize
such limited liability were to apply the laws of such state to a controversy
involving such obligations. The AGS Declaration of Trust provides that
shareholders of the Acquired Funds shall not be subject to any personal
liability for acts or obligations of the Acquired Funds and that every written
agreement, obligation or other undertaking made or issued by the Acquired Funds
shall contain a provision to the effect that shareholders are not personally
liable thereunder. In addition, the Declaration of Trust provides for
indemnification out of the Acquired Funds' property for any shareholder held
personally liable solely by reason of his or her being or having been a
shareholder. Therefore, the risk of any shareholder incurring financial loss
beyond his investment due to shareholder liability is limited to circumstances
in which the Acquired Funds themselves are unable to meet their obligations and
the express disclaimer of shareholder liabilities is determined not to be
effective. Given the nature of the assets and operations of the Acquired Funds,
the possibility of the Acquired Funds being unable to meet their obligations is
considered remote, and even if a claim were brought against the Funds and a
court determined that shareholders were personally liable, it would likely not
impose a material obligation on a shareholder.
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he receives any distribution which exceeds the amount
which he could properly receive under Maryland law or where such liability is
necessary to prevent fraud.
Election of Directors/Trustees; Terms
The shareholders of AGS have elected the trustees of AGS. Such trustees
serve for the life of AGS, subject to the earlier death, incapacitation,
resignation, retirement or removal (see below). Shareholders may elect
successors to such trustees only at annual or special meetings of shareholders.
The shareholders of AIF have elected the directors of AIF. Each
director serves until a successor is elected, subject to earlier death,
incapacitation, resignation, retirement or removal (see below). Shareholders may
elect successors to such directors only at annual or special meetings of
shareholders.
Removal of Trustees/Directors
A trustee of AGS may be removed at any time by vote of at least
two-thirds of the trustees or by vote of two-thirds of the outstanding shares of
AGS. The Declaration of Trust provides that vacancies may be filled by
appointment by the remaining trustees.
22
<PAGE> 30
A director of AIF may be removed by the affirmative vote of a majority
of the Board of Directors, a committee of the Board of Directors appointed for
such purpose, or the holders of a majority of the outstanding shares of AIF.
Meetings of Shareholders
AGS is not required to hold annual meetings of shareholders unless
required by the 1940 Act and does not intend to do so. The By-Laws of AGS
provide that a majority of the Trustees may call special meetings of
shareholders and the Trustees shall call a special meeting of the shareholders
upon written request of the holders of not less than 10% of the Acquired Funds'
shares. Special meetings may be called for the purpose of electing trustees or
for any other action requiring shareholder approval, or for any matter deemed by
the trustees to be necessary or desirable.
AIF is not required to hold annual meetings of shareholders and does
not intend to do so unless required by the 1940 Act. AIF's Bylaws provide that a
special meeting of shareholders may be called by the President, Secretary, a
majority of the Board of Directors or holders of shares entitled to cast at
least 10% of the votes entitled to be cast at the special meeting. Requests for
special meetings must, among other things, state the purpose of such meeting and
the matters to be voted upon. No special meeting may be called to consider any
matter previously voted upon at a special meeting called by the shareholders
during the preceding twelve months, unless requested by a majority of all shares
entitled to vote at such meeting.
Liability of Directors/Trustees and Officers; Indemnification
Delaware law provides that trustees of a business trust shall not be
liable to the business trust or its shareholders for acting in good faith
reliance on the provisions of its governing instrument and that the trustee's
liabilities may be expanded or restricted by such instrument. Under the AGS
Declaration of Trust, the trustees and officers of AGS are not liable for any
act or omission or any conduct whatsoever in their capacity as trustees, except
for liability to the trust or shareholders due to willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. Delaware law allows a business trust to
indemnify and hold harmless any trustee or other person against any and all
claims and demands. The AGS Declaration of Trust require the indemnification of
its trustees and officers to the fullest extent permitted by Delaware law,
except with respect to any matter in which it has been determined that such
director or officer acted with willful misfeasance, bad faith, gross negligence
or reckless disregard of his or her duties.
Maryland law permits a corporation to eliminate liability of its
directors and officers to the corporation or its stockholders, except for
liability arising from receipt of an improper benefit or profit and from active
and deliberate dishonesty. AIF's Articles of Incorporation eliminate director
and officer liability to the fullest extent permitted under Maryland law. Under
Maryland law, indemnification of a corporation's directors and officers is
mandatory if a director or officer has been successful on the merits or
otherwise in the defense of certain proceedings. Maryland law permits
indemnification for other matters unless it is established that the act or
omission giving rise to the
23
<PAGE> 31
proceeding was committed in bad faith, a result of active and deliberate
dishonesty, or one in which a director or officer actually received an improper
benefit.
Termination
AGS or any series or class of shares of beneficial interest in AGS may
be terminated by (1) a majority shareholder vote of AGS or the affected series
or class, respectively, or (2) if there are fewer than 100 shareholders of
record of AGS or of such terminating series or class, the trustees pursuant to
written notice to the shares of AGS or the affected series or class.
Maryland law provides that AIF may be dissolved by the vote of a
majority of the Board of Directors and two-thirds of the shares entitled to vote
on the dissolution.
Voting Rights of Shareholders
The AGS Declaration of Trust grants shareholders power to vote only
with respect to the following: (i) election of trustees; (ii) removal of
trustees, (iii) approval of investment advisory contracts, as required by the
1940 Act; (iv) termination of AGS or a series of class of its shares of
beneficial interest, (v) amendment of the Declaration of Trust, (vi) sale of all
or substantially all of the assets of AGS or one of its investment portfolios,
(vii) merger or consolidation of AGS or any of its investment portfolios, with
certain exceptions, and (viii) approval of such additional matters as may be
required by law or as the trustees, in their sole discretion, shall determine.
Shareholders of a Maryland corporation such as AIF are entitled to vote
on, among other things, those matters which effect fundamental changes in the
corporate structure (such as a merger, consolidation or sale of substantially
all of the assets of the corporation) as provided by Maryland corporation law.
Dissenters' Rights
Neither Delaware law nor the Declaration of Trust confers upon AGS
shareholders appraisal or dissenters' rights.
24
<PAGE> 32
Under Maryland law, AIF's shareholders may not demand the fair value of
their shares from the successor company in a transaction involving the transfer
of the Acquiring Funds' assets, and are bound by the terms of the transaction.
Amendments to Organization Documents
Consistent with Delaware law, the Board of Trustees of AGS may, without
shareholder approval, amend the Declaration of Trust at any time, except that no
amendment may be made which repeals the limitations of personal liability of any
shareholder, which reduces the amount payable in respect of the shares of AGS
upon liquidation of AGS or which diminishes or eliminates any voting rights
pertaining to the shares of AGS, without approval of the majority of the shares
of AGS. The trustees shall have the power to alter, amend or repeal the Bylaws
of AGS or adopt new Bylaws at any time.
Consistent with Maryland law, AIF reserves the right to amend, alter,
change or repeal any provision contained in their Articles of Incorporation in
the manner now or hereafter prescribed by statute, including any amendment that
alters the contract rights, as expressly set forth in the Articles of
Incorporation, of any outstanding stock, and all rights conferred on
shareholders are granted subject to this reservation. The Board of Directors of
AIF may approve amendments to the Articles of Incorporation to classify or
reclassify unissued shares of a class of stock without shareholder approval.
Other amendments to the AIF Articles of Incorporation may be adopted if approved
by a vote of a majority of the shares at any meeting at which a quorum is
present. The AIF Bylaws provide that the Bylaws may be amended at any regular
meeting or special meeting of the stockholders provided that notice of such
amendment is contained in the notice of the special meeting. Except as to any
particular Bylaw which is specified as not subject to amendment by the Board of
Directors, the Bylaws may be also amended by the affirmative vote of a majority
of the Board of Directors at any regular or special meetings of the Board.
RIGHTS OF SHAREHOLDERS UNDER DECLARATIONS OF TRUST OF AGS AND AIMF IF THE
REDOMESTICATION IS APPROVED
Generally, there will be no material differences between the rights of
shareholders under the Agreement and Declaration of Trust of AGS and the rights
of shareholders under the proposed Agreement and Declaration of Trust of AIMF.
However, under the Agreement and Declaration of Trust of AIMF, Class B shares,
other than those purchased through reinvestment dividends and distributions will
be subject to automatic conversion to Class A shares eight years following the
calendar month in which the purchase was made.
Class B shares purchased through the reinvestment of dividends and
distributions paid in respect of Class B shares will be considered held in a
separate sub-account, and will automatically convert to Class A shares in the
same proportion as any Class B shares (other than those in the sub-account)
convert to Class A shares unless Asian Growth implements any amendment to its
Plan of Distribution adopted pursuant to Rule 12b-1 under the 1940 Act. In that
case, if the Trustees determine that the amendment would materially increase the
charges that may be borne by the Class
25
<PAGE> 33
A shareholders under the 12b-1 plan, the Class B shares will stop converting to
the Class A shares unless the Class B shares, voting separately, approve the
amendment.
OWNERSHIP OF ASIAN GROWTH AND NEW PACIFIC SHARES
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person
who as of April 3, 2000, to the knowledge of AGS, owned beneficially 5% or more
of any class of the outstanding shares of New Pacific:
NEW PACIFIC
<TABLE>
<CAPTION> PERCENT
CLASS OF NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS SHARES OWNED OWNERSHIP
- ---------------- -------- ---------------- ----------
<S> <C> <C> <C>
</TABLE>
Listed below is the name, address and percent ownership of each person
who as of April 3, 2000 to the knowledge of AIF, owned beneficially 5% or more
of the outstanding shares of Asian Growth:
ASIAN GROWTH
<TABLE>
<CAPTION> PERCENT
CLASS OF NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS SHARES OWNED OWNERSHIP
- ---------------- -------- ---------------- ----------
<S> <C> <C> <C>
</TABLE>
OWNERSHIP OF OFFICERS AND DIRECTORS/TRUSTEES
To the best of the knowledge of AIF, the beneficial ownership of shares
of Asian Growth by officers and directors of AIF as a group constituted less
than 1% of the outstanding shares of such fund as of April 3, 2000. To the best
of the knowledge of AGS, the beneficial ownership of shares of New Pacific by
officers or trustees of AGS as a group constituted less than 1% of the
outstanding shares of such fund as of April 3, 2000.
26
<PAGE> 34
CAPITALIZATION
The following table sets forth as of October 31, 1999, (i) the
capitalization of Asian Growth Class A, Class B and Class C Shares, (ii) the
capitalization of New Pacific Class A, Class B and Class C shares, and (iii) the
pro forma capitalization of Asian Growth Class A, Class B, and Class C shares as
adjusted to give effect to the transactions contemplated by the Agreement.
ASIAN GROWTH AND NEW PACIFIC
<TABLE>
<CAPTION>
PRO FORMA ASIAN GROWTH
ASIAN GROWTH NEW PACIFIC NEW PACIFIC CLASS A
CLASS A SHARES CLASS A SHARES CLASS A SHARES(1) SHARES AS ADJUSTED
-------------- -------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Net Assets $ 25,419,567 $ 86,707,102 $ 1,018,627 $113,145,296
Shares Outstanding 2,361,340 14,024,150 164,762 10,510,835
Net Asset Value Per $ 10.76 $ 6.18 $ 6.19 $ 10.76
Share
</TABLE>
- ---
(1) Effective February 11, 2000, New Pacific discontinued sales of Advisor
Class shares and converted them into Class A shares.
<TABLE>
<CAPTION>
PRO FORMA ASIAN GROWTH
ASIAN GROWTH NEW PACIFIC CLASS B
CLASS B SHARES CLASS B SHARES SHARES AS ADJUSTED
-------------- -------------- ------------------
<S> <C> <C> <C>
Net Assets $12,069,543 $34,091,431 $46,160,974
Shares Outstanding 1,133,253 5,707,119 4,332,455
Net Asset Value Per Share $ 10.65 $ 5.97 $ 10.65
</TABLE>
<TABLE>
<CAPTION>
ASIAN GROWTH NEW PACIFIC PRO FORMA ASIAN GROWTH CLASS C
CLASS C SHARES CLASS C SHARES SHARES AS ADJUSTED
-------------- -------------- ------------------------------
<S> <C> <C> <C>
Net Assets $5,007,989 $1,400,575 $6,408,564
Shares Outstanding 471,104 234,674 602,901
Net Asset Value Per Share $ 10.63 $ 5.97 $ 10.63
</TABLE>
27
<PAGE> 35
LEGAL MATTERS
Certain legal matters concerning AIF and its participation in the
Reorganization, the issuance of shares of Asian Growth in connection with the
Reorganization and the tax consequences of the Reorganization will be passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor,
Philadelphia, PA 19103-7599. Certain legal matters concerning AGS and its
participation in the Reorganization will be passed upon by Kirkpatrick &
Lockhart, LLP 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036-1800.
INFORMATION FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which AGS and
AIF have filed with the SEC pursuant to the requirements of the 1933 Act and the
1940 Act, to which reference is hereby made. The SEC file number for AGS's
registration statement containing the Prospectus and Statement of Additional
Information relating to New Pacific is Registration No. 811-2699. Such
Prospectus and Statement of Additional Information are incorporated herein by
reference. The SEC file number for AIF's registration statement containing the
Prospectus and Statement of Additional Information relating to Asian Growth is
Registration No. 811-6463. Such Prospectus and Statement of Additional
Information are incorporated herein by reference.
AIF and AGS are subject to the informational requirements of the 1940
Act and in accordance therewith file reports and other information with the SEC.
Reports, proxy statements, registration statements and other information filed
by AGS and AIF (including the Registration Statement of AIF relating to Asian
Growth on Form N-14 of which this Proxy Statement/Prospectus is a part and which
is hereby incorporated by reference) may be inspected without charge and copied
at the public reference facilities maintained by the SEC at Room 1014, Judiciary
Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the following regional
offices of the SEC: 7 World Trade Center, New York, New York 10048; and 500 West
Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the SEC at 450 Fifth
Street, NW, Washington, DC 20549, at the prescribed rates. The SEC maintains a
Web site at http://www.sec.gov that contains information regarding AIF, AGS and
other registrants that file electronically with the SEC.
ADDITIONAL INFORMATION ABOUT ASIAN GROWTH AND
NEW PACIFIC
Currently, the Board of Directors of AIF is soliciting proxies from its
shareholders to vote on various proposals, including changing Asian Growth's
fundamental investment restrictions and changing Asian Growth's fundamental
investment objective so that it is non-fundamental. These proposals are expected
to be approved by AIF shareholders at a special meeting of shareholders to
28
<PAGE> 36
be held on May 3, 2000, and this Proxy Statement/Prospectus has been prepared
assuming such approval. If these proposals are not approved, AIF will provide
you with additional information.
For more information with respect to AIF and Asian Growth concerning
the following topics, please refer to the Asian Growth Prospectus as indicated:
(i) see "Investment Objectives and Strategies" and "Fund Management" for further
information regarding AIF and Asian Growth; (ii) see "Investment Objectives and
Strategies," "Fund Management," and "Other Information" for further information
regarding management of AIF and Asian Growth; (iii) see "Fund Management" and
"Other Information" for further information regarding the shares of AIF and
Asian Growth; (iv) see "Fund Management," "Other Information," and "Shareholder
Information" for further information regarding the purchase, redemption and
repurchase of shares of AIF and Asian Growth.
For more information with respect to AGS and New Pacific concerning the
following topics, please refer to New Pacific Prospectus as indicated: (i) see
"Investment Objectives and Strategies" and "Fund Management" for further
information regarding AGS and New Pacific; (ii) see discussion in "Investment
Objectives and Strategies," "Fund Management," and "Other Information" for
further information regarding management of AGS and New Pacific; (iii) see
"Fund Management" and "Other Information" for further information regarding the
shares of AGS and New Pacific; (iv) see "Fund Management," "Other Information,"
and "Shareholder Information" for further information regarding the purchase,
redemption and repurchase of AGS and New Pacific.
29
<PAGE> 37
APPENDIX I
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM NEW PACIFIC GROWTH FUND
a separate portfolio of
AIM GROWTH SERIES
March 22, 2000
<PAGE> 38
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS.................................................................................. I-1
Section 1.1 Definitions.............................................................................. I-1
ARTICLE 2 TRANSFER OF ASSETS........................................................................... I-4
Section 2.1 Reorganizations.......................................................................... I-4
Section 2.2 Computation of Net Asset Value........................................................... I-4
Section 2.3 Valuation................................................................................ I-5
Section 2.4 Delivery................................................................................. I-5
Section 2.5 Termination of Series.................................................................... I-5
Section 2.6 Issuance of Asian Pacific Shares......................................................... I-6
Section 2.7 Investment Securities.................................................................... I-6
Section 2.8 Liabilities............................................................................. I-6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AIM GROWTH................................................. I-6
Section 3.1 Organization; Authority.................................................................. I-6
Section 3.2 Registration and Regulation of AIM Growth................................................ I-6
Section 3.3 Financial Statements..................................................................... I-7
Section 3.4 No Material Adverse Changes; Contingent Liabilities...................................... I-7
Section 3.5 New Pacific Shares; Liabilities; Business Operations..................................... I-7
Section 3.6 Accountants.............................................................................. I-8
Section 3.7 Binding Obligation....................................................................... I-8
Section 3.8 No Breaches or Defaults.................................................................. I-8
Section 3.9 Authorizations or Consents............................................................... I-8
Section 3.10 Permits................................................................................... I-9
Section 3.11 No Actions, Suits or Proceedings.......................................................... I-9
Section 3.12 Contracts................................................................................. I-9
Section 3.13 Properties and Assets..................................................................... I-9
Section 3.14 Taxes..................................................................................... I-9
Section 3.15 Benefit and Employment Obligations........................................................ I-10
Section 3.16 Brokers................................................................................... I-10
Section 3.17 Voting Requirements....................................................................... I-10
Section 3.18 State Takeover Statutes................................................................... I-10
Section 3.19 Books and Records......................................................................... I-11
Section 3.20 Prospectus and Statement of Additional Information........................................ I-11
Section 3.21 No Distribution........................................................................... I-11
Section 3.22 Liabilities of New Pacific................................................................ I-11
Section 3.23 Value of Shares........................................................................... I-11
Section 3.24 Shareholder Expenses...................................................................... I-11
Section 3.25 Intercompany Indebtedness................................................................. I-11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AIM INTERNATIONAL.......................................... I-11
Section 4.1 Organization; Authority.................................................................. I-11
Section 4.2 Registration and Regulation of AIM International......................................... I-12
Section 4.3 Financial Statements..................................................................... I-12
Section 4.4 No Material Adverse Changes; Contingent Liabilities...................................... I-12
</TABLE>
I-i
<PAGE> 39
<TABLE>
<S> <C>
Section 4.5 Registration of Asian Growth Class A Shares, Asian Growth
Class B Shares and Asian Growth Class C Shares...................................... I-12
Section 4.6 Accountants.............................................................................. I-13
Section 4.7 Binding Obligation....................................................................... I-13
Section 4.8 No Breaches or Defaults.................................................................. I-13
Section 4.9 Authorizations or Consents............................................................... I-14
Section 4.10 Permits................................................................................... I-14
Section 4.11 No Actions, Suits or Proceedings.......................................................... I-14
Section 4.12 Taxes..................................................................................... I-14
Section 4.13 Brokers................................................................................... I-15
Section 4.14 Representations Concerning the Reorganization............................................. I-15
Section 4.15 Prospectus and Statement of Additional Information........................................ I-15
Section 4.16 Value of Shares........................................................................... I-16
Section 4.17 Intercompany Indebtedness; Consideration.................................................. I-16
ARTICLE 5 COVENANTS.................................................................................... I-16
Section 5.1 Conduct of Business...................................................................... I-16
Section 5.2 Announcements............................................................................ I-17
Section 5.3 Expenses................................................................................. I-17
Section 5.4 Further Assurances....................................................................... I-17
Section 5.5 Notice of Events......................................................................... I-18
Section 5.6 Access to Information.................................................................... I-18
Section 5.7 Consents, Approvals and Filings.......................................................... I-18
Section 5.8 Submission of Agreement to Shareholders.................................................. I-18
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION................................................... I-19
Section 6.1 Conditions Precedent of AIM International................................................ I-19
Section 6.2 Mutual Conditions........................................................................ I-19
Section 6.3 Conditions Precedent of AIM Growth....................................................... I-20
ARTICLE 7 TERMINATION OF AGREEMENT..................................................................... I-21
Section 7.1 Termination.............................................................................. I-21
Section 7.2 Survival After Termination............................................................... I-21
ARTICLE 8 MISCELLANEOUS................................................................................ I-21
Section 8.1 Survival of Representations and Warranties............................................... I-21
Section 8.2 Governing Law............................................................................ I-22
Section 8.3 Binding Effect, Persons Benefiting, No Assignment........................................ I-22
Section 8.4 Obligations of AIM International and AIM Growth.......................................... I-22
Section 8.5 Amendments............................................................................... I-22
Section 8.6 Enforcement.............................................................................. I-22
Section 8.7 Interpretation........................................................................... I-22
Section 8.8 Counterparts............................................................................. I-23
Section 8.9 Entire Agreement; Schedules.............................................................. I-23
Section 8.10 Notices................................................................................... I-23
Section 8.11 Representations by AIM Advisors........................................................... I-24
Schedule 6.1(d) Opinion of Counsel to AIM International Funds, Inc.
Schedule 6.2(f) Tax Opinions
Schedule 6.3(d) Opinion of Counsel to AIM Growth Series
</TABLE>
I-ii
<PAGE> 40
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of March 22,
2000 (this "Agreement"), by and among AIM Growth Series, a Delaware business
trust ("AIM Growth"), acting on behalf of AIM New Pacific Growth Fund ("New
Pacific"), a separate series of AIM Growth, AIM International Funds, Inc., a
Maryland corporation ("AIM International"), acting on behalf of AIM Asian Growth
Fund ("Asian Growth"), a separate series of AIM International, and A I M
Advisors, Inc. ("AIM Advisors"), a Delaware corporation.
WITNESSETH
WHEREAS, AIM Growth is an investment company registered with
the Securities and Exchange Commission (the "SEC") under the Investment Company
Act (as defined below) that offers separate series of its shares representing
interests in its investment portfolios, including New Pacific, for sale to the
public; and
WHEREAS, AIM International is an investment company registered
with the SEC under the Investment Company Act that offers separate series of its
shares representing interests in investment portfolios, including Asian Growth,
for sale to the public; and
WHEREAS, AIM Advisors provides investment advisory services to
both AIM Growth and AIM International; and
WHEREAS, New Pacific desires to provide for its reorganization
through the transfer of all of its assets to Asian Growth in exchange for the
assumption by Asian Growth of all of the liabilities of New Pacific and the
issuance by AIM International of shares of Asian Growth in the manner set forth
in this Agreement; and
WHEREAS, this Agreement is intended to be and is adopted by
the parties hereto as a Plan of Reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
the agreements and undertakings contained in this Agreement, AIM Growth, AIM
International and AIM Advisors agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. For all purposes in this Agreement,
the following terms shall have the respective meanings set forth in this Section
1.1 (such definitions to be equally applicable to both the singular and plural
forms of the terms herein defined):
"Advisers Act" means the Investment Advisers Act of 1940, as
amended, and all rules and regulations of the SEC adopted pursuant thereto.
I-1
<PAGE> 41
"Affiliated Person" means an affiliated person as defined in
Section 2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization,
together with all schedules and exhibits attached hereto and all amendments
hereto and thereof.
"AIM Growth" means AIM Growth Series, a Delaware business
trust.
"AIM Growth Registration Statement" means the registration
statement on Form N-1A of AIM Growth, as amended, 1940 Act Registration No.
811-2699.
"AIM International" means AIM International Funds, Inc., a
Delaware business trust.
"AIM International Registration Statement" means the
registration statement on Form N-1A of AIM International, as amended, 1940 Act
Registration No.811-6463.
"Asian Growth" means AIM Asian Growth Fund, a separate series
of AIM International.
"Asian Growth Class A Shares" means Class A Shares of the
capital stock of Asian Growth issued by AIM International.
"Asian Growth Class B Shares" means Class B Shares of the
capital stock of Asian Growth issued by AIM International.
"Asian Growth Class C Shares" means Class C Shares of the
capital stock of Asian Growth issued by AIM International.
"Asian Growth Financial Statements" shall have the meaning set
forth in Section 4.3 of this Agreement.
"Asian Growth Shares" means shares of the capital stock of AIM
International issued pursuant to Section 2.6 of this Agreement.
"Benefit Plan" means any material "employee benefit plan" (as
defined in Section 3(3) of ERISA) and any material bonus, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, vacation, retirement, profit sharing, welfare plans or other plan,
arrangement or understanding maintained or contributed to by AIM Growth on
behalf of New Pacific, or otherwise providing benefits to any current or former
employee, officer or trustee of AIM Growth.
"Closing" means the transfer of the assets of New Pacific to
Asian Growth, the assumption of all of New Pacific's liabilities by Asian Growth
and the issuance of Asian Growth Shares directly to New Pacific Shareholders as
described in Section 2.1 of this Agreement.
"Closing Date" means June 12, 2000 or such other date as the
parties may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended,
and all rules and regulations adopted pursuant thereto.
I-2
<PAGE> 42
"Custodian" means State Street Bank and Trust Company acting
in its capacity as custodian for the assets of Asian Growth and New Pacific.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing
Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all rules or regulations adopted pursuant thereto. "
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations adopted pursuant thereto.
"Governmental Authority" means any foreign, United States or
state government, government agency, department, board, commission (including
the SEC) or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the National Association of
Securities Dealers, Inc., the Commodity Futures Trading Commission, the National
Futures Association, the Investment Management Regulatory Organization Limited
and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of
1940, as amended, and all rules and regulations adopted pursuant thereto.
"Lien" means any pledge, lien, security interest, charge,
claim or encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a
change in the condition (financial or otherwise), properties, assets or
prospects of an entity having an adverse monetary effect in an amount equal to
or greater than $50,000.
"New Pacific" means AIM New Pacific Growth Fund, a separate
series of AIM Growth.
"New Pacific Financial Statements" shall have the meaning set
forth in Section 3.3 of this Agreement.
"New Pacific Shareholders" means the holders of record as of
the Effective Time of the issued and outstanding shares of beneficial interest
in New Pacific.
"New Pacific Shareholders Meeting" means a meeting of the
shareholders of New Pacific convened in accordance with applicable law and the
Agreement and Declaration of Trust of AIM Growth to consider and vote upon the
approval of this Agreement and the Reorganization of New Pacific contemplated by
this Agreement.
"New Pacific Shares" means the issued and outstanding shares
of beneficial interest in New Pacific.
"Person" means an individual or a corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of New
Pacific by Asian Growth in consideration of the assumption by Asian Growth of
all of the liabilities of New Pacific and the issuance by
I-3
<PAGE> 43
AIM International of Asian Growth Shares directly to New Pacific Shareholders as
described in this Agreement, and the termination of New Pacific's status as
designated series of shares of AIM Growth.
"Required Shareholder Vote" shall have the meaning set forth
in Section 3.17 of this Agreement.
"Return" means any return, report or form or any attachment
thereto required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations adopted pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or
levy (including income taxes (including alternative minimum tax and estimated
tax), franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross
receipts taxes, value added taxes, employment taxes, excise taxes, ad valorem
taxes, property taxes, withholding taxes, payroll taxes, minimum taxes, or
windfall profit taxes), together with any related penalties, fines, additions to
tax or interest, imposed by the United States or any state, county, local or
foreign government or subdivision or agency thereof.
"Valuation Date" shall have the meaning set forth in Section
2.3 of this Agreement.
ARTICLE 2
TRANSFER OF ASSETS
Section 2.1 Reorganizations.
(a) Reorganization of New Pacific. At the Effective Time, all
of the assets of New Pacific shall be delivered to the Custodian for the account
of Asian Growth in exchange for the assumption by Asian Growth of all of the
liabilities of any kind of New Pacific and delivery by AIM International
directly to (i) the holders of record as of the Effective Time of the issued and
outstanding Class A shares of New Pacific of a number of Asian Growth Class A
shares (including, if applicable, fractional shares rounded to the nearest
thousandth), to (ii) the holders of record as of the Effective Time of the
issued and outstanding Class B shares of New Pacific of a number of Asian Growth
Class B shares (including, if applicable, fractional shares rounded to the
nearest thousandth), and to (iii) the holders of record as of the Effective Time
of the issued and outstanding Class C shares of New Pacific of a number of Asian
Growth Class C shares (including, if applicable, fractional shares rounded to
the nearest thousandth), having an aggregate net asset value equal to the net
value of the assets of New Pacific so transferred, assigned and delivered, all
determined and adjusted as provided in Section 2.2 below. Upon delivery of such
assets, AIM Asian Growth Fund will receive good and marketable title to such
assets free and clear of all Liens
Section 2.2 Computation of Net Asset Value.
(a) The net asset value of Asian Growth Shares, and the net
value of the assets of New Pacific, shall, in each case, be determined as of the
close of regular trading on the NYSE on the Valuation Date.
I-4
<PAGE> 44
(b) The net asset value of Asian Growth Shares shall be
computed in accordance with the policies and procedures of Asian Growth as
described in the AIM International Registration Statement.
(c) The net value of the assets of New Pacific to be
transferred to Asian Growth pursuant to this Agreement shall be computed in
accordance with the policies and procedures of New Pacific as described in the
AIM Growth Registration Statement.
(d) All computations of value regarding the net assets of New
Pacific and the net asset value of Asian Growth Shares to be issued pursuant to
this Agreement shall be made by agreement of AIM Growth and AIM International.
The parties agree to use commercially reasonable efforts to resolve any material
pricing differences between the prices of portfolio securities determined in
accordance with their respective pricing policies and procedures.
Section 2.3 Valuation Date. The assets of New Pacific and the
net asset value per share of Asian Growth Shares shall be valued as of the close
of regular trading on the NYSE on the business day next preceding the Closing
Date (the "Valuation Date"). The share transfer books of New Pacific will be
permanently closed as of the close of business on the Closing Date and only
requests for the redemption of shares of New Pacific received in proper form
prior to the close of regular trading on the NYSE on the Valuation Date shall be
accepted by New Pacific. Redemption requests thereafter received by New Pacific
shall be deemed to be redemption requests for Asian Growth Class A Shares, Asian
Growth Class B Shares or Asian Growth Class C Shares, as applicable (assuming
that the transactions contemplated by this Agreement have been consummated), to
be distributed to New Pacific Shareholders under this Agreement.
Section 2.4 Delivery.
(a) Assets held by New Pacific shall be delivered by AIM
Growth to the Custodian on the Closing Date. No later than three (3) business
days preceding the Closing Date, AIM Growth shall instruct the Custodian to
transfer such assets to the account of Asian Growth. The assets so delivered
shall be duly endorsed in proper form for transfer in such condition as to
constitute a good delivery thereof, in accordance with the custom of brokers,
and shall be accompanied by all necessary state stock transfer stamps, if any,
or a check for the appropriate purchase price thereof. Cash held by New Pacific
shall be delivered on the Closing Date and shall be in the form of currency or
wire transfer in Federal funds, payable to the order of the account of Asian
Growth at the Custodian.
(b) If, on the Closing Date, New Pacific is unable to make
delivery in the manner contemplated by Section 2.4(a) of securities held by New
Pacific for the reason that any of such securities purchased prior to the
Closing Date have not yet been delivered to New Pacific or its broker, then AIM
International shall waive the delivery requirements of Section 2.4(a) with
respect to said undelivered securities if New Pacific has delivered to the
Custodian by or on the Closing Date, and with respect to said undelivered
securities, executed copies of an agreement of assignment and escrow and due
bills executed on behalf of said broker or brokers, together with such other
documents as may be required by AIM International or the Custodian, including
brokers' confirmation slips.
Section 2.5 Termination of Series. As soon as reasonably
practicable after the Closing Date, the status of New Pacific as a designated
series of shares of AIM Growth shall be terminated; provided, however, that the
termination of the status of New Pacific as a series of shares of AIM Growth
shall not be required if the Reorganization shall not have been consummated.
I-5
<PAGE> 45
Section 2.6 Issuance of Asian Growth Shares. At the Effective
Time, New Pacific Shareholders of record as of the close of regular trading on
the NYSE on the Valuation Date holding New Pacific Class A shares shall be
issued that number of full and fractional Class A shares of Asian Growth having
a net asset value equal to the net asset value of New Pacific Class A shares
held by New Pacific Shareholders on the Valuation Date, New Pacific Shareholders
of record as of the Valuation Date holding New Pacific Class B shares shall be
issued that number of full and fractional Class B shares of Asian Growth having
a net asset value equal to the net asset value of New Pacific Class B Shares
held by New Pacific Shareholders on the Valuation Date, and New Pacific
Shareholders of record as of the Valuation Date holding New Pacific Class C
shares shall be issued that number of full and fractional Class C shares of
Asian Growth having a net asset value equal to the net asset value of New
Pacific Class C shares held by New Pacific Shareholders on the Valuation Date.
All issued and outstanding shares of beneficial interest in New Pacific shall
thereupon be canceled on the books of AIM Growth. AIM Growth shall provide
instructions to the transfer agent of AIM International with respect to Asian
Growth Class A Shares, Asian Growth Class B Shares and Asian Growth Class C
Shares to be issued to New Pacific Shareholders. AIM International shall have no
obligation to inquire as to the validity, propriety or correctness of any such
instruction, but shall, in each case, assume that such instruction is valid,
proper and correct. AIM International shall record on its books the ownership of
Asian Growth Class A, Asian Growth Class B and Asian Growth Class C Shares by
New Pacific Shareholders and shall forward a confirmation of such ownership to
New Pacific Shareholders. No redemption or repurchase of such shares credited to
former New Pacific Shareholders in respect of New Pacific shares represented by
unsurrendered shares certificates shall be permitted until such certificates
have been surrendered to AIM International for cancellation, or if such
certificates are lost or misplaced, until lost certificate affidavits have been
executed and delivered to AIM International.
Section 2.7 Investment Securities. On or prior to the
Valuation Date, AIM Growth shall deliver a list setting forth the securities New
Pacific then owns together with the respective Federal income tax bases thereof.
AIM Growth shall provide to AIM International on or before the Valuation Date,
detailed tax basis accounting records for each security to be transferred to it
pursuant to this Agreement. Such records shall be prepared in accordance with
the requirements for specific identification tax lot accounting and clearly
reflect the bases used for determination of gain and loss realized on the sale
of any security transferred to Asian Growth hereunder. Such records shall be
made available by AIM Growth prior to the Valuation Date for inspection by the
Treasurer (or his or her designee) or the auditors of AIM International upon
reasonable request.
Section 2.8 Liabilities. New Pacific shall use reasonable best
efforts to discharge all of its known liabilities, so far as may be possible,
prior to the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AIM GROWTH
AIM Growth, on behalf of New Pacific, represents and warrants
to AIM International that:
Section 3.1 Organization; Authority. AIM Growth is duly
organized, validly existing and in good standing under the Delaware Business
Trust Act, with all requisite trust power and authority to enter into this
Agreement and perform its obligations hereunder.
Section 3.2 Registration and Regulation of AIM Growth. AIM
Growth is duly registered with the SEC as an investment company under the
Investment Company Act and all New Pacific Shares which have been or are being
offered for sale have been duly registered under the Securities Act and
I-6
<PAGE> 46
have been duly registered, qualified or are exempt from registration or
qualification under the securities laws of each state or other jurisdiction in
which such shares have been or are being offered for sale, and no action has
been taken by AIM Growth to revoke or rescind any such registration or
qualification. New Pacific is in compliance in all material respects with all
applicable laws, rules and regulations, including, without limitation, the
Investment Company Act, the Securities Act, the Exchange Act and all applicable
state securities laws. New Pacific is in compliance in all material respects
with the investment policies and restrictions applicable to it set forth in the
AIM Growth Registration Statement currently in effect. The value of the net
assets of New Pacific is determined using portfolio valuation methods that
comply in all material respects with the requirements of the Investment Company
Act and the policies of New Pacific and all purchases and redemptions of New
Pacific Shares have been effected at the net asset value per share calculated in
such manner.
Section 3.3 Financial Statements. The books of account and
related records of New Pacific fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements for
the fiscal year ended December 31, 1999, of New Pacific previously delivered to
AIM International (the "New Pacific Financial Statements") present fairly in all
material respects the financial position of New Pacific as at the dates
indicated and the results of operations and changes in net assets for the
periods then ended in accordance with generally accepted accounting principles
applied on a consistent basis for the periods then ended.
Section 3.4 No Material Adverse Changes; Contingent
Liabilities. Since December 31, 1999 no material adverse change has occurred in
the financial condition, results of operations, business, assets or liabilities
of New Pacific or the status of New Pacific as a regulated investment company
under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by New Pacific or occurring in the ordinary course of business
of New Pacific or AIM Growth. There are no contingent liabilities of New Pacific
not disclosed in the New Pacific Financial Statements which are required to be
disclosed in accordance with generally accepted accounting principles.
Section 3.5 New Pacific Shares; Liabilities; Business
Operations.
(a) New Pacific Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(b) During the five-year period ending on the date of the
Reorganization, neither New Pacific nor any person related to New Pacific (as
defined in section 1.368-1(e)(3) of the Treasury Regulations without regard to
section 1.368-1(e)(3)(i)(A)) will have directly or through any transaction,
agreement, or arrangement with any other person, (i) acquired shares of New
Pacific for consideration other than shares of New Pacific, except for shares
redeemed in the ordinary course of New Pacific's business as an open-end
investment company as required by the Investment Company Act, or (ii) made
distributions with respect to New Pacific's Shares, except for (a) distributions
necessary to satisfy the requirements of sections 852 and 4982 of the Code for
qualification as a regulated investment company and avoidance of excise tax
liability and (b) additional distributions, to the extent such additional
distributions do not exceed 50 percent of the value (without giving effect to
such distributions) of the proprietary interest in New Pacific on the Effective
Date.
I-7
<PAGE> 47
(c) At the time of its Reorganization, New Pacific shall not
have outstanding any warrants, options, convertible securities or any other type
of right pursuant to which any Person could acquire New Pacific Shares, except
for the right of investors to acquire New Pacific Shares at net asset value in
the normal course of its business as a series of an open-end management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the
Closing Date, New Pacific will have conducted its historic business within the
meaning of Section 1.368-1(d)(2) of the Income Tax Regulations under the Code in
a substantially unchanged manner. In anticipation of its Reorganization, New
Pacific will not dispose of assets that, in the aggregate, will result in less
than fifty percent (50%) of its historic business assets (within the meaning of
Section 1.368-1(d) of those regulations) being transferred to Asian Growth.
(e) AIM Growth does not have, and has not had during the six
(6) months prior to the date of this Agreement, any employees, and shall not
hire any employees from and after the date of this Agreement through the Closing
Date.
Section 3.6 Accountants. PricewaterhouseCoopers LLP, which has
reported upon the New Pacific Financial Statements for the period ended December
31, 1999, are independent public accountants as required by the Securities Act
and the Exchange Act.
Section 3.7 Binding Obligation. This Agreement has been duly
authorized, executed and delivered by AIM Growth on behalf of New Pacific and,
assuming this Agreement has been duly executed and delivered by AIM
International and approved by New Pacific Shareholders, constitutes the legal,
valid and binding obligation of AIM Growth enforceable against AIM Growth in
accordance with its terms from and with respect to the revenues and assets of
New Pacific, except as the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors
rights generally, or by general equity principles (whether applied in a court of
law or a court of equity and including limitations on the availability of
specific performance or other equitable remedies).
Section 3.8 No Breaches or Defaults . The execution and
delivery of this Agreement by AIM Growth on behalf of New Pacific and
performance by AIM Growth of its obligations hereunder has been duly authorized
by all necessary trust action on the part of AIM Growth, other than New Pacific
Shareholders approval, and (i) do not, and on the Closing Date will not, result
in any violation of the Agreement and Declaration of Trust or by-laws of AIM
Growth and (ii) do not, and on the Closing Date will not, result in a breach of
any of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation or imposition of any Lien upon
any property or assets of New Pacific (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which AIM Growth is a
party or by which it may be bound and which relates to the assets of New Pacific
or to which any property of New Pacific may be subject; (B) any Permit (as
defined below); or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over AIM
Growth or any property of New Pacific. AIM Growth is not under the jurisdiction
of a court in a proceeding under Title 11 of the United States Code or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
Section 3.9 Authorizations or Consents. Other than those which
shall have been obtained or made on or prior to the Closing Date and those that
must be made after the Closing Date to comply
I-8
<PAGE> 48
with Section 2.5 of this Agreement, no authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority will be required
to be obtained or made by AIM Growth in connection with the due execution and
delivery by AIM Growth of this Agreement and the consummation by AIM Growth of
the transactions contemplated hereby.
Section 3.10 Permits. AIM Growth has in full force and effect
all approvals, consents, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights of Governmental Authorities (collectively,
"Permits") necessary for it to conduct its business as presently conducted as it
relates to New Pacific, and there has occurred no default under any Permit,
except for the absence of Permits and for defaults under Permits the absence or
default of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. To the knowledge of AIM Growth there
are no proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
Section 3.11 No Actions, Suits or Proceedings.
(a) There is no pending action, litigation or proceeding, nor,
to the knowledge of AIM Growth, has any litigation been overtly threatened in
writing or, if probable of assertion, orally, against AIM Growth before any
Governmental Authority which questions the validity or legality of this
Agreement or of the actions contemplated hereby or which seeks to prevent the
consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no judicial, administrative or arbitration
actions, suits, or proceedings instituted or pending or, to the knowledge of AIM
Growth, threatened in writing or, if probable of assertion, orally, against AIM
Growth affecting any property, asset, interest or right of New Pacific, that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to New Pacific. There are not in existence
on the date hereof any plea agreements, judgments, injunctions, consents,
decrees, exceptions or orders that were entered by, filed with or issued by
Governmental Authority relating to AIM Growth's conduct of the business of New
Pacific affecting in any significant respect the conduct of such business. AIM
Growth is not, and has not been to the knowledge of AIM Growth, the target of
any investigation by the SEC or any state securities administrator with respect
to its conduct of the business of New Pacific.
Section 3.12 Contracts. AIM Growth is not in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party and which involves or affects the assets of
New Pacific, by which the assets, business, or operations of New Pacific may be
bound or affected, or under which it or the assets, business or operations of
New Pacific receives benefits, and which default could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of AIM Growth there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
Section 3.13 Properties and Assets. New Pacific has good and
marketable title to all properties and assets reflected in the New Pacific
Financial Statements as owned by it, free and clear of all Liens, except as
described in New Pacific Financial Statements.
Section 3.14 Taxes.
(a) New Pacific has elected to be treated as a regulated
investment company under Subchapter M of the Code and is a separate corporation
within the meaning of Section 851(g)(1) of the Code.
I-9
<PAGE> 49
New Pacific has qualified as a regulated investment company for each taxable
year since inception that has ended prior to the Closing Date and will have
satisfied the requirements of Part I of Subchapter M of the Code to maintain
such qualification for the period beginning on the first day of its current
taxable year and ending on the Closing Date. New Pacific has no earnings and
profits accumulated in any taxable year in which the provisions of Subchapter M
of the Code did not apply to it. In order to (i) insure continued qualification
of New Pacific as a "regulated investment company" for tax purposes and (ii)
eliminate any tax liability of New Pacific arising by reason of undistributed
investment company taxable income or net capital gain, AIM Growth will declare
prior to the Valuation Date to the shareholders of New Pacific a dividend or
dividends that, together with all previous such dividends, shall have the effect
of distributing (A) all of New Pacific's investment company taxable income
(determined without regard to any deductions for dividends paid) for the taxable
year ended December 31, 1999 and for the short taxable year beginning on January
1, 2000 and ending on the Closing Date and (B) all of New Pacific's net capital
gain recognized in its taxable year ended December 31, 1999 and in such short
taxable year (after reduction for any capital loss carryover).
(b) New Pacific has timely filed all Returns required to be
filed by it and all Taxes with respect thereto have been paid, except where the
failure so to file or so to pay, would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. Adequate provision has
been made in the New Pacific Financial Statements for all Taxes in respect of
all periods ended on or before the date of such financial statements, except
where the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against New Pacific, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding
nor are any written requests for such waivers pending and no Returns of New
Pacific are currently being or have been audited with respect to income taxes or
other Taxes by any Federal, state, local or foreign Tax authority.
(c) To the best knowledge of AIM Growth, the fiscal year of
New Pacific has not been changed for tax purposes since the date on which it
commenced operations.
Section 3.15 Benefit and Employment Obligations. On or prior
to the Closing Date, New Pacific will have no obligation to provide any
post-retirement or post-employment benefit to any Person, including but not
limited to under any Benefit Plan, and have no obligation to provide unfunded
deferred compensation or other unfunded or self-funded benefits to any Person.
Section 3.16 Brokers. No broker, finder or similar
intermediary has acted for or on behalf of AIM Growth in connection with this
Agreement or the transactions contemplated hereby, and no broker, finder, agent
or similar intermediary is entitled to any broker's, finder's or similar fee or
other commission in connection therewith based on any agreement, arrangement or
understanding with AIM Growth or any action taken by it.
Section 3.17 Voting Requirements. The vote of a majority of
each class of shares of New Pacific cast at a meeting at which a quorum is
present (the "Required Shareholder Vote") is the only vote of the holders of any
class or series of shares of beneficial interest in New Pacific necessary to
approve this Agreement and the Reorganization of New Pacific contemplated by
this Agreement.
Section 3.18 State Takeover Statutes. No state takeover
statute or similar statute or regulation applies or purports to apply to the
Reorganizations, this Agreement or any of the transactions contemplated by this
Agreement.
I-10
<PAGE> 50
Section 3.19 Books and Records. The books and records of AIM
Growth relating to New Pacific, reflecting, among other things, the purchase and
sale of New Pacific Shares, the number of issued and outstanding shares owned by
New Pacific Shareholder and the state or other jurisdiction in which such shares
were offered and sold, are complete and accurate in all material respects.
Section 3.20 Prospectus and Statement of Additional
Information. The current prospectus and statement of additional information for
New Pacific as of the date on which they were issued did not contain, and as
supplemented by any supplement thereto dated prior to or on the Closing Date do
not contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
Section 3.21 No Distribution. Asian Growth Shares are not
being acquired for the purpose of any distribution thereof, other than in
accordance with the terms of this Agreement.
Section 3.22 Liabilities of New Pacific. The liabilities of
New Pacific that are to be assumed by Asian Growth in connection with the
Reorganization, or to which the assets of New Pacific to be transferred in the
Reorganizations are subject, were incurred by New Pacific in the ordinary course
of its business. The fair market value of the assets of New Pacific to be
transferred to Asian Growth in the Reorganization will equal or exceed the sum
of the liabilities to be assumed by Asian Growth plus the amount of liabilities,
if any, to which such transferred assets will be subject. The total adjusted
basis of the assets transferred to Asian Growth will equal or exceed the sum of
the liabilities to be assumed by Asian Growth plus the amount of liabilities to
which the transferred assets are subject.
Section 3.23 Value of Shares. The fair market value of Asian
Growth Class A Shares received by New Pacific Shareholders in the Reorganization
will be approximately equal to the fair market value of New Pacific Class A
shares constructively surrendered in exchange therefor, the fair market value of
Asian Growth Class B Shares received by New Pacific Shareholders in the
Reorganization will be approximately equal to the fair market value of New
Pacific Class B shares constructively surrendered in exchange therefor, and the
fair market value of Asian Growth Class C Shares received by New Pacific
Shareholders in the Reorganization will be approximately equal to the fair
market value of New Pacific Class C shares constructively surrendered in
exchange therefor.
Section 3.24 Shareholder Expenses. New Pacific Shareholders
will pay their own expenses, if any, incurred in connection with the
Reorganization.
Section 3.25 Intercompany Indebtedness. There is no
intercompany indebtedness between AIM Growth and AIM International that was
issued or acquired, or will be settled, at a discount.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AIM INTERNATIONAL
AIM International, on behalf of Asian Growth, represents and
warrants to AIM Growth as follows:
Section 4.1 Organization; Authority. AIM International is duly
organized, validly existing and in good standing under the Maryland General
Corporation Law, with all requisite trust power and authority to enter into this
Agreement and perform its obligations hereunder.
I-11
<PAGE> 51
Section 4.2 Registration and Regulation of AIM International.
AIM International is duly registered with the SEC as an investment company under
the Investment Company Act. Asian Growth is in compliance in all material
respects with all applicable laws, rules and regulations, including, without
limitation, the Investment Company Act, the Securities Act, the Exchange Act and
all applicable state securities laws. Asian Growth is in compliance in all
material respects with the applicable investment policies and restrictions set
forth in the AIM International Registration Statement. The value of the net
assets of Asian Growth is determined using portfolio valuation methods that
comply in all material respects with the requirements of the Investment Company
Act and the policies of Asian Growth and all purchases and redemptions of Asian
Growth Shares have been effected at the net asset value per share calculated in
such manner.
Section 4.3 Financial Statements. The books of account and
related records of Asian Growth fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements for
the fiscal year ended October 31, 1999, of Asian Growth previously delivered to
AIM Growth (the "Asian Growth Financial Statements") present fairly in all
material respects the financial position of Asian Growth as at the dates
indicated and the results of operations and changes in net assets for the
periods then ended in accordance with generally accepted accounting principles
applied on a consistent basis for the periods then ended.
Section 4.4 No Material Adverse Changes; Contingent
Liabilities. Since October 31, 1999, no material adverse change has occurred in
the financial condition, results of operations, business, assets or liabilities
of Asian Growth or the status of Asian Growth as a regulated investment company
under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by Asian Growth or occurring in the ordinary course of business
of Asian Growth or AIM International. There are no contingent liabilities of
Asian Growth not disclosed in the Asian Growth Financial Statements which are
required to be disclosed in accordance with generally accepted accounting
principles.
Section 4.5 Registration of Asian Growth Class A Shares, Asian
Growth Class B Shares and Asian Growth Class C Shares.
(a) The capital stock of AIM International is divided into six
portfolios, including Asian Growth. Asian Growth currently has three classes of
shares, Class A shares, Class B shares and Class C shares. Under its Charter,
AIM International is authorized to issue forty million (40,000,000) Class A
shares, forty million (40,000,000) Class B shares and forty million (40,000,000)
Class C shares of Asian Growth.
(b) Asian Growth Shares to be issued pursuant to Section 2.6
shall on the Closing Date be duly registered under the Securities Act by a
Registration Statement on Form N-14 of AIM International then in effect.
(c) Asian Growth Shares to be issued pursuant to Section 2.6
are duly authorized and on the Closing Date will be validly issued and fully
paid and non-assessable and will conform to the description thereof contained in
the Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, Asian Growth shall not have outstanding any warrants, options,
convertible securities or any other type of right pursuant to which any Person
could acquire Asian Growth Class A, Asian Growth Class B or Asian Growth Class C
shares that, if exercised or converted, would affect the New Pacific
Shareholders' acquisition or retention of control of Asian Growth as defined in
Section 368(a)(2)(H)(i) of the Code, except for the right of investors to
acquire Asian Growth Class A Shares, Asian Growth Class B Shares or Asian Growth
Class C
I-12
<PAGE> 52
Shares at net asset value in the normal course of its business as a series of an
open-end management investment company operating under the Investment Company
Act.
(d) The combined proxy statement/prospectus (the "Combined
Proxy Statement/Prospectus") which forms a part of AIM International's
Registration Statement on Form N-14 shall be furnished to New Pacific
Shareholders entitled to vote at the New Pacific Shareholders Meeting. The
Combined Proxy Statement/Prospectus and related Statement of Additional
Information of Asian Growth, when they become effective, shall conform to the
applicable requirements of the Securities Act and the Investment Company Act and
shall not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading, provided, however, that no representation or warranty is
made with respect to written information provided by AIM Growth for inclusion in
the Combined Proxy Statement/Prospectus.
(e) The shares of Asian Growth which have been or are being
offered for sale (other than the Asian Growth Shares to be issued in connection
with the Reorganizations) have been duly registered under the Securities Act by
the AIM International Registration Statement and have been duly registered,
qualified or are exempt from registration or qualification under the securities
laws of each state or other jurisdiction in which such shares have been or are
being offered for sale, and no action has been taken by AIM International to
revoke or rescind any such registration or qualification.
Section 4.6 Accountants. KPMG LLP, which has reported upon the
Asian Growth Financial Statements for the period ended October 31, 1999, are
independent public accountants as required by the Securities Act and the
Exchange Act.
Section 4.7 Binding Obligation. This Agreement has been duly
authorized, executed and delivered by AIM International on behalf of Asian
Growth and, assuming this Agreement has been duly executed and delivered by AIM
Growth, constitutes the legal, valid and binding obligation of AIM
International, enforceable against AIM International in accordance with its
terms from and with respect to the revenues and assets of Asian Growth, except
as the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally, or by general equity principles (whether applied in a court or law or
a court of equity and including limitations on the availability of specific
performance or other equitable remedies).
Section 4.8 No Breaches or Defaults. The execution and
delivery of this Agreement by AIM International on behalf of Asian Growth and
performance by AIM International of its obligations hereunder have been duly
authorized by all necessary corporate action on the part of AIM International
and (i) do not, and on the Closing Date will not, result in any violation of the
Charter or by-laws of AIM International and (ii) do not, and on the Closing Date
will not, result in a breach of any of the terms or provisions of, or constitute
(with or without the giving of notice or the lapse of time or both) a default
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation or imposition of any Lien upon any property or assets of Asian Growth
(except for such breaches or defaults or Liens that would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect)
under (A) any indenture, mortgage or loan agreement or any other material
agreement or instrument to which AIM International is a party or by which it may
be bound and which relates to the assets of Asian Growth or to which any
properties of Asian Growth may be subject; (B) any Permit; or (C) any existing
applicable law, rule, regulation, judgment, order or decree of any Governmental
Authority having jurisdiction over AIM International or any property of Asian
Growth. AIM International is
I-13
<PAGE> 53
not under the jurisdiction of a court in a proceeding under Title 11 of the
United States Code or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
Section 4.9 Authorizations or Consents. Other than those which
shall have been obtained or made on or prior to the Closing Date, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority will be required to be obtained or made by AIM
International in connection with the due execution and delivery by AIM
International of this Agreement and the consummation by AIM International of the
transactions contemplated hereby.
Section 4.10 Permits. AIM International has in full force and
effect all Permits necessary for it to conduct its business as presently
conducted as it relates to Asian Growth, and there has occurred no default under
any Permit, except for the absence of Permits and for defaults under Permits the
absence or default of which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. To the knowledge of
AIM International there are no proceedings relating to the suspension,
revocation or modification of any Permit, except for such that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 4.11 No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to
the knowledge of AIM International, has any litigation been overtly threatened
in writing or, if probable of assertion, orally, against AIM International
before any Governmental Authority which questions the validity or legality of
this Agreement or of the transactions contemplated hereby, or which seeks to
prevent the consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no judicial, administrative or arbitration
actions, suits, or proceedings instituted or pending or, to the knowledge of AIM
International, threatened in writing or, if probable of assertion, orally,
against AIM International, affecting any property, asset, interest or right of
Asian Growth, that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect with respect to Asian Growth. There are not
in existence on the date hereof any plea agreements, judgments, injunctions,
consents, decrees, exceptions or orders that were entered by, filed with or
issued by any Governmental Authority relating to AIM International's conduct of
the business of Asian Growth affecting in any significant respect the conduct of
such business. AIM International is not, and has not been, to the knowledge of
AIM International, the target of any investigation by the SEC or any state
securities administrator with respect to its conduct of the business of Asian
Growth.
Section 4.12 Taxes.
(a) Asian Growth has elected to be treated as a regulated
investment company under Subchapter M of the Code and is a separate corporation
within the meaning of Section 851(g)(1) of the Code. Asian Growth has qualified
as a regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will satisfy the requirements of Part I of
Subchapter M of the Code to maintain such qualification for its current taxable
year. Asian Growth has no earnings or profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it.
(b) Asian Growth has timely filed all Returns required to be
filed by it and all Taxes with respect thereto have been paid, except where the
failure so to file or so to pay, would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. Adequate provision has
been made in the Asian Growth Financial Statements for all Taxes in respect of
all periods ending on or before the
I-14
<PAGE> 54
date of such financial statements, except where the failure to make such
provisions would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect. No deficiencies for any Taxes have been
proposed, assessed or asserted in writing by any taxing authority against Asian
Growth, and no deficiency has been proposed, assessed or asserted, in writing,
where such deficiency would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. No waivers of the time to assess
any such Taxes are outstanding nor are any written requests for such waivers
pending and no Return of Asian Growth is currently being or has been audited
with respect to income taxes or other Taxes by any Federal, state, local or
foreign Tax authority.
(c) The fiscal year of Asian Growth has not been changed for
tax purposes since the date on which it commenced operations.
Section 4.13 Brokers. No broker, finder or similar
intermediary has acted for or on behalf of AIM International in connection with
this Agreement or the transactions contemplated hereby, and no broker, finder,
agent or similar intermediary is entitled to any broker's, finder's or similar
fee or other commission in connection therewith based on any agreement,
arrangement or understanding with AIM International or any action taken by it.
Section 4.14 Representations Concerning the Reorganization.
(a) AIM International has no plan or intention to reacquire
any Asian Growth Shares issued in the Reorganization, except to the extent that
Asian Growth is required by the Investment Company Act to redeem any of its
shares presented for redemption at net asset value in the ordinary course of its
business as an open-end, management investment company.
(b) Asian Growth has no plan or intention to sell or otherwise
dispose of any of the assets of New Pacific acquired in the Reorganization,
other than in the ordinary course of its business and to the extent necessary to
maintain its status as a "regulated investment company" under the Code.
(c) Following the Reorganization, Asian Growth will continue
an "historic business" (within the meaning of Section 1.368-1(d) of the Income
Tax Regulations under the Code) of New Pacific or use a significant portion of
New Pacific's historic business assets in a business.
(d) Following the Reorganization, the New Pacific Shareholders
will be in control of Asian Growth within the meaning of Section 368(a)(2)(H)(i)
of the Code.
(e) Prior to or in the Reorganization, neither Asian Growth
nor any person related to Asian Growth (for purposes of this paragraph as
defined in section 1.368-1(e)(3) of the Treasury Regulations) will have acquired
directly or through any transaction, agreement or arrangement with any other
person, shares of New Pacific with consideration other than shares of Asian
Growth. There is no plan or intention by Asian Growth or any person related to
Asian Growth to acquire or redeem any of the Asian Growth Shares issued in the
Reorganization either directly or through any transaction, agreement, or
arrangement with any other person, other than redemptions in the ordinary course
of Asian Growth's business as an open-end investment company as required by the
Investment Company Act.
Section 4.15 Prospectus and Statement of Additional
Information. The current prospectus and statement of additional information for
Asian Growth as of the date on which it was issued does not contain, and as
supplemented by any supplement thereto dated prior to or on the Closing Date
does not
I-15
<PAGE> 55
contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
Section 4.16 Value of Shares. The fair market value of Asian
Growth Class A Shares received by New Pacific Shareholders in each
Reorganization will be approximately equal to the fair market value of New
Pacific Class A shares constructively surrendered in exchange therefor, the fair
market value of Asian Growth Class B Shares received by New Pacific Shareholders
in each Reorganization will be approximately equal to the fair market value of
New Pacific Class B shares constructively surrendered therefor, and the fair
market value of Asian Growth Class C Shares received by New Pacific Shareholders
in each Reorganization will be approximately equal to the fair market value of
New Pacific Class C shares constructively surrendered therefor.
Section 4.17 Intercompany Indebtedness; Consideration. There
is no intercompany indebtedness between AIM Growth and AIM International that
was issued or acquired, or will be settled, at a discount. No consideration
other than Asian Growth Shares (and Asian Growth's assumption of New Pacific's
liabilities, including for this purpose all liabilities to which the assets of
New Pacific are subject) will be issued in exchange for the assets of New
Pacific acquired by Asian Growth in connection with the Reorganization. The fair
market value of the assets of New Pacific transferred to Asian Growth in the
Reorganization will equal or exceed the sum of the liabilities assumed by Asian
Growth, plus the amount of liabilities, if any, to which such transferred assets
are subject.
ARTICLE 5
COVENANTS
Section 5.1 Conduct of Business.
(a) From the date of this Agreement up to and including the
Closing Date (or, if earlier, the date upon which this Agreement is terminated
pursuant to Article 7), AIM Growth shall conduct the business of New Pacific
only in the ordinary course and substantially in accordance with past practices,
and shall use its reasonable best efforts to preserve intact its business
organization and material assets and maintain the rights, franchises and
business and customer relations necessary to conduct the business of New Pacific
in the ordinary course in all material respects. Without limiting the generality
of the foregoing, AIM Growth shall not do any of the following with respect to
New Pacific without the prior written consent of AIM International, which
consent shall not be unreasonably withheld:
(i) split, combine or reclassify any of its
shares of beneficial interest or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for its
shares of beneficial interest;
(ii) amend its Agreement and Declaration of Trust
or by-laws;
(iii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or series or division thereof or any assets that are material,
individually or in the aggregate, to New Pacific taken as a whole,
except purchases of assets in the ordinary course of business
consistent with past practice;
I-16
<PAGE> 56
(iv) sell, lease or otherwise dispose of any of
its material properties or assets, or mortgage or otherwise encumber or
subject to any Lien any of its material properties or assets, other
than in the ordinary course of business;
(v) incur any indebtedness for borrowed money or
guarantee any indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of New Pacific, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another Person, or enter into any arrangement
having the economic effect of any of the foregoing;
(vi) settle or compromise any material income tax
liability or make any material tax election;
(vii) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary course
of business;
(viii) change its method of accounting, except as
required by changes in generally accepted accounting principles as
concurred in by its independent auditors, or change its fiscal year;
(ix) make or agree to make any material
severance, termination, indemnification or similar payments except
pursuant to existing agreements; or
(x) adopt any Benefit Plan.
(b) From the date of this Agreement up to and including the
Closing Date (or, if earlier, the date upon which this Agreement is terminated
pursuant to Article 7), AIM International shall conduct the business of Asian
Growth only in the ordinary course and substantially in accordance with past
practices, and shall use its reasonable best efforts to preserve intact its
business organization and material assets and maintain the rights, franchises
and business relations necessary to conduct the business operations of Asian
Growth in the ordinary course in all material respects.
Section 5.2 Announcements. AIM Growth and AIM International
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement and the transactions
contemplated by this Agreement, and neither AIM Growth nor AIM International
shall issue any such press release or make any public statement without the
prior written approval of the other party to this Agreement, such approval not
to be unreasonably withheld, except as may be required by law.
Section 5.3 Expenses. New Pacific and Asian Growth shall each,
respectively, bear the expenses it incurs in connection with this Agreement and
a Reorganization and other transactions contemplated hereby.
Section 5.4 Further Assurances. Each of the parties hereto
shall execute such documents and other papers and perform such further acts as
may be reasonably required to carry out the provisions hereof and the
transactions contemplated hereby. Each such party shall, on or prior to the
Closing Date, use its reasonable best efforts to fulfill or obtain the
fulfillment of the conditions precedent to the consummation of the
Reorganizations, including the execution and delivery of any documents,
certificates, instruments or other papers that are reasonably required for the
consummation of the Reorganizations.
I-17
<PAGE> 57
Section 5.5 Notice of Events. AIM International shall give
prompt notice to AIM Growth, and AIM Growth shall give prompt notice to AIM
International, of (a) the occurrence or non-occurrence of any event which to the
knowledge of AIM International or to the knowledge of AIM Growth, the occurrence
or non-occurrence of which would be likely to result in any of the conditions
specified in (i) in the case of AIM Growth, Sections 6.1 and 6.2 or (ii) in the
case of AIM International, Sections 6.2 and 6.3, not being satisfied so as to
permit the consummation of the Reorganizations and (b) any material failure on
its part, or on the part of the other party hereto of which it has knowledge, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.5 shall not limit or otherwise affect the remedies
available hereunder to any party.
Section 5.6 Access to Information.
(a) AIM Growth will, during regular business hours and on
reasonable prior notice, allow AIM International and its authorized
representatives reasonable access to the books and records of AIM Growth
pertaining to the assets of New Pacific and to officers of AIM Growth
knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AIM Growth.
(b) AIM International will, during regular business hours and
on reasonable prior notice, allow AIM Growth and its authorized representatives
reasonable access to the books and records of AIM International pertaining to
the assets of Asian Growth and to officers of AIM International knowledgeable
thereof; provided, however, that any such access shall not significantly
interfere with the business or operations of AIM International.
Section 5.7 Consents, Approvals and Filings. Each of AIM
Growth and AIM International shall make all necessary filings, as soon as
reasonably practicable, including, without limitation, those required under the
Securities Act, the Exchange Act, the Investment Company Act and the Advisers
Act, in order to facilitate prompt consummation of the Reorganizations and the
other transactions contemplated by this Agreement. In addition, each of AIM
Growth and AIM International shall use its reasonable best efforts, and shall
cooperate fully with each other (i) to comply as promptly as reasonably
practicable with all requirements of Governmental Authorities applicable to the
Reorganizations and the other transactions contemplated herein and (ii) to
obtain as promptly as reasonably practicable all necessary permits, orders or
other consents of Governmental Authorities and consents of all third parties
necessary for the consummation of the Reorganizations and the other transactions
contemplated herein. Each of AIM Growth and AIM International shall use
reasonable efforts to provide such information and communications to
Governmental Authorities as such Governmental Authorities may request.
Section 5.8 Submission of Agreement to Shareholders. AIM
Growth shall take all action necessary in accordance with applicable law and its
Agreement and Declaration of Trust and by-laws to convene the New Pacific
Shareholders Meeting. AIM Growth shall, through its Board of Trustees, recommend
to New Pacific Shareholders approval of this Agreement and the transactions
contemplated by this Agreement. AIM Growth shall use its reasonable best efforts
to hold a New Pacific Shareholders Meeting as soon as practicable after the date
hereof.
I-18
<PAGE> 58
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1 Conditions Precedent of AIM International. The
obligation of AIM International to consummate the Reorganization is subject to
the satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived in writing by AIM
International.
(a) The representations and warranties of AIM Growth on behalf
of New Pacific participating in the Reorganization set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date with the same effect as though all such
representations and warranties had been made as of the Closing Date.
(b) AIM Growth shall have complied with and satisfied in all
material respects all agreements and conditions relating to New Pacific
participating in the Reorganization set forth herein on its part to be performed
or satisfied at or prior to the Closing Date.
(c) AIM International shall have received at the Closing Date
(i) a certificate, dated as of the Closing Date, from an officer of AIM Growth,
in such individual's capacity as an officer of AIM Growth and not as an
individual, to the effect that the conditions specified in Section 6.1(a) and
(b) have been satisfied and (ii) a certificate, dated as of the Closing Date,
from the Secretary or Assistant Secretary of AIM Growth certifying as to the
accuracy and completeness of the attached Agreement and Declaration of Trust and
by-laws of AIM Growth, and resolutions, consents and authorizations of or
regarding AIM Growth with respect to the execution and delivery of this
Agreement and the transactions contemplated hereby.
(d) AIM International shall have received the signed opinion
of Kirkpatrick & Lockhart LLP, counsel to AIM Growth, or other counsel
reasonably acceptable to AIM International, in form and substance reasonably
acceptable to counsel for AIM International, as to the matters set forth in
Schedule 6.1(d).
(e) The dividend or dividends described in the last sentence
of Section 3.14(a) shall have been declared.
Section 6.2 Mutual Conditions. The obligations of AIM Growth
and AIM International to consummate a Reorganization are subject to the
satisfaction, at or prior to the Closing Date, of all of the following further
conditions, any one or more may be waived in writing by AIM Growth and AIM
International, but only if and to the extent that such waiver is mutual.
(a) All filings required to be made prior to the Closing Date
with, and all consents, approvals, permits and authorizations required to be
obtained on or prior to the Closing Date from Governmental Authorities in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein by AIM Growth and AIM
International shall have been made or obtained, as the case may be; provided,
however, that such consents, approvals, permits and authorizations may be
subject to conditions that would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
(b) This Agreement, the Reorganization of New Pacific and
related matters shall have been approved and adopted at the New Pacific
Shareholders Meeting by the shareholders of New Pacific on the record date by
the Required Shareholder Vote.
I-19
<PAGE> 59
(c) The assets of New Pacific to be acquired by Asian Growth
shall constitute at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by New Pacific
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by New Pacific to pay the expenses it incurs in connection with this
Agreement and the Reorganization and to effect all shareholder redemptions and
distributions (other than regular, normal dividends and regular, normal
redemptions pursuant to the Investment Company Act, and not in excess of the
requirements of Section 852 of the Code, occurring in the ordinary course of New
Pacific's business as a series of an open-end management investment company)
after the date of this Agreement shall be included as assets of New Pacific held
immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent
injunction or other order issued by any Governmental Authority preventing the
consummation of the Reorganization on the Closing Date shall be in effect;
provided, however, that the party or parties invoking this condition shall use
reasonable efforts to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by AIM
International with respect to Asian Growth Shares to be issued to New Pacific
Shareholders in connection with the Reorganization shall have become effective
under the Securities Act and no stop order suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the Securities Act.
(f) AIM Growth and AIM International shall have received on or
before the Closing Date an opinion of Ballard Spahr Andrews & Ingersoll, LLP in
form and substance reasonably acceptable to AIM Growth and AIM International, as
to the matters set forth on Schedule 6.2(f).
(g) The dividend or dividends described in the last sentence
of Section 3.14(a) shall have been declared.
Section 6.3 Conditions Precedent of AIM Growth. The obligation
of AIM Growth to consummate a Reorganization is subject to the satisfaction, at
or prior to the Closing Date, of all of the following conditions, any one or
more of which may be waived in writing by AIM Growth.
(a) The representations and warranties of AIM International on
behalf of Asian Growth participating in the Reorganization set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date with the same effect as though all
such representations and warranties had been made as of the Closing Date.
(b) AIM International shall have complied with and satisfied
in all material respects all agreements and conditions relating to Asian Growth
participating in the Reorganization set forth herein on its part to be performed
or satisfied at or prior to the Closing Date.
(c) AIM Growth shall have received on the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AIM International,
in such individual's capacity as an officer of AIM International and not as an
individual, to the effect that the conditions specified in Sections 6.3(a) and
(b) have been satisfied and (ii) a certificate, dated as of the Closing Date,
from the Secretary or Assistant Secretary of AIM International certifying as to
the accuracy and completeness of the attached Charter and by-laws, as amended,
of AIM International and resolutions, consents and authorizations of or
regarding AIM International with respect to the execution and delivery of this
Agreement and the transactions contemplated hereby.
I-20
<PAGE> 60
(d) AIM Growth shall have received the signed opinion of
Ballard Spahr Andrews & Ingersoll, LLP, counsel to AIM International, or other
counsel reasonably acceptable to AIM Growth, in form and substance reasonably
acceptable to counsel for AIM International, as to the matters set forth on
Schedule 6.3(d).
ARTICLE 7
TERMINATION OF AGREEMENT
Section 7.1 Termination.
(a) This Agreement may be terminated in whole or with respect
to a Reorganization described herein on or prior to the Closing Date as follows:
(i) by mutual written consent of AIM Growth and AIM
International; or
(ii) at the election of AIM Growth or AIM
International:
(A) if the Closing Date shall not be on or
before September 1, 2000, or such later date as the
parties hereto may agree upon, unless the failure
to consummate the Reorganization is the result of a
willful and material breach of this Agreement by
the party seeking to terminate this Agreement;
(B) if, upon a vote at New Pacific
Shareholders Meeting or any adjournment thereof,
the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(C) if any Governmental Authority shall
have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such
order, decree, ruling or other action shall have
become final and nonappealable.
(b) The termination of this Agreement shall be effectuated by
the delivery by the terminating party to the other party of a written notice of
such termination.
Section 7.2 Survival After Termination. If this Agreement is
terminated in accordance with Section 7.1 hereof and the Reorganization of New
Pacific is not consummated, this Agreement shall become void and of no further
force and effect with respect to such Reorganization and the respective New
Pacific, except for the provisions of Section 5.3.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Survival of Representations and Warranties. The
representations, warranties and covenants in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement shall survive the
consummation of the transactions contemplated hereunder for a period of one (1)
year following the Closing Date.
I-21
<PAGE> 61
Section 8.2 Governing Law. This Agreement shall be construed
and interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
Section 8.3 Binding Effect, Persons Benefiting, No Assignment.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and the respective successors and assigns of the parties and such
Persons. Nothing in this Agreement is intended or shall be construed to confer
upon any entity or Person other than the parties hereto and their respective
successors and permitted assigns any right, remedy or claim under or by reason
of this Agreement or any part hereof. Without the prior written consent of the
parties hereto, this Agreement may not be assigned by any of the parties hereto;
provided, however, that AIM International may assign its rights and obligations
under this Agreement to AIM International Mutual Funds, a Delaware business
trust, as successor to AIM International under that certain Agreement and Plan
of Reorganization dated December 7, 1999, without the prior consent of AIM
Growth.
Section 8.4 Obligations of AIM International and AIM Growth.
(a) AIM Growth and AIM International hereby acknowledge and
agree that Asian Growth is a separate investment portfolio of AIM International,
that AIM International is executing this Agreement on behalf of Asian Growth,
and that any amounts payable by AIM International under or in connection with
this Agreement shall be payable solely from the revenues and assets of Asian
Growth. AIM Growth further acknowledges and agrees that this Agreement has been
executed by a duly authorized officer of AIM International in his or her
capacity as an officer of AIM International intending to bind AIM International
as provided herein, and that no officer, director or shareholder of AIM
International shall be personally liable for the liabilities or obligations of
AIM International incurred hereunder.
(b) AIM Growth and AIM International hereby acknowledge and
agree that New Pacific is a separate investment portfolio of AIM Growth, that
AIM Growth is executing this Agreement on behalf of New Pacific and that any
amounts payable by AIM Growth under or in connection with this Agreement shall
be payable solely from the revenues and assets of New Pacific. AIM International
further acknowledges and agrees that this Agreement has been executed by a duly
authorized officer of AIM Growth in his or her capacity as an officer of AIM
Growth intending to bind AIM Growth as provided herein, and that no officer,
trustee or shareholder of AIM Growth shall be personally liable for the
liabilities of AIM Growth incurred hereunder.
Section 8.5 Amendments. This Agreement may not be amended,
altered or modified except by a written instrument executed by AIM Growth and
AIM International.
Section 8.6 Enforcement. The parties agree irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.
Section 8.7 Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section of, or
a Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
I-22
<PAGE> 62
limitation." Each representation and warranty contained in Article 3 or 4 that
relates to a general category of a subject matter shall be deemed superseded by
a specific representation and warranty relating to a subcategory thereof to the
extent of such specific representation or warranty.
Section 8.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
Section 8.9 Entire Agreement; Schedules. This Agreement,
including the Schedules, certificates and lists referred to herein, and any
documents executed by the parties simultaneously herewith or pursuant thereto,
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, written or oral, between the parties with respect to such
subject matter.
Section 8.10 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt requested, or by courier,
addressed as follows (or to such other address as a party may designate by
notice to the other):
(a) If to AIM Growth:
AIM Growth Series
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Attn: Arthur J. Brown, Esq.
Fax: (202) 778-9100
(b) If to AIM International:
AIM International Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
I-23
<PAGE> 63
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
Section 8.11 Representations by AIM Advisors. In its capacity
as investment adviser to AIM Growth, AIM Advisors represents to AIM
International that to the best of its knowledge the representations and
warranties of AIM Growth and New Pacific contained in this Agreement are true
and correct as of the date of this Agreement. In its capacity as investment
adviser to AIM International, AIM Advisors represents to AIM Growth that to the
best of its knowledge the representations and warranties of AIM International
and Asian Growth contained in this Agreement are true and correct as of the date
of this Agreement. For purposes of this Section 8.11, the best knowledge
standard shall be deemed to mean that the officers of AIM Advisors who have
substantive responsibility for the provision of investment advisory services to
AIM Growth and AIM International do not have actual knowledge to the contrary
after due inquiry.
I-24
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
AIM GROWTH SERIES, acting
on behalf of AIM New Pacific Growth
By: /s/ ROBERT H. GRAHAM
--------------------------------------
AIM INTERNATIONAL FUNDS, INC., acting
on behalf of AIM Asian Growth Fund
By: /s/ ROBERT H. GRAHAM
--------------------------------------
A I M Advisors, Inc.
By: /s/ ROBERT H. GRAHAM
--------------------------------------
I-25
<PAGE> 65
Schedule 6.1(d)
Opinion of Counsel to AIM Growth
1. AIM Growth is duly organized and validly existing as a business
trust under the Delaware Business Trust Act.
2. AIM Growth is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AIM
Growth have been duly authorized and approved by all requisite trust
action on the part of AIM Growth. The Agreement has been duly
executed and delivered by AIM Growth and constitutes the valid and
binding obligation of AIM Growth.
4. New Pacific Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are
non-assessable.
5. To the best of our knowledge, AIM Growth is not required to submit
any notice, report or other filing with or obtain any authorization,
consent or approval from any governmental authority or self
regulatory organization prior to the consummation of the
transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AIM Growth or who has devoted substantive
attention on behalf of AIM Growth during the preceding twelve months and who is
still currently employed by or is currently a member of this firm, no litigation
or governmental proceeding is pending or threatened in writing against New
Pacific (i) with respect to the Agreement or (ii) which involves in excess of
$500,000 in damages.
I-26
<PAGE> 66
Schedule 6.2(f)
Tax Opinions
(i) The transfer of the assets of New Pacific to Asian
Growth in exchange for Asian Growth Shares distributed directly to New Pacific
Shareholders, as provided in the Agreement, will constitute a "reorganization"
within the meaning of Section 368(a) of the Code and that New Pacific and Asian
Growth will be "a party to a reorganization" within the meaning of Section
368(b) of the Code.
(ii) In accordance with Section 361(a) and Section 361(c)(1)
of the Code, no gain or loss will be recognized by New Pacific on the transfer
of its assets to Asian Growth solely in exchange for Asian Growth Class A
Shares, Asian Growth Class B Shares and Asian Growth Class C Shares or on the
distribution of Asian Growth Class A Shares, Asian Growth Class B Shares and
Asian Growth Class C Shares to New Pacific Shareholders.
(iii) In accordance with Section 1032 of the Code, no gain
or loss will be recognized by Asian Growth upon the receipt of assets of New
Pacific in exchange for Asian Growth Class A Shares, Asian Growth Class B Shares
and Asian Growth Class C Shares issued directly to New Pacific Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no
gain or loss will be recognized by New Pacific Shareholders on the receipt of
Asian Growth Class A Shares, Asian Growth Class B Shares and Asian Growth Class
C Shares in exchange for New Pacific Shares.
(v) In accordance with Section 362(b) of the Code, the
basis to Asian Growth of the assets of New Pacific will be the same as the basis
of such assets in the hands of New Pacific immediately prior to the
Reorganization.
(vi) In accordance with Section 358(a) of the Code, a New
Pacific Shareholder's basis for Asian Growth Class A Shares, Asian Growth Class
B Shares or Asian Growth Class C Shares received by the New Pacific Shareholder
will be the same as his basis for New Pacific Shares exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a New
Pacific Shareholder's holding period for Asian Growth Class A Shares, Asian
Growth Class B Shares or Asian Growth Class C Shares will be determined by
including New Pacific Shareholder's holding period for New Pacific Shares
exchanged therefor, provided that the New Pacific Shareholder held New Pacific
Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the
holding period with respect to the assets of New Pacific transferred to Asian
Growth in the Reorganization will include the holding period for such assets in
the hands of New Pacific.
I-27
<PAGE> 67
Schedule 6.3(d)
Opinion of Counsel to AIM International
1. AIM International is a corporation validly existing and in good
standing under the Maryland General Corporation Law.
2. AIM International is an open-end, management investment company
registered under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AIM
International have been duly authorized and approved by all
requisite trust action on the part of AIM International. The
Agreement has been duly executed and delivered by AIM International
and constitutes the valid and binding obligation of AIM
International.
4. Asian Growth Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are
non-assessable.
5. To the best of our knowledge, AIM International is not required to
submit any notice, report or other filing with or obtain any
authorization, consent or approval from any governmental authority
or self regulatory organization prior to the consummation of the
transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AIM International or who has devoted
substantive attention on behalf of AIM International during the preceding twelve
months and who is still currently employed by or is currently a member of this
firm, no litigation or governmental proceeding is pending or threatened in
writing against Asian Growth (i) with respect to the Agreement or (ii) which
involves in excess of $500,000 in damages.
I-28
<PAGE> 68
APPENDIX II
AIM ASIAN GROWTH FUND
- --------------------------------------------------------------------------------
AIM Asian Growth Fund seeks to provide long-term growth of capital.
AIM--Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it before
investing and keep it for future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
The Board of Directors voted to
request shareholder approval of
certain items. For further
information on these items, see
Submission of Matters to
Shareholders in this prospectus.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 69
---------------------
AIM ASIAN GROWTH FUND
---------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 2
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 6
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 6
Dividends and Distributions 6
Submission of Matters to Shareholders 6
FINANCIAL HIGHLIGHTS 7
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 70
---------------------
AIM ASIAN GROWTH FUND
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, at least 80%
(65% beginning March 1, 2000) of its assets in marketable equity securities
issued by Asian companies (except Japanese companies), including companies with
market capitalizations of less than $1 billion. The fund considers Asian
companies to be those (1) organized under the laws of a country in Asia and
having a principal office in a country in Asia; (2) that derive 50% or more of
their total revenues from business in Asia; or (3) whose equity securities are
traded principally on a stock exchange, or in an over-the-counter market, in
Asia.
The fund may invest up to 20% of its total assets in securities exchangeable
for or convertible into equity securities of Asian companies. The fund may also
invest up to 20% of its total assets in securities of non-Asian companies. The
fund may also invest up to 20% of its total assets in high-grade short-term
securities and debt securities, including U.S. Government obligations,
investment grade corporate bonds or taxable municipal securities, whether
denominated in U.S. dollars or foreign currencies.
The fund will normally invest in companies located in at least three
countries, including countries in Asia as well as Australia and New Zealand. The
fund may also invest up to 100% of its total assets in companies in developing
countries, i.e., those that are in the initial stages of their industrial
cycles.
The portfolio managers focus on companies that have experienced above-average
long-term growth in earnings and have strong prospects for future growth. In
selecting countries in which the fund will invest, the portfolio managers also
consider such factors as the prospect for relative economic growth among
countries or regions, economic or political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
1
<PAGE> 71
---------------------
AIM ASIAN GROWTH FUND
---------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of small and micro-cap
companies, whose prices may go up and down more than the prices of equity
securities of larger, more established companies. Also, since equity securities
of small and micro-cap companies may not be traded as often as equity securities
of larger, more established companies, it may be difficult or impossible for the
fund to sell securities at a desired price.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
The fund may participate in the initial public offering (IPO) market. Because
of the fund's small asset base, any investment the fund may make in IPOs may
significantly increase the fund's total return. As the fund's assets grow, the
impact of IPO investments will decline, which may reduce the fund's total
return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 72
---------------------
AIM ASIAN GROWTH FUND
---------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1998................................... -8.54%
1999................................... 67.98%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
40.89% (quarter ended June 30, 1999) and the lowest quarterly return was -25.67%
(quarter ended June 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR INCEPTION DATE
- -------------------------------------------------------------------
<S> <C> <C> <C>
Class A 58.70% 11.14% 11/03/97
Class B 61.58 12.02 11/03/97
Class C 65.84 13.11 11/03/97
MSCI AC Asia Pacific Free ex-Japan
Index(1) 49.83 13.75(2) 10/31/97(2)
- -------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country Asia Pacific Free
ex-Japan Index measures the performance of 12 of both developed and emerging
markets in this region. The index excludes shares that are not readily
purchased by non-local investors.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 73
---------------------
AIM ASIAN GROWTH FUND
---------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.95% 0.95% 0.95%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 1.42 1.64 1.64
Total Annual Fund
Operating Expenses 2.72 3.59 3.59
Fee Waivers and
Reimbursements(2) 0.80 0.80 0.80
Net Expenses 1.92 2.79 2.79
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses of Class A, Class B and Class C to 1.92%, 2.80% and
2.80%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $810 $1,348 $1,910 $3,433
Class B 862 1,400 2,059 3,662
Class C 462 1,100 1,859 3,854
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $810 $1,348 $1,910 $3,433
Class B 362 1,100 1,859 3,662
Class C 362 1,100 1,859 3,854
- ----------------------------------------------
</TABLE>
4
<PAGE> 74
---------------------
AIM ASIAN GROWTH FUND
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management including the fund's investment
decisions and the execution of securities transactions. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO Global Asset
Management Limited (the subadvisor), the fund's subadvisor, is located at Cedar
House, 41 Cedar Avenue, Hamilton, Bermuda HM12. INVESCO Asia Limited (the
subsubadvisor), the fund's subsubadvisor, is located at 2001 Exchange Square,
Tower 2, Central, Hong Kong. All three entities are affiliated.
The subadvisor and subsubadvisor are responsible for providing the advisor
with economic and market research, securities analysis and investment
recommendations with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives. The subadvisor has acted as an investment advisor since
1995. The subsubadvisor has acted as an investment advisor since 1972.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.15% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, both of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Shuxin Cao, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1997. Prior to 1997, Mr. Cao was an international equity analyst for Boatmen's
Trust Company.
- - A. Dale Griffin, III, Senior Portfolio Manager, who has been responsible for
the fund since its inception in 1997 and has been associated with the advisor
and/or its affiliates since 1989.
- - Barrett K. Sides, Portfolio Manager, who has been responsible for the fund
since its inception in 1997 and has been associated with the advisor and/or
its affiliates since 1990.
5
<PAGE> 75
---------------------
AIM ASIAN GROWTH FUND
---------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Asian Growth Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
SUBMISSION OF MATTERS TO SHAREHOLDERS
At a meeting held on February 3, 2000, the Board of Directors of AIM
International Funds, Inc. (the company), on behalf of the fund, voted to request
shareholders to approve the following items that will affect the fund:
- - An Agreement and Plan of Reorganization which provides for the reorganization
of the company, which is currently a Maryland corporation, as a Delaware
business trust;
- - A new advisory agreement between the company and A I M Advisors, Inc. (AIM).
The principal changes to the advisory agreement are (i) the deletion of
references to the provision of administrative services and certain expense
limitations that are no longer applicable, and (ii) the clarification of
provisions relating to delegations of responsibilities and the non-exclusive
nature of AIM's services. The revised advisory agreement does not change the
fees paid by the fund (except that the agreement permits the fund to pay a fee
to AIM in connection with any new securities lending program implemented in
the future);
- - Changing the fund's fundamental investment restrictions. The proposed
revisions to the fund's fundamental investment restrictions are described in
the fund's statement of additional information; and
- - Changing the fund's investment objective so that it is non-fundamental. If the
investment objective of the fund becomes non-fundamental, it can be changed in
the future by the Board of Directors of the company without further approval
by shareholders.
The Board of Directors of the company has called a meeting of the fund's
shareholders to be held on or about May 3, 2000 to vote on these and other
proposals. Only shareholders of record as of February 18, 2000 are entitled to
vote at the meeting. Proposals that are approved are expected to become
effective on or about May 22, 2000.
6
<PAGE> 76
---------------------
AIM ASIAN GROWTH FUND
---------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------- -------------------------- --------------------------
NOVEMBER 3, NOVEMBER 3, NOVEMBER 3,
1997 1997 1997
YEAR ENDED THROUGH YEAR ENDED THROUGH YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999(a) 1998 1999(a) 1998 1999(a) 1998
- --------------------------------------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 7.69 $ 10.00 $ 7.63 $ 10.00 $ 7.61 $ 10.00
Income from investment
operations:
Net investment income (loss) (0.03) 0.05 (0.13) (0.01) (0.13) (0.01)
Net gains (losses) on
securities (both
realized and
unrealized) 3.14 (2.36) 3.16 (2.36) 3.16 (2.38)
Total from investment
operations 3.11 (2.31) 3.03 (2.37) 3.03 (2.39)
Less distributions:
Dividends from net
investment income (0.04) -- (0.01) -- (0.01) --
Net asset value, end of
period $ 10.76 $ 7.69 $ 10.65 $ 7.63 $ 10.63 $ 7.61
Total return(b) 40.66% (23.10)% 39.76% (23.70)% 39.86% (23.90)%
- --------------------------------------------------------- -------------------------- --------------------------
Ratios/supplemental data:
- --------------------------------------------------------- -------------------------- --------------------------
Net assets, end of period
(000s omitted) $25,420 $ 7,716 $12,070 $ 3,030 $ 5,008 $ 686
Ratio of expenses to
average net assets(c) 1.92%(d) 1.92%(e) 2.79%(d) 2.80%(e) 2.79%(d) 2.80%(e)
Ratio of net investment
income (loss) to average
net assets(f) (0.50)%(d) 0.70%(e) (1.37)%(d) (0.18)%(e) (1.37)%(d) (0.18)%(e)
Portfolio turnover rate 142% 79% 142% 79% 142% 79%
- --------------------------------------------------------- -------------------------- --------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct 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
2.72% and 4.88% (annualized) for Class A for 1999-1998, 3.59% and 5.75%
(annualized) for Class B for 1999-1998, and 3.59% and 5.75% (annualized) for
Class C for 1999-1998.
(d) Ratios are based on average net assets of $17,430,236, $6,408,688 and
$2,061,860 for Class A, 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 (1.30)% and (2.27)% (annualized) for Class A for
1999-1998, (2.17)% and (3.15)% (annualized) for Class B for 1999-1998,
(2.17)% and (3.15)% (annualized), for Class C for 1999-1998.
7
<PAGE> 77
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 78
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 79
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 80
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 81
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 82
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 83
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 84
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 85
---------------------
AIM ASIAN GROWTH FUND
---------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
- -----------------------------------------------------
</TABLE>
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Asian Growth Fund
SEC 1940 Act file number: 811-6463
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com AAG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 86
APPENDIX III
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND FEASTS ON ASIAN RECOVERY
THIS YEAR, ASIAN MARKETS HAVE BOUNCED BACK IMPRESSIVELY FROM THEIR 1997-1998
CRISIS. HOW HAS THE FUND RESPONDED?
What a difference a year makes. After weathering last year's dramatic Asian
crisis, the fund roared back to life. Average annual returns at net asset value
(without sales charges) for the fiscal year ended October 31, 1999, were
impressive, totaling 40.79% for Class A shares, 39.76% for Class B shares and
39.86% for Class C shares. By comparison, the fund's benchmark--the MSCI All
Country Asia Free ex-Japan Index--posted a return of 53.45% for the same period.
The fund's performance helped attract significant investor attention over
the 12-month period as net assets increased almost fourfold to $42.5 million.
WHAT'S DRIVING ASIA'S RECOVERY?
Performance during the first half of 1999 was largely driven by improvements at
the macro level, including emergence from a recession, stable currencies, benign
inflation, improving trade balances and--perhaps most importantly--declining
interest rates.
When the crisis hit, interest rates shot up and remained at high levels,
choking off economic growth while at the same time stabilizing economies and
currencies. Once economies stabilized, banks were able to lower rates. Since
then, we've seen a strong correlation between declining interest rates and
market performance.
Restructuring has also played a major role in the Asian recovery. Countries
that have focused most on cleaning up their banking systems and stabilizing
their currencies have outperformed this year, including Singapore, Taiwan and
South Korea.
Trends like these are bringing foreign investors back into the region and
are beginning to build confidence among consumers within the region as well.
DO YOU THINK THE RECOVERY IS SUSTAINABLE?
We feel confident that the recovery we've seen so far in 1999 will persist
because the region is back in a growth environment. We're not blindly
optimistic, but many of the countries are taking the steps necessary to further
their recoveries, and that's being reflected in such indicators as corporate
earnings expectations. Recent analysts' earnings revisions have turned net
positive, meaning more upgrades than downgrades. Another positive sign is that
almost every economy in Asia is expected to post positive economic growth in
1999, as measured by gross domestic product (GDP).
We think the past quarter marked a defining period for these markets going
forward. As mentioned before, the first-half performance was driven by
macro-level improvements, which benefited every economy in the region.
Third-quarter weakness indicates these factors have largely played themselves
out. We believe the focus now will shift to earnings growth and sustainability
of the restructuring efforts that began in response to last year's financial
crisis.
OTHER THAN THE OBVIOUS RECOVERY, TO WHAT DO YOU ATTRIBUTE THE FUND'S STRONG
PERFORMANCE THIS YEAR?
Because we use a bottom-up selection process and because the fund is fairly
small, we've been able to be nimble and invest our way around the crisis. For
example, early on in the crisis we favored the more developed countries,
including Hong Kong, Australia and Singapore, and maintained low weightings in
Thailand and South Korea because they were probably the two most troubled
economies in the region. But now South Korea has one of the largest weightings
in the fund because we're finding a number of terrific earnings-momentum stories
there as companies restructure and reduce their debt levels.
HAVE THERE BEEN ANY DISAPPOINTMENTS?
Almost without exception, the first-half rally in Asian stock markets peaked in
early July--the same time regional interest rates reached a trough. As rates
appeared to bottom out, Asian markets outside of Japan dipped in September--some
as much as 15%--eroding some of the fund's gains from earlier in the year.
In the third quarter, the fund slightly underperformed its peer group due to
a low weighting in India, which posted a surprisingly strong return for the
quarter, and an overweight position in the Philippines. We've divested some
holdings there as a result of earnings disappointments and have increased our
exposure to Australia and South Korea by adding some
================================================================================
ASIA'S POWERFUL PURCHASING POTENTIAL
A major element of Asia's economic potential is its people. Accounting for more
than half the world's population, Asian consumers represent formidable
purchasing power, which bears heavily on continued recovery in the region.
[MAP]
CHINA NEW ZEALAND
SOUTH KOREA AUSTRALIA
HONG KONG SINGAPORE
TAIWAN INDONESIA
VIETNAM BANGLADESH
PHILIPPINES THAILAND
MALAYSIA SRI LANKA
INDIA
PAKISTAN
================================================================================
See important fund and index disclosures inside front cover.
AIM ASIAN GROWTH FUND
2
<PAGE> 87
ANNUAL REPORT / MANAGERS' OVERVIEW
companies with strong upward revision momentum, including Foster's Brewing and
Samsung Electronics.
WHAT SECTORS DID YOU FIND MOST ATTRACTIVE?
With personal consumption in the region improving, the fund has increased its
exposure to the Asian consumer in countries where spending is coming back--for
example, mid-market clothing retailers in Hong Kong. Recovery in exports is also
driving fund performance through holdings in port operators, cargo handlers and
contract manufacturers.
The financial sector's continuing consolidation has drawn our attention as
well. For example, Development Bank of Singapore has made some judicious
acquisitions. Hong Kong financial companies also look promising because of their
moves to diversify their earnings base to include more non-interest income
offerings--such as credit cards--to help reduce cyclical risk.
WHAT IS YOUR OUTLOOK FOR THE REGION?
Overall we're fairly positive on Asia right now. When you marry a strong,
relatively long earnings cycle with improving economic growth and markets that
are still reasonably valued, you have a good recipe for equity performance.
For the moment, attractive market fundamentals are being overshadowed by
several issues: investor concerns about demand in the United States--a major
export destination for Asian-produced goods--U.S. interest rates and a nascent
Japanese recovery. These issues are worthy of consideration since Asia's
recovery is geared to global economic growth. However, it's important to
remember that a major element of Asia's economic potential is its large
population, and domestic personal consumption bears heavily on continued
recovery. Asian consumers have enormous savings and once they begin to feel
secure about their jobs, they will exert their buying power.
THE WAY TO AN INVESTOR'S HEART
Political and economic unrest in Indonesia--especially its former colony of East
Timor--may have given some Asian investors financial heartburn. Fund managers
agreed and largely steered clear of investing in a country they felt had done
little to rectify its problems. However, using their bottom-up stock-selection
approach, which relies on company-by-company analysis, fund managers did find at
least one appetizing investment opportunity in Indonesia: the world's largest
noodle-maker, Indofood. According to fund managers, "Whether you're in crisis or
not, noodles are the staple of the Indonesian diet and the company continues to
increase its sales every year."
PORTFOLIO COMPOSITION
As of 10/31/99, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES TOP 10 COUNTRIES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. ERG Ltd. (Australia) 3.01% 1. Electronics (Component Distribution) 5.91% 1. Hong Kong 26.33%
2. Giordano International Ltd. (Hong Kong) 2.10 2. Banks (Major Regional) 5.29 2. Singapore 15.43
3. Li & Fung Ltd. (Hong Kong) 1.97 3. Banks (Regional) 4.92 3. Australia 13.85
4. Kookmin Bank (South Korea) 1.91 4. Electrical Equipment 4.76 4. South Korea 10.20
5. Far Eastern Textile Ltd. (Taiwan) 1.87 5. Land Development 4.72 5. Philippines 6.48
6. Korea Telecom Corp.-ADR (South Korea) 1.82 6. Telephone 4.58 6. Taiwan 6.16
7. Esprit Asia Holdings Ltd. (Hong Kong) 1.81 7. Telecommunications (Cellular/ 7. Thailand 4.47
8. Hon Hai Precision Industry Co. Ltd. Wireless) 3.43 8. India 3.76
(Taiwan) 1.80 8. Beverages (Alcoholic) 3.31 9. Indonesia 2.42
9. Videsh Sanchar Nigam Ltd. - GDR (India) 1.79 9. Broadcasting (Television, Radio & 10. New Zealand 1.21
10. Samsung Electronics (South Korea) 1.77 Cable) 3.27
10. Computers (Software and Services) 2.78
The fund's portfolio is subject to change, and there is no assurance that the fund will continue to hold any particular security.
===================================================================================================================================
</TABLE>
See important fund and index disclosures inside front cover.
AIM ASIAN GROWTH FUND
3
<PAGE> 88
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ASIAN GROWTH FUND VS. BENCHMARK INDEX
11/3/97-10/31/99
in thousands
================================================================================
MSCI All Country AIM Asian Growth AIM Asian Growth AIM Asian Growth
Asia Free Fund, Class A Fund, Class B Fund, Class C
ex-Japan Index Shares Shares Shares
- --------------------------------------------------------------------------------
11/3/97 10,000 9,432 10,000 10,000
1/31/98 8,811 7,836 8,280 8,290
4/30/98 9,367 8,715 9,200 9,200
7/31/98 7,421 6,682 7,040 7,030
10/31/98 8,110 7,268 7,630 7,610
1/31/99 8,905 7,307 7,670 7,640
4/30/99 11,029 9,140 9,582 9,552
7/31/99 11,713 10,461 10,934 10,914
10/31/99 11,340 10,233 10,263 10,643
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
ABOUT THIS CHART
This chart compares your fund's shares to a benchmark index. It is intended to
give you a general idea of how your fund performed compared to this benchmark
over the period 11/3/97- 10/31/99. (Please note that the index's performance
figures are for the period (10/31/97- 10/31/99.) It is important to understand
the differences between your fund and the index. An index measures performance
of a hypothetical portfolio. A market index such as the MSCI All Country Asia
Free ex-Japan Index is not managed, incurring 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.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/99, including sales charges
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
Inception (11/3/97) 1.16%
1 year 33.00
CLASS B SHARES
- --------------------------------------------------------------------------------
Inception (11/3/97) 1.31%
1 year 34.76
CLASS C SHARES
- --------------------------------------------------------------------------------
Inception (11/3/97) 3.18%
1 year 38.86
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
For fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM ASIAN GROWTH FUND
4
<PAGE> 89
AIM ASIAN GROWTH FUND
A PORTFOLIO OF
AIM INTERNATIONAL FUNDS, INC.
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
AIM NEW PACIFIC GROWTH FUND
A PORTFOLIO OF
AIM GROWTH SERIES
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION
(May 31, 2000 Special Meeting of Shareholders of AIM New Pacific Growth Fund)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement and Prospectus dated
April __, 2000 of AIM International Funds, Inc. (the "Company") for use in
connection with the Special Meeting of Shareholders of AIM New Pacific Growth
Fund to be held on May 31, 2000. Copies of the Combined Proxy Statement and
Prospectus may be obtained at no charge by writing the Company at the address
shown above or by calling 1-800-347-4246. Unless otherwise indicated,
capitalized terms used herein and not otherwise defined have the same meanings
as are given to them in the Combined Proxy Statement and Prospectus.
A Statement of Additional Information for the Company dated February
28, 2000, has been filed with the Securities and Exchange Commission and is
attached hereto as Appendix I which is incorporated herein by this reference.
The date of this Statement of Additional Information is April __, 2000.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE COMPANY.......................................................................................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS..............................................................................S-2
DIRECTORS AND OFFICERS OF THE COMPANY.............................................................................S-2
ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION.....................................S-2
PORTFOLIO TRANSACTIONS............................................................................................S-2
DESCRIPTION OF SHARES.............................................................................................S-2
DETERMINATION OF NET ASSET VALUE..................................................................................S-2
TAXES.............................................................................................................S-2
PERFORMANCE DATA..................................................................................................S-2
FINANCIAL INFORMATION.............................................................................................S-3
</TABLE>
Appendix I - AIM International Funds, Inc. Statement of Additional
Information
Appendix II - Annual Report of AIM New Pacific Growth Fund
Appendix III - Pro Forma Financial Statements
S-1
<PAGE> 90
THE COMPANY
This Statement of Additional Information relates to AIM International Funds,
Inc. (the "Company") and its investment portfolio, AIM Asian Growth Fund. The
Company is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). AIM Asian Growth
Fund is a separate series of shares of capital stock of the Company.
DESCRIPTION OF PERMITTED INVESTMENTS
For a discussion of the fundamental and nonfundamental investment policies of
the Acquiring Funds adopted by the Company's Board of Directors, see heading
"Investment Restrictions" in the Company's Statement of Additional Information
attached hereto as Appendix I.
DIRECTORS AND OFFICERS OF THE COMPANY
For a disclosure of the names and a brief occupational biography of each of the
Company's officers and directors identifying those who are interested persons of
the Company as well as stating their aggregate remuneration, see heading
"Management - Directors and Officers" in the Company's Statement of Additional
Information attached hereto as Appendix I.
ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION
For a discussion of the Company's advisory and management-related services
agreements and plans of distribution, see headings "Management - Investment
Advisory, Sub-Advisory and Administrative Services Agreements," "The
Distribution Plans," and "The Distributor" in the Company's Statement of
Additional Information attached hereto as Appendix I.
PORTFOLIO TRANSACTIONS
For a discussion of the Company's brokerage policy, see heading "Portfolio
Transactions and Brokerage" in the Company's Statement of Additional Information
attached hereto as Appendix I.
DESCRIPTION OF SHARES
For a discussion of the Company's authorized securities and the characteristics
of the Company's shares of capital stock, see heading "General Information about
the Company" in the Company's Statement of Additional Information attached
hereto as Appendix I.
DETERMINATION OF NET ASSET VALUE
For a discussion of the Company's valuation and pricing procedures and a
description of its purchase and redemption procedures, see heading "Net Asset
Value Determination" in the Company's Statement of Additional Information
attached hereto as Appendix I.
TAXES
For a discussion of any tax information relating to ownership of the Company's
shares, see heading "Dividends, Distributions and Tax Matters" in the Company's
Statement of Additional Information attached hereto as Appendix I.
PERFORMANCE DATA
For a description and quotation of certain performance data used by the Company,
see heading "Performance" in the Company's Statement of Additional Information
attached hereto as Appendix I.
S-2
<PAGE> 91
FINANCIAL INFORMATION
The audited financial statements of AIM ASIAN GROWTH FUND and the report thereon
by KPMG LLP, are set forth under the heading "Financial Statements" in the
Company's Statement of Additional Information attached hereto as Appendix I.
The audited financial statements of AIM NEW PACIFIC GROWTH FUND and the report
thereon by PricewaterhouseCoopers LLP, are set forth in the Annual Report of AIM
Global Government Income Fund, dated December 31, 1999, which is incorporated
herein by reference and attached hereto as Appendix II.
Pro forma financial statements for AIM Asian Growth Fund, giving effect to the
Reorganization, are attached hereto as Appendix III.
S-3
<PAGE> 92
APPENDIX I
STATEMENT OF
ADDITIONAL INFORMATION
AIM ASIAN GROWTH FUND
AIM EUROPEAN DEVELOPMENT FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND
AIM GLOBAL GROWTH FUND
AIM GLOBAL INCOME FUND
AIM INTERNATIONAL EQUITY FUND
(SERIES PORTFOLIOS OF AIM INTERNATIONAL FUNDS, INC.)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
---------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IT SHOULD BE READ IN CONJUNCTION WITH
A PROSPECTUS OF THE ABOVE-NAMED FUNDS,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE
FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246
---------------------------------
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 2000,
RELATING TO THE AIM ASIAN GROWTH FUND PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM EUROPEAN DEVELOPMENT FUND PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM GLOBAL AGGRESSIVE GROWTH FUND PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM GLOBAL GROWTH FUND PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM GLOBAL INCOME FUND PROSPECTUS DATED FEBRUARY 28, 2000,
AND THE AIM INTERNATIONAL EQUITY FUND PROSPECTUS DATED FEBRUARY 28, 2000
<PAGE> 93
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION.................................................................1
Submission of Matters to Shareholders...............................1
GENERAL INFORMATION ABOUT THE COMPANY........................................3
The Company and its Shares..........................................3
PERFORMANCE..................................................................4
Total Return Calculations...........................................5
Yield Quotations....................................................6
Historical Portfolio Results........................................6
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................9
General Brokerage Policy............................................9
Allocation of Portfolio Transactions...............................10
Allocation of IPO Securities Transactions..........................11
Section 28(e) Standards............................................11
Transactions with Regular Brokers..................................12
Brokerage Commissions Paid.........................................13
INVESTMENT STRATEGIES AND RISKS.............................................14
All Funds (except Income Fund).....................................14
Asian Fund.........................................................14
European Fund......................................................15
Aggressive Growth Fund and Growth Fund.............................17
Income Fund........................................................18
Equity Fund........................................................21
Real Estate Investment Trusts ("REITs")............................22
Repurchase Agreements and Reverse Repurchase Agreements............22
Lending of Portfolio Securities....................................23
Borrowings.........................................................23
Securities Issued on a When-Issued or Delayed Delivery Basis.......24
Short Sales........................................................24
Illiquid Securities................................................24
Rule 144A Securities...............................................24
Foreign Securities.................................................25
Portfolio Turnover.................................................28
Foreign Exchange Transactions......................................28
Equity-Linked Derivatives..........................................28
Investment in Other Investment Companies...........................29
Temporary Defensive Investments....................................29
OPTIONS, FUTURES AND CURRENCY STRATEGIES....................................29
Introduction.......................................................29
General Risks of Options, Futures and Currency Strategies..........29
Cover..............................................................30
Writing Call Options...............................................31
Writing Put Options................................................31
Purchasing Put Options.............................................31
Purchasing Call Options............................................32
Over-The-Counter Options...........................................32
Index Options......................................................33
Limitations on Options.............................................33
</TABLE>
i
<PAGE> 94
<TABLE>
<S> <C>
Interest Rate, Currency and Stock Index Futures Contracts..........33
Options on Futures Contracts.......................................34
Forward Contracts..................................................34
Limitations on Use of Futures, Options on Futures and Certain
Options on Currencies..............................................35
INVESTMENT RESTRICTIONS.....................................................35
Aggressive Growth Fund, Growth Fund, and Income Fund...............35
Equity Fund........................................................37
Asian Fund and European Fund.......................................39
MANAGEMENT..................................................................40
Directors and Officers.............................................40
Remuneration of Directors..........................................44
AIM Funds Retirement Plan for Eligible Directors/Trustees..........46
Deferred Compensation Agreements...................................46
Investment Advisory, Sub-Advisory and Administrative Services
Agreements.........................................................47
THE DISTRIBUTION PLANS......................................................51
The Class A and C Plan.............................................51
The Class B Plan...................................................52
Both Plans.........................................................52
THE DISTRIBUTOR.............................................................56
SALES CHARGES AND DEALER CONCESSIONS........................................58
REDUCTIONS IN INITIAL SALES CHARGES.........................................61
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS.................................64
HOW TO PURCHASE AND REDEEM SHARES...........................................66
Backup Withholding.................................................67
NET ASSET VALUE DETERMINATION...............................................69
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS....................................70
Reinvestment of Dividends and Distributions........................70
Tax Matters........................................................70
Qualification as a Regulated Investment Company....................70
Fund Distributions.................................................71
Investment in Foreign Financial Instruments........................71
Hedging Transactions...............................................72
PFIC Investments...................................................72
Redemption or Exchange of Shares...................................73
Foreign Income Taxes...............................................74
Backup Withholding.................................................74
Reinstatement Privilege............................................74
Foreign Shareholders...............................................75
Miscellaneous Considerations; Effect of Future Legislation.........75
SHAREHOLDER INFORMATION.....................................................75
</TABLE>
ii
<PAGE> 95
<TABLE>
<S> <C>
MISCELLANEOUS INFORMATION...................................................78
Changes for Certain Account Information............................78
Audit Reports......................................................78
Legal Matters......................................................79
Custodian and Transfer Agent.......................................79
Principal Holders of Securities....................................79
Other Information..................................................83
APPENDIX A..................................................................A-1
APPENDIX B..................................................................B-1
APPENDIX C..................................................................C-1
FINANCIAL STATEMENTS........................................................FS
</TABLE>
iii
<PAGE> 96
INTRODUCTION
AIM International Funds, Inc. (the "Company") is a series mutual fund. The
rules and regulations of the Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the fund being considered for investment. This
information is included in the AIM Asian Growth Fund Prospectus dated February
28, 2000, the AIM European Development Fund Prospectus dated February 28, 2000,
the AIM Global Aggressive Growth Fund Prospectus dated February 28, 2000, the
AIM Global Growth Fund Prospectus dated February 28, 2000, the AIM Global Income
Fund Prospectus dated February 28, 2000, and the AIM International Equity Fund
Prospectus dated February 28, 2000 (individually, a "Prospectus" and
collectively, the "Prospectuses"). Copies of each Prospectus and additional
copies of this Statement of Additional Information may be obtained without
charge by writing the principal distributor of the Funds' (hereinafter defined)
shares, A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston,
Texas 77210-4739, or by calling (800) 347-4246. Investors must receive a
Prospectus before they invest in the Funds.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in each Fund's current Prospectus, and in order to avoid repetition,
reference will be made herein to sections of the applicable Prospectus.
Additionally, each Prospectus and this Statement of Additional Information omit
certain information contained in the Company's Registration Statement filed with
the SEC. Copies of the Registration Statement, including items omitted from each
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.
SUBMISSION OF MATTERS TO SHAREHOLDERS
At a meeting held on February 3, 2000, the Board of Directors of the
Company, on behalf of its series portfolios (the "Funds"), voted to request
shareholder approval to amend the Funds' fundamental investment restrictions.
The Board of Directors has called a meeting of the Funds' shareholders to be
held on or about May 3, 2000. Only shareholders of record as of February 18,
2000 are entitled to vote at the meeting. Proposals that are approved are
expected to become effective on or about May 22, 2000.
If shareholders approve the proposal to amend the Funds' fundamental
investment restrictions, each of Asian Fund, European Fund, Aggressive Growth
Fund, Growth Fund, Income Fund and Equity Fund will operate under the following
fundamental investment restrictions:
Each Fund is subject to the following investment restrictions, which may be
changed only by a vote of a majority of such Fund's outstanding shares, except
that Income Fund is not subject to restriction (a):
(a) the Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund
would fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as such statute, rules and
regulations are amended from time to time or are interpreted from time to time
by the SEC staff (collectively, the 1940 Act laws and interpretations) or except
to the extent that the Fund may be permitted to do so by exemptive order or
similar relief (collectively, with the 1940 Act laws and interpretations, the
1940 Act laws, interpretations and exemptions). In complying with this
restriction, however, the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act laws, interpretations and
exemptions.
(b) the Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act laws, interpretations and exemptions.
1
<PAGE> 97
(c) the Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving
the acquisition, disposition or resale of its portfolio securities, regardless
of whether the Fund may be considered to be an underwriter under the Securities
Act of 1933.
(d) the Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act laws,
interpretations and exemptions) of its investments in the securities of issuers
primarily engaged in the same industry. This restriction does not limit the
Fund's investments in (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or (ii) tax-exempt obligations
issued by governments or political subdivisions of governments. In complying
with this restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(e) the Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or investing in securities that are secured by real estate or interests therein.
(f) the Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
(g) the Fund may not make personal loans or loans of its assets to persons
who control or are under common control with the Fund, except to the extent
permitted by 1940 Act laws, interpretations and exemptions. This restriction
does not prevent the Fund from, among other things, purchasing debt obligations,
entering into repurchase agreements, loaning its assets to broker-dealers or
institutional investors, or investing in loans, including assignments and
participation interests.
(h) the Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and restrictions as the Fund.
The investment restrictions set forth above provide the Funds with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Funds have this flexibility, the Board of Directors
has adopted internal guidelines for each Fund relating to certain of these
restrictions which the adviser must follow in managing the Funds. Any changes to
these guidelines, which are set forth below, require the approval of the Board
of Directors.
1. In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total
assets, purchase securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Fund's total
assets would be invested in the securities of that issuer, or (ii) the Fund
would hold more than 10% of the outstanding voting securities of that
issuer. The Fund may (i) purchase securities of other investment companies
as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets
in securities of other money market funds and lend money to other
investment companies and their series portfolios that have AIM as an
investment adviser, subject to the terms and conditions of any exemptive
orders issued by the SEC. (This restriction does not apply to Income Fund.)
2
<PAGE> 98
2. In complying with the fundamental restriction regarding borrowing money
and issuing senior securities, the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). The Fund may borrow from banks,
broker/dealers or other investment companies or their series portfolios
that have AIM or an affiliate of AIM as an investment advisor (an AIM
fund). The Fund may not borrow for leveraging, but may borrow for temporary
or emergency purposes, in anticipation of or in response to adverse market
conditions, or for cash management purposes. The Fund may not purchase
additional securities when any borrowings from banks exceed 5% of the
Fund's total assets.
3. In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry.
4. In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend
money to another AIM fund, on such terms and conditions as the SEC may
require in an exemptive order.
5. Notwithstanding the fundamental restriction with regard to investing all
assets in an open-end fund, the Fund may not invest all of its assets in
the securities of a single open-end management investment company with the
same fundamental investment objectives, policies and limitations as the
Fund.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values of assets will not
be considered a violation of the restriction.
GENERAL INFORMATION ABOUT THE COMPANY
THE COMPANY AND ITS SHARES
The Company was organized in 1991 as a Maryland corporation, and is
registered with the SEC as an open-end, series, management investment company.
The Company currently consists of six separate portfolios: AIM Asian Growth Fund
(the "Asian Fund"), AIM European Development Fund ( the "European Fund"), AIM
Global Aggressive Growth Fund (the "Aggressive Growth Fund"), AIM Global Growth
Fund (the "Growth Fund"), AIM Global Income Fund ( the "Income Fund") and AIM
International Equity Fund (the "Equity Fund") (individually, a "Fund" and
collectively, the "Funds"). Each portfolio of the Company offers Class A, Class
B and Class C shares.
As used in each Prospectus, the term "majority of the outstanding shares"
of the Company, of a particular Fund or of a class of a Fund means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Company, such Fund or such class present at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares of the Company, such Fund or
such class are present or represented by proxy or (ii) more than 50% of the
outstanding shares of the Company, such Fund or such class.
Class A shares, Class B shares and Class C shares of each Fund represent
interests in the Fund's assets and have identical voting, dividend, liquidation
and other rights on the same terms and conditions, except that each class of
shares bears differing class-specific expenses (such as those associated with
the shareholder servicing of their shares) and is subject to differing sales
loads (which may affect performance), conversion features and exchange
privileges, and has exclusive voting rights on matters pertaining to that class'
distribution plan. Each share of a particular class is entitled to one vote, to
participate equally in dividends and distributions declared by the Company's
Board of Directors with respect to the class of such Fund and, upon liquidation
of the Fund, to participate proportionately in the
3
<PAGE> 99
net assets of the Fund allocable to such class remaining after satisfaction of
outstanding liabilities of the Fund allocable to such class.
Except as specifically noted above, shareholders of each Fund are entitled
to one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the different classes of shares,
where applicable, of a Fund. However, on matters affecting one portfolio of the
Company or one class of shares, a separate vote of shareholders of that
portfolio or class is required. Shareholders of a portfolio or class are not
entitled to vote on any matter which does not affect that portfolio or class but
which requires a separate vote of another portfolio or class. An example of a
matter which would be voted on separately by shareholders of a portfolio is the
approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan. When issued, shares of the Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversation of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect directors,
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors of the Company, and the holders of less than 50% of
the shares voting for the election of directors will not be able to elect any
directors.
Under Maryland law and the Company's By-Laws, the Company need not hold an
annual meeting of shareholders to elect directors unless a meeting is required
under the Investment Company Act of 1940, as amended, (the "1940 Act").
Shareholders may remove directors from office, and a meeting of shareholders may
be called at the request of the holders of 10% or more of the Company's
outstanding shares.
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of yield
(Income Fund) or total return. All advertisements of the Funds will disclose the
maximum sales charge (including deferred sales charge) to which investments in
shares of the Funds may be subject. If any advertised performance data does not
reflect the maximum sales charge (if any), such advertisement will disclose that
the sales charge has not been deducted in computing the performance data, and
that, if reflected, the maximum sales charge would reduce the performance
quoted.
From time to time, A I M Advisors, Inc. ("AIM") or its affiliates may waive
all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume expenses may be
rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions or commitments to assume expenses, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions or reimbursement of expenses set
forth in the Fee Table in a Prospectus may not be terminated or amended to the
Funds' detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses will have the
effect of increasing a Fund's yield and total return.
The performance of each Fund will vary from time to time and past results
are not necessarily indicative of future results. A Fund's performance is a
function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market conditions. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in any Fund.
Some or all of the Funds may participate in the Initial Public Offering
("IPO") market, and a significant portion of those Funds' returns may be
attributable to their investment in IPOs, which can have a magnified impact if a
Fund's asset base is small. There is no guarantee that as the Funds' assets
grow, they will continue to experience substantially similar performance by
investing in IPOs.
4
<PAGE> 100
Additional performance information is contained in a Fund's Annual Report
to Shareholders, which is available upon request without charge.
Total return and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. The Funds may provide
performance information in reports, sales literature and advertisements. The
Funds may also, from time to time, quote information about the Funds published
or aired by publications or other media entities which contain articles or
segments relating to investment results or other data about one or more of the
Funds. The following is a list of such publications or media entities:
<TABLE>
<S> <C> <C>
Advertising Age Financial World Nation's Business
Barron's Forbes New York Times
Best's Review Fortune Pension World
Broker World Hartford Courant Inc. Pensions & Investment
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
</TABLE>
Each Fund may also compare its performance to performance data of similar
mutual funds as published by the following services:
<TABLE>
<S> <C>
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper, Inc.
</TABLE>
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
TOTAL RETURN CALCULATIONS
Standardized total return for Class A shares of a Fund reflects the
deduction of the maximum initial sales charge at the time of purchase.
Standardized total return for Class B shares of a Fund reflects the deduction of
the maximum applicable contingent deferred sales charge on a redemption of
shares held for the period. Standardized total return for Class C shares of a
Fund reflects the deduction of a 1% contingent deferred sales charge, if
applicable, on a redemption of shares held for the period. Total returns quoted
in advertising reflect all aspects of the applicable Fund's return, including
the effect of reinvesting dividends and capital gain distributions, the
deduction of charges and expenses and any change in such Fund's net asset value
per share over the period. Average annual total returns are calculated by
determining the growth or decline in value of a hypothetical investment in a
particular Fund over a stated period of time, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline in value had been constant over the period. While average
annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a Fund's performance is not constant
over time, but changes from year to year, and that average annual total returns
do not represent the actual year-to-year performance of such
5
<PAGE> 101
Fund. The stated period for quotations of average annual total return will be
for periods of one year and the life of a Fund (commencing as of the effective
date of its registration statement).
In addition to average annual total returns, each Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount, and may be calculated for a
single investment, a series of investments, and/or a series of redemptions, over
any time period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns and other performance information may be quoted
numerically or in tables, graphs or similar illustrations. For Asian Fund,
European Fund and Equity Fund total returns may be quoted with or without taking
the Class A shares' 5.50% maximum sales charge, the Class B shares' 5% maximum
contingent deferred sales charge ("CDSC") or the Class C shares' 1% maximum CDSC
into account. For Aggressive Growth Fund, Growth Fund and Income Fund total
returns may be quoted with or without taking the Class A shares' 4.75% maximum
sales charge, the Class B shares' 5% maximum CDSC or the Class C shares' 1%
maximum CDSC into account. Excluding sales charges from a total return
calculation produces a higher total return figure.
YIELD QUOTATIONS
Yield is computed in accordance with the standardized formula described
below and can be expected to fluctuate from time to time and is not necessarily
indicative of future results. Accordingly, yield information may not provide a
basis for comparison with investments which pay a fixed rate of interest for a
stated period of time. Yield reflects investment income net of expenses over the
relevant period attributable to a share of Income Fund, expressed as an
annualized percentage of the maximum offering price per share of Income Fund.
Yield is a function of the type and quality of Income Fund's investments, the
Fund's maturity and the Fund's operating expense ratio. The standard formula for
calculating yield for the Income Fund, is as follows:
(6)
YIELD = 2[((a-b)/(c x d) + 1) -1]
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued
rather than recorded on the ex-dividend date. Interest
earned under this formula must generally be calculated based
on the yield to maturity of each obligation (or, if more
appropriate, based on yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the
period.
d = the maximum offering price per share on the last day of the
period.
The yields for the Class A, Class B and Class C shares of Income Fund for
the 30-day period ended October 31, 1999 were as follows:
<TABLE>
<CAPTION>
With Without
Waivers Waivers
------- -------
<S> <C> <C>
Class A........................... 6.68% 5.99%
Class B........................... 6.53% 5.80%
Class C........................... 6.53% 5.80%
</TABLE>
HISTORICAL PORTFOLIO RESULTS
Total returns for each of the named Funds, with respect to its Class A
shares, for the one-year and five-year (if applicable) periods and since
inception ended October 31, 1999 (which include the maximum sales charge and
reinvestment of all dividends and distributions), were as follows:
6
<PAGE> 102
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
Periods ended October 31, 1999 Periods ended October 31, 1999
----------------------------------- ----------------------------------
One Five Since One Five Since
Class A Shares: Year Years Inception Year Years Inception
- --------------- -------- ----- --------- -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund 31.75% 15.47% 15.55%** 31.75% 105.30% 109.80%**
Asian Fund 33.00% N/A 1.16%*** 33.00% N/A 2.33%***
European Fund 19.88% N/A 24.75%*** 19.88% N/A 55.34%***
Equity Fund 18.84% 11.35% 13.75%* 18.84% 71.14% 165.00%*
Growth Fund 28.06% 18.56% 18.58%** 28.06% 134.23% 139.58%**
Income Fund -6.61% 6.26% 6.29%** -6.61% 35.45% 36.70%**
</TABLE>
* The inception date for the Class A shares of Equity Fund was April 7,
1992.
** The inception date for the Class A shares of each of Aggressive Growth
Fund, Growth Fund and Income Fund was September 15, 1994.
*** The inception date for the Class A shares of Asian Fund and European Fund
was November 3, 1997.
Total returns for each of the named Funds, with respect to its Class B
shares, for the one-year and five-year (if applicable) periods and since
inception for the period ended October 31, 1999 (which include the maximum
contingent deferred sales charge and reinvestment of all dividends and
distributions) were as follows:
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
Periods ended October 31, 1999 Periods ended October 31, 1999
--------------------------------- ---------------------------------
One Five Since One Five Since
Class B Shares: Year Years Inception Year Years Inception
- --------------- -------- ----- --------- -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund 32.56% 15.76% 15.92%* 32.56% 107.86% 113.27%*
Asian Fund 34.76% N/A 1.31%** 34.76% N/A 2.63%**
European Fund 20.87% N/A 25.82%** 20.87% N/A 58.00%**
Equity Fund 19.72% 11.47% 11.41%* 19.72% 72.13% 74.03%*
Growth Fund 28.70% 18.89% 18.98%* 28.70% 137.50% 143.77%*
Income Fund -6.94% 6.47% 6.62%* -6.94% 36.82% 38.89%*
</TABLE>
* The inception date for the Class B shares of each of Aggressive Growth
Fund, Equity Fund, Growth Fund and Income Fund was September 15, 1994.
** The inception date for the Class B shares of each of Asian Fund and
European Fund was November 3, 1997.
Total returns for each of the named Funds, with respect to its Class C
shares for the one-year period and since inception ended October 31, 1999 (which
include the maximum contingent deferred sales charge and reinvestment of all
dividends and distributions) were as follows:
7
<PAGE> 103
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Return
Periods ended October 31, 1999 Periods ended October 31, 1999
------------------------------- ------------------------------
One Since One Since
Class C Shares: Year Inception Year Inception
- --------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Aggressive Growth Fund 36.56% 6.89%* 36.56% 16.09%*
Asian Fund 38.86% 3.18%** 38.86% 6.43%**
European Fund 24.85% 27.45%** 24.85% 62.10%**
Equity Fund 23.76% 8.97%* 23.76% 21.22%*
Growth Fund 32.69% 15.58%* 32.69% 38.33%*
Income Fund -3.38% 1.70%* -3.38% 3.85%*
</TABLE>
* The inception date for the Class C shares of each of Aggressive Growth
Fund, Equity Fund, Growth Fund and Income Fund was August 4, 1997.
** The inception date for the Class C Shares of each of Asian Fund and
European Fund was November 3, 1997.
During the one-year period ended October 31, 1999, a hypothetical $1,000
investment in the Class A shares of Aggressive Growth Fund, Asian Fund, European
Fund, Equity Fund, Growth Fund and Income Fund at the beginning of such period
would have been worth $1,317.53, $1,330.04, $1,198.76, $1,188.44, $1,280.64 and
$933.86, respectively, assuming the maximum sales charge was paid and all
distributions were reinvested. For the period November 3, 1997 (inception date
for Asian Fund and European Fund) through October 31, 1999, and the five-year
period ended October 31, 1999, for Aggressive Growth Fund, Equity Fund, Growth
Fund and Income Fund, a hypothetical $1,000 investment in the Class A shares of
Aggressive Growth Fund, Asian Fund, European Fund, Equity Fund, Growth Fund and
Income Fund at the beginning of such period would have been worth $2,052.98,
$1,023.30, $1,553.41, $1,711.43, $2,342.27 and $1,354.46, respectively, assuming
the maximum sales charge was paid and all distributions were reinvested.
During the one-year period ended October 31, 1999, a hypothetical $1,000
investment in the Class B shares of Aggressive Growth Fund, Asian Fund, European
Fund, Equity Fund, Growth Fund and Income Fund at the beginning of such period
would have been worth $1,325.64, $1,347.56, $1,208.74, $1,197.16, $1,286.95 and
$930.42, respectively, assuming the maximum contingent deferred sales charge was
paid and all distributions were reinvested. For the period November 3, 1997
(inception date for Asian Fund and European Fund) through October 31, 1999, and
the five-year period ended October 31, 1999, for Aggressive Growth Fund, Equity
Fund, Growth Fund and Income Fund, a hypothetical $1,000 investment in the Class
B shares of Aggressive Growth Fund, Asian Fund, European Fund, Equity Fund,
Growth Fund and Income Fund at the beginning of such period would have been
worth $2,078.62, $1,026.33, $1,580.00, $1,721.26, $2,374.96 and $1,367.99,
respectively, assuming the maximum contingent deferred sales charge was paid and
all distributions were reinvested.
During the one-year period ended October 31, 1999, a hypothetical $1,000
investment in the Class C shares of Aggressive Growth Fund, Asian Fund, European
Fund, Equity Fund, Growth Fund and Income Fund at the beginning of such period
would have been worth $1,365.64, $1,388.60, $1,248.54, $1,237.62, $1,326.93 and
$966.15, respectively, assuming the maximum contingent deferred sales charge was
paid and all distributions were reinvested. For the period November 3, 1997
(inception date of Asian Fund and European Fund) through October 31, 1999, and
for the period August 4, 1997 (inception date for Aggressive Growth Fund, Equity
Fund, Growth Fund and Income Fund) through October 31, 1999, a hypothetical
$1,000 investment in the Class C shares of Aggressive Growth Fund, Asian Fund,
European Fund, Equity Fund, Growth Fund and Income Fund at the beginning of such
period would have been worth $1,160.95, $1,064.33, $1,621.00, $1,212.25,
$1,383.33, and $1,038.49, respectively, assuming the maximum contingent deferred
sales charge was paid and all distributions were reinvested.
8
<PAGE> 104
Each Fund's performance may be compared in advertising to the performance
of other mutual funds in general, or of particular types of mutual funds,
especially those with similar objectives. Such performance data may be prepared
by Lipper, Inc. and other independent services which monitor the performance of
mutual funds. The Funds may also advertise mutual fund performance rankings
which have been assigned to each respective Fund by such monitoring services.
Each Fund's performance may also be compared in advertising and other materials
to the performance of comparative benchmarks such as indices of stocks
comparable to those in which the Funds invest, as well as the following:
<TABLE>
<S> <C>
Standard & Poor's 500 Stock Index Dow Jones Industrial Average
Consumer Price Index Morgan Stanley Capital International Indices,
Bond Buyer Index including:
NASDAQ EAFE Index
COFI AC Asia Pacific Free Ex-Japan
First Boston High Yield Index Europe Index
The Financial Times - Actuaries World Indices AC World Index
(a wide range of comprehensive measures Salomon Bros World Gov't Bond Index
of stock price performance for the world's
major stock markets and regional areas)
</TABLE>
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasuries
30 year Treasuries
90 Day Treasury Bills
Advertising for the Income Fund may from time to time include discussions
of general economic conditions and interest rates.
From time to time, each Fund's advertising may include discussions of
general domestic and international economic conditions and interest rates, and
may make reference to international economic sources such as The Bundesbank (the
German equivalent of the U.S. Federal Reserve Board). Each Fund's advertising
may also include references to the use of the Fund as part of an individual's
overall retirement investment program.
From time to time, each Fund's sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. This includes,
but is not limited to, literature addressing general information about mutual
funds, variable annuities, dollar-cost averaging, stocks, bonds, money markets,
certificates of deposit, retirement, retirement plans, asset allocation,
tax-free investing, college planning and inflation. Also from time to time,
sales literature and/or advertisements for the Funds may disclose (i) the
largest holdings in the Funds' portfolios, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
AIM makes decisions to buy and sell securities for the Funds, selects
broker-dealers, effects the Funds' investment transactions, allocates brokerage
fees in such transactions, and where applicable, negotiates commissions and
spreads on transactions. Since purchases and sales of portfolio securities by
the Funds are usually principal transactions, the Funds incur little or no
brokerage commission. AIM's primary consideration in effecting a security
transaction is to obtain the most favorable execution of the order, which
includes the best price on the security and a low commission rate (as
applicable). While AIM
9
<PAGE> 105
seeks reasonably competitive commission rates, the Funds may not pay the lowest
commission or spread available. See "Section 28(e) Standards" below.
In the event a Fund purchases securities traded over-the-counter, the Fund
deals directly with dealers who make markets in the securities involved, except
when better prices are available elsewhere. Fund transactions placed through
dealers who are primary market makers are effected at net prices without
commissions, but which include compensation in the form of a mark up or mark
down.
AIM may determine target levels of commission business with various brokers
on behalf of its clients (including the Funds) over a certain time period. The
target levels will be based upon the following factors, among others: (1) the
execution services provided by the broker; (2) the research services provided by
the broker; and (3) the broker's interest in mutual funds in general and in the
Funds and other mutual funds advised by AIM or A I M Capital Management, Inc.
(collectively, the "AIM Funds") in particular, including sales of the Funds and
of the other AIM Funds. In connection with (3) above, the Funds' trades may be
executed directly by dealers which sell shares of the AIM Funds or by other
broker-dealers with which such dealers have clearing arrangements. AIM will not
use a specific formula in connection with any of these considerations to
determine the target levels.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of the Funds, provided the conditions of an exemptive order received
by the Funds from the SEC are met. In addition, the Funds may purchase or sell a
security from or to another AIM Fund or account provided the Funds follow
procedures adopted by the Board of Directors/Trustees of the various AIM Funds,
including the Company. These inter-fund transactions do not generate brokerage
commissions but may result in custodial fees or taxes or other related expenses.
Under the 1940 Act, certain persons affiliated with the Company are
prohibited from dealing with the Company as principal in any purchase or sale of
securities unless an exemptive order allowing such transactions is obtained from
the SEC. The 1940 Act also prohibits the Company from purchasing a security
being publicly underwritten by a syndicate of which certain persons affiliated
with the Company are members except in accordance with certain conditions. These
conditions may restrict the ability of the Funds to purchase municipal
securities being publicly underwritten by such syndicate, and the Funds may be
required to wait until the syndicate has been terminated before buying such
securities. At such time, the market price of the securities may be higher or
lower than the original offering price. A person affiliated with the Company
may, from time to time, serve as placement agent or financial advisor to an
issuer of Municipal Securities and be paid a fee by such issuer. The Funds may
purchase such Municipal Securities directly from the issuer, provided that the
purchase is reviewed by the Company's Board of Directors and a determination is
made that the placement fee or other remuneration paid by the issuer to a person
affiliated with the Company is fair and reasonable in relation to the fees
charged by others performing similar services.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage several other investment accounts. Some of
these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by a Fund
and one or more of these investment accounts. However, the position of each
account in the same securities and the length of time that each account may hold
its investment in the same securities may vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities is consistent with the investment policies of a
Fund and one or more of these accounts, and is considered at or about the same
time, AIM will fairly allocate transactions in such securities among such Fund
and these accounts. AIM may combine such transactions, in accordance with
applicable laws and regulations, to obtain the most favorable execution.
10
<PAGE> 106
Simultaneous transactions could, however, adversely affect the Funds' ability to
obtain or dispose of the full amount of a security which it seeks to purchase or
sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to the Funds. In making such
allocations, AIM considers the investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the judgments of the persons
responsible for recommending the investment.
ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds or accounts may become
interested in participating in security distributions that are available in an
IPO, and occasions may arise when purchases of such securities by one AIM Fund
or account may also be considered for purchase by one or more other AIM Funds or
accounts. In such cases, it shall be AIM's practice to specifically combine or
otherwise bunch indications of interest for IPO securities for all AIM Funds and
accounts participating in purchase transactions for that security, and to
allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks
to participate in a particular IPO by reviewing a number of factors, including
suitability of the investment with the AIM Fund's or account's investment
objective, policies and strategies, the liquidity of the AIM Fund or account if
such investment is purchased, and whether the portfolio manager intends to hold
the security as a long-term investment. The allocation of limited supply
securities issued in IPOs will be made to eligible AIM Funds and accounts in a
manner designed to be fair and equitable for the eligible AIM Funds and
accounts, and so that there is equal allocation of IPOs over the longer term.
Where multiple funds or accounts are eligible, rotational participation may
occur, based on the extent to which an AIM Fund or account has participated in
previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM
Fund and account with an asset level of less than $500 million will be placed in
one of three tiers, depending upon its asset level. The AIM Funds and accounts
in the tier containing funds with the smallest asset levels will participate
first, each receiving a 40 basis point allocation (rounded to the nearest share
round lot that approximates 40 basis points) (the "Allocation"), based on that
AIM Fund's or account's net assets. This process continues until all of the AIM
Funds and accounts in the three tiers receive their Allocations, or until the
shares are all allocated. Should securities remain after this process, eligible
AIM Funds and accounts will receive their Allocations on a straight pro rata
basis. For the tier of AIM Funds and accounts not receiving a full Allocation,
the Allocation may be made only to certain AIM Funds or accounts so that each
may receive close to or exactly 40 basis points.
When any AIM Fund and/or account with substantially identical investment
objectives and policies participate in syndicates, they will do so in amounts
that are substantially proportionate to each other. In these cases, the net
assets of the largest AIM Fund will be used to determine in which tier, as
described in the paragraph above, such group of AIM Funds or accounts will be
placed. If no AIM Fund is participating, then the net assets of the largest
account will be used to determine tier placement. The price per share of
securities purchased in such syndicate transactions will be the same for each
AIM Fund and account.
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided viewed in terms of either
that particular transaction or [AIM's] overall responsibilities with respect to
the accounts as to which it exercises investment discretion." The services
provided by the broker also must lawfully and
11
<PAGE> 107
appropriately assist AIM in the performance of its investment decision-making
responsibilities. Accordingly, in recognition of research services provided to
them, Funds may pay a broker higher commissions than those available from
another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Company's directors with respect to
the performance, investment activities, and fees and expenses of other mutual
funds. Broker-dealers may communicate such information electronically, orally,
in written form or on computer software. Research services may also include the
providing of custody services, as well as the providing of equipment used to
communicate research information, the providing of specialized consultations
with AIM personnel with respect to computerized systems and data furnished to
AIM as a component of other research services, the arranging of meetings with
management of companies, and the providing of access to consultants who supply
research information.
The outside research assistance is useful to AIM since the broker-dealers
used by AIM tend to follow a broader universe of securities and other matters
than AIM's staff can follow. In addition, the research provides AIM with a
diverse perspective on financial markets. Research services provided to AIM by
broker-dealers are available for the benefit of all accounts managed or advised
by AIM or by its affiliates. Some broker-dealers may indicate that the provision
of research services is dependent upon the generation of certain specified
levels of commissions and underwriting concessions by AIM's clients, including
the Funds. However, the Funds are not under any obligation to deal with any
broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fees paid by the Funds are not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research services
had they not been provided by broker-dealers, the expenses to AIM could be
considered to have been reduced accordingly.
TRANSACTIONS WITH REGULAR BROKERS
As of October 31, 1999, European Fund had common stock holdings in Deutsche
Bank Securities Inc. having a market value of $1,721,995. As of October 31,
1999, Growth Fund had common stock holdings in Deutsche Bank Securities Inc.
having a market value of $1,578,496. As of October 31, 1999, Equity Fund had
common stock holdings in Deutsche Bank Securities Inc. having a market value of
$29,776,171. Deutsche Bank Securities Inc. is a regular broker/dealer of the
Company, as defined in Rule 10b-1.
As of October 31, 1999, Growth Fund had common stock holdings in Morgan
Stanley, Dean Witter, Discovery & Co. having a market value of $4,853,750.
Morgan Stanley, Dean Witter, Discovery & Co. is a regular broker/dealer of the
Company, as defined in rule 10b-1.
As of October 31, 1999, Income Fund had common stock holdings in Dresdner
Finance B.V. having a market value of $1,047,839. Dresdner Finance B.V. is a
regular broker/dealer of the Company, as defined in Rule 10b-1.
12
<PAGE> 108
As of October 31, 1999, Income Fund had common stock holdings in Lehman
Brothers Inc. having a market value of $523,667. Lehman Brothers Inc. is a
regular broker/dealer of the Company, as defined in Rule 10b-1.
As of October 31, 1999, Income Fund had common stock holdings in Societe
Generale having a market value of $76,221. Societe Generale is a regular
broker/dealer of the Company, as defined in Rule 10b-1.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1999, 1998 AND 1997, Aggressive
Growth Fund paid brokerage commissions of $4,648,141, $5,519,840 and $6,227,671,
respectively. For the fiscal year ended October 31, 1999, AIM allocated certain
of Aggressive Growth Fund's brokerage transactions to certain broker-dealers
that provided AIM with certain research, statistical and other information. Such
transactions amounted to $132,746,868 and the related brokerage commissions were
$193,563.
For the fiscal years ended October 31, 1999, 1998 and 1997, Equity Fund
paid brokerage commissions of $9,975,166, $8,743,049 and $6,002,915,
respectively. The increase in brokerage commissions from October 31, 1996
through October 31, 1998 was due to the increase in Equity Fund's net assets
during such period. For the fiscal year ended October 31, 1999, AIM allocated
certain of Equity Fund's brokerage transactions to certain broker-dealers that
provided AIM with certain research, statistical and other information. Such
transactions amounted to $93,942,068 and the related brokerage commissions were
$161,641.
For the fiscal years ended October 31, 1999, 1998 AND 1997, Growth Fund
paid brokerage commissions of $1,919,718, $1,482,482 AND $1,249,946,
respectively. The increase in brokerage commissions from October 31, 1996
through October 31, 1998 was due to the increase in Growth Fund's net assets
during such period. For the fiscal year ended October 31, 1999, AIM allocated
certain of Growth Fund's brokerage transactions to certain broker-dealers that
provided AIM with certain research, statistical and other information. Such
transactions amounted to $89,020,581 and the related brokerage commissions were
$116,369.
For the fiscal years ended October 31, 1999, 1998, and 1997, Income Fund
paid brokerage commissions of $813, $2,638 and $162, respectively. For the
fiscal year ended October 31, 1999, AIM allocated certain of Income Fund's
brokerage transactions to certain broker-dealers that provided AIM with certain
research, statistical and other information. Such transactions amounted to
$112,170 and the related brokerage commissions were $208.
For the fiscal year ended October 31, 1999, and the period November 3, 1997
to October 31, 1998, European Fund paid brokerage commissions of $915,158 and
$563,626, respectively. For the fiscal year ended October 31, 1999, AIM
allocated certain of European Fund's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $8,610,037 and the related brokerage
commissions were $15,829.
For the fiscal year ended October 31, 1999, and the period November 3,1997
to October 31, 1998, Asian Fund paid brokerage commissions of $327,148 and
$75,694, respectively. For the fiscal year ended October 31, 1999, AIM allocated
certain of Asian Fund's brokerage transactions to certain broker-dealers that
provided AIM with certain research, statistical and other information. Such
transactions amounted to $95,394 and the related brokerage commissions were
$270.
13
<PAGE> 109
INVESTMENT STRATEGIES AND RISKS
The following discussion of certain investment strategies and risks
supplements the discussion set forth in each Fund's Prospectus under the
headings "Investment Objective(s) and Strategies" and "Principal Risks of
Investing in the Fund."
The Funds' investment objective(s) are fundamental policies that cannot be
changed without shareholder approval. There can, of course, be no assurance that
any Fund will in fact achieve its objective(s). The Board of Directors of the
Company reserves the right to change any of the investment policies, strategies
or practices of any of the Funds, as described in this Statement of Additional
Information, without shareholder approval, except in those instances where
shareholder approval is expressly required.
ALL FUNDS (EXCEPT INCOME FUND)
In managing the Funds, AIM seeks to apply to each of the diversified
portfolios of equity securities the same investment strategy which it applies to
several of its other managed portfolios which have similar investment objectives
but which invest primarily in United States equities markets. Each of the Funds
will utilize to the extent practicable a fully managed investment policy
providing for the selection of securities which meet certain quantitative
standards determined by AIM. AIM reviews carefully the earnings history and
prospects for growth of each company considered for investment by each of the
Funds. It is anticipated that common stocks will be the principal form of
investment of the Funds. The portfolio of each of the Funds is primarily
comprised of securities of two basic categories of companies: (a) "core"
companies, which AIM considers to have experienced above-average and consistent
long-term growth in earnings and to have excellent prospects for outstanding
future growth, and (b) "earnings acceleration" companies which AIM believes are
currently enjoying a dramatic increase in earnings.
If a particular foreign company meets the quantitative standards determined
by AIM, its securities may be acquired by a Fund regardless of the location of
the company or their percentage of the Fund's investments in the company's
country or region. However, AIM will also consider other factors in making
investment decisions for these Funds including such factors as the prospects for
relative economic growth among countries or regions, economic and political
conditions, currency exchange fluctuations, tax considerations and the liquidity
of a particular security.
AIM recognizes that often there is less public information about foreign
companies than is available in reports supplied by domestic companies, that
foreign companies are not subject to uniform accounting and financial reporting
standards, and that there may be greater delays experienced by a Fund in
receiving financial information supplied by foreign companies than comparable
information supplied by domestic companies. In addition, the value of the Fund's
investments that are denominated in a foreign currency may be affected by
changes in currency exchange rates. For these and other reasons, AIM from time
to time may encounter greater difficulty applying its disciplined stock
selection strategy to an international equity investment portfolio than to a
portfolio of domestic equity securities.
ASIAN FUND
The investment objective of the Asian Fund is to provide long-term growth
of capital.
The Asian Fund seeks to achieve its investment objective by investing in a
diversified portfolio of equity securities, the issuers of which are located in
Asia, and which are considered by AIM to have strong earnings momentum or
demonstrate other potential for capital appreciation. Any income realized by the
Asian Fund will be incidental and will not be an important criterion in the
selection of portfolio securities.
Under normal market conditions the Asian Fund will invest at least 80%
(effective March 1, 2000, 65%) of its total assets in marketable equity
securities, including common stock, preferred stock, depositary receipts for
stock and other securities having the characteristics of stock (such as an
equity or
14
<PAGE> 110
ownership interest in a company) of Asian companies. The Asian Fund may satisfy
the foregoing requirement in part by investing in the securities of foreign
issuers which are in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), or other securities representing underlying
securities of Asian issuers. The Asian Fund may also satisfy such requirement by
investing up to 20% of its total assets in securities exchangeable for or
convertible into equity securities of Asian companies. The Asian Fund will not
invest in Japanese securities. Any change to such policy must be submitted by
AIM to the Company's Board of Directors prior to the effectiveness of such
change.
The Asian Fund considers an issuer of securities to be an Asian company if:
(i) it is organized under the laws of a country in Asia and has a principal
office in a country in Asia; (ii) it derives a significant portion (i.e., 50% or
more) of its total revenues from business in Asia; or (iii) its equity
securities are traded principally on a stock exchange in Asia or in an
over-the-counter market in Asia. The Asian Fund also considers shares of Asian
closed-end management investment companies, the assets of which are invested
primarily in Asian equity securities, to be securities of Asian companies.
There are no prescribed limits on geographic asset distribution within
Asia. Under normal market conditions, at least three countries will be
represented in the Asian Fund's portfolio of investments. The Asian Fund intends
to invest in securities of issuers in Asia as well as countries such as
Australia and New Zealand. The Asian Fund may invest, without limit, in
"developing" countries or "emerging markets." For a description of the risk
factors associated with investment in emerging markets. The Fund may invest up
to 20% of its total assets in securities of non-Asian companies.
A description of other investment strategies Asian Fund may pursue follows
after the section entitled " --Equity Fund."
The Asian Fund considers issuers of securities located in the following
countries to be Asian issuers:
<TABLE>
<S> <C> <C> <C>
Bangladesh Indonesia Philippines Thailand
China Korea Singapore Vietnam
Hong Kong Malaysia Sri Lanka
India Pakistan Taiwan
</TABLE>
In addition to Asian issuers, Asian Fund may invest up to 20% (effective
March 1, 2000, 35%) of its total assets in securities of non-Asian issuers. The
following is a list of some of the non-Asian countries in which Asian Fund may
invest from time to time:
<TABLE>
<S> <C>
Australia New Zealand
</TABLE>
EUROPEAN FUND
The investment objective of the European Fund is to provide long-term
growth of capital.
The European Fund seeks to achieve its investment objective by investing in
a diversified portfolio of European equity securities, the issuers of which are
considered by AIM to have strong earnings momentum or demonstrate other
potential for capital appreciation. Any income realized by the European Fund
will be incidental and will not be an important criterion in the selection of
portfolio securities.
Under normal market conditions the European Fund will invest at least 80%
of its total assets in marketable equity securities, including common stock,
preferred stock, depositary receipts for stock and other securities having the
characteristics of stock (such as an equity or ownership interest in a company)
of European companies. The European Fund may satisfy the foregoing requirement
in part by investing in the securities of European issuers which are in the form
of ADRs, EDRs, or other securities representing underlying securities of
European issuers. The European Fund may also satisfy such
15
<PAGE> 111
requirement by investing up to 20% of its total assets in securities
exchangeable for or convertible into equity securities of European issuers.
Investments in foreign securities may include securities issued by enterprises
that have undergone or are currently undergoing privatization.
The European Fund considers an issuer of securities to be a European
company if; (i) it is organized under the laws of a European country and has a
principal office in a European country; (ii) it derives a significant portion
(i.e., 50% or more) of its total revenues from business in Europe; or (iii) its
equity securities are traded principally on a stock exchange in Europe or in an
over-the-counter market in Europe. The European Fund also considers European
equity securities of closed-end management investment companies, the assets of
which are invested primarily in European equity securities, to be securities of
European companies.
There are no prescribed limits on geographic asset distribution within the
European community. Under normal market conditions, at least three European
countries will be represented in the European Fund's portfolio of investments.
The European Fund intends to invest in securities of issuers in Western Europe
(such as the United Kingdom, Germany and the Netherlands) as well as companies
of issuers in Eastern Europe (such as Croatia, the Czech Republic, Russia and
Turkey). Many of the countries in Eastern Europe are "developing" countries or
"emerging markets." The European Fund may invest up to 65% of its total assets
in securities of European issuers located in "developing" countries or "emerging
markets." The European Fund may invest up to 20% of its total assets in
securities of non-European companies.
A description of other investment strategies European Fund may pursue
follows after the section entitled "--Equity Fund."
European Fund considers issuers of securities located in the following
countries to be European issuers:
<TABLE>
<S> <C> <C> <C>
Austria Germany Netherlands Slovenia
Belgium Greece Norway Spain
Croatia Hungary Poland Sweden
Czech Republic Ireland Portugal Switzerland
Denmark Italy Romania Turkey
Finland Liechtenstein Russia Ukraine
France Luxembourg Slovakia United Kingdom
</TABLE>
In addition to European issuers, European Fund may invest up to 20% of its
total assets in securities of non-European issuers. The following is a list of
some of the non-European countries in which European Fund may invest from time
to time:
<TABLE>
<S> <C> <C> <C>
Bermuda Israel South Africa United States
Egypt
</TABLE>
The above lists may include foreign countries that have not yet been
approved by the Company's advisor. European Fund will only invest in foreign
countries that have been approved by the advisor.
The word "Development" in European Fund's name is designed to address the
general restructuring taking place in Europe as well as a more dramatic
political and economic restructuring taking place in regions such as Eastern
Europe. Also consistent with the name, the Fund has the ability to invest a
significant portion of its total assets in securities issued in emerging
markets.
PRIVATIZED ENTERPRISES. The governments of certain foreign countries have,
to varying degrees, embarked on privatization programs contemplating the sale of
all or part of their interests in state
16
<PAGE> 112
enterprises. European Fund's investments in the securities of privatized
enterprises include privately negotiated investments in a government- or
state-owned or controlled company or enterprise that has not yet conducted an
initial equity offering, investments in the initial offering of equity
securities of a state enterprise or former state enterprise and investments in
the securities of a state enterprise following its initial equity offering.
In certain jurisdictions, the ability of foreign entities, such as European
Fund, to participate in privatizations may be limited by local law, or the price
or terms on which European Fund may be able to participate may be less
advantageous than for local investors. Moreover, there can be no assurance that
governments that have embarked on privatization programs will continue to divest
their ownership of state enterprises, that proposed privatizations will be
successful or that governments will not re-nationalize enterprises that have
been privatized.
In the case of the enterprises in which European Fund may invest, large
blocks of the stock of those enterprises may be held by a small group of
stockholders, even after the initial equity offerings by those enterprises. The
sale of some portion or all of those blocks could have an adverse effect on the
price of the stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or
former state enterprises go through an internal reorganization or management
changes. Such reorganizations are made in an attempt to better enable these
enterprises to compete in the private sector. However, certain reorganizations
could result in a management team that does not function as well as the
enterprise's prior management and may have a negative effect on such enterprise.
In addition, the privatization of an enterprise by its government may occur over
a number of years, with the government continuing to hold a controlling position
in the enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which European
Fund may invest enjoy the protection of and receive preferential treatment from
the respective sovereigns that own or control them. After making an initial
equity offering these enterprises may no longer have such protection or receive
such preferential treatment and may become subject to market competition from
which they were previously protected. Some of these enterprises may not be able
to effectively operate in a competitive market and may suffer losses or
experience bankruptcy due to such competition.
AGGRESSIVE GROWTH FUND AND GROWTH FUND
Aggressive Growth Fund and Growth Fund have their own investment objective
and investment program as discussed herein.
The investment objective of Aggressive Growth Fund is to provide
above-average long-term growth of capital appreciation.
The Fund seeks to achieve its objective by investing in a portfolio of
global equity securities including securities of selected companies with
relatively small market capitalization.
The Aggressive Growth Fund will invest in companies throughout the world
which AIM believes possess exceptional growth potential that should enhance such
companies' prospects for future growth in earnings. As a result of this policy,
the market prices of many of the securities purchased and held by Aggressive
Growth Fund may fluctuate widely. Any income received from securities held by
the Fund will be incidental, and an investor should not consider a purchase of
shares of Aggressive Growth Fund as equivalent to a complete investment program.
Aggressive Growth Fund will emphasize investment in small to medium-sized
companies, but its strategy does not preclude investment in large, seasoned
companies which in AIM's judgment possess superior potential returns similar to
companies with formative growth profiles. The Fund will also invest in
established smaller companies (under $1 billion in market capitalization) which
in AIM's judgment offer exceptional value based upon substantially above average
earnings growth potential relative to market value. Investors should realize
that equity securities
17
<PAGE> 113
of small to medium-sized companies may involve greater risk than is associated
with investing in more established companies. Small to medium-sized companies
often have limited product and market diversification, fewer financial and
managerial resources or may be dependent on a few key managers. Also, because
smaller companies normally have fewer shares outstanding than larger companies
and trade less frequently, it may be more difficult for the Fund to buy and sell
shares without an unfavorable impact on prevailing market prices. Some of the
companies in which the Fund may invest may distribute, sell or produce products
which have recently been brought to market. Any of the foregoing may change
suddenly and have an immediate impact on the value of the Fund's investments.
Furthermore, whenever the securities markets have experienced rapid price
changes due to national economic trends, secondary growth securities have
historically been subject to exaggerated price changes.
The investment objective of Growth Fund is to provide long-term growth of
capital.
The Fund seeks to achieve its objective by investing in a portfolio of
global equity securities of selected companies that are considered by AIM to
have strong earnings momentum. Current income will not be an important criterion
of investment section, and any such income should be considered incidental.
Under normal market conditions, Aggressive Growth Fund and Growth Fund will
invest 65% of their respective total assets in marketable equity securities
(including common and preferred stock and other securities having the
characteristics of stock (such as an equity or ownership interest in a company))
of companies which are listed on a recognized securities exchange or traded in
an over-the-counter market. Each of these Funds may satisfy the foregoing
requirement in part by investing in the securities of issuers which are in the
form of ADRs, EDRs, or other securities representing underlying securities of
foreign issuers. Each of Aggressive Growth Fund and Growth Fund may invest up to
20% of its total assets in securities convertible into or exchangeable for
equity securities of foreign and domestic issuers which (except in the case of
ADRs, EDRs and other securities representing underlying securities of foreign
issuers) are listed on a recognized securities exchange or traded in an
over-the-counter market.
Under normal market conditions, the assets of each Fund will be invested in
the securities of companies located in at least four different countries,
including the United States. Aggressive Growth Fund and Growth Fund will each
emphasize investment in companies in developed countries such as the United
States, the countries of Western Europe and certain countries in the Pacific
Basin (such as Japan, Hong Kong and Australia). The Funds may also invest in the
securities of companies located in developing countries (such as Turkey, Poland
and Mexico) in various regions of the world. A "developing country" is a country
in the initial stages of this industrial cycle.
Investment in the equity markets of developing countries involves exposure
to securities exchanges that may have substantially less trading volume and
greater price volatility, economic structures that are less diverse and mature,
and political systems that may be less stable than the equity markets of
developed countries.
A description of other investment strategies Aggressive Growth Fund and
Growth Fund may pursue follows the section entitled "Investment Strategies and
Risks."
INCOME FUND
Income Fund's primary investment objective is to provide a high level of
current income. As a secondary objective the Fund seeks preservation of
principal and capital appreciation.
The Fund seeks to achieve its objectives by investing in a portfolio of
U.S. and foreign government and corporate debt securities. Income Fund intends
to invest in (i) foreign government securities, (ii) securities issued by
supranational organizations (such as the World Bank), (iii) foreign and domestic
corporate debt securities, including lower-rated or unrated U.S.
dollar-denominated high yield corporate debt securities, commonly known as "junk
bonds" and (iv) U.S. Government securities, including U.S. Government Agency
mortgage-backed securities.
18
<PAGE> 114
Income Fund is a non-diversified portfolio, which means that with respect
to 50% of its assets, it is permitted to invest more than 5% of its assets in
the securities of any one issuer. Income Fund will, however, invest no more than
5% of its total assets in the securities of any one corporate issuer, and will
invest no more than 25% of its total assets in securities of any one foreign
government or supranational issuer. Income Fund will generally invest in the
securities of issuers located in at least four countries, including the United
States.
Income Fund will invest in securities issued by governments and companies
throughout the world, but expects that it will invest primarily in securities of
issuers in industrialized countries with established securities markets, such as
Western European countries, Canada, Japan, Australia, New Zealand and the United
States. Income Fund may, however, invest up to 20% of its total assets in
securities of issuers in developing countries such as Turkey, Poland and Mexico.
Although Income Fund will invest at least 65% of its total assets in
non-convertible debt securities of foreign and domestic issuers, it may invest
up to 10% of its total assets in common stocks, preferred stocks and similar
equity securities of foreign and domestic issuers. Income Fund may also invest
up to 10% of its total assets in convertible debt securities of foreign and
domestic issuers.
Income Fund may invest less than 35% of its total assets in high yield debt
securities (i.e., "junk bonds"). Such securities, at the time of purchase, are
rated below investment grade or are determined by AIM to be non-investment grade
quality. For a description of the various rating categories of corporate debt
securities in which Income Fund may invest, see Appendix B. While generally
providing greater income and opportunity for gain, non-investment grade debt
securities may be subject to greater risks than higher-rated securities.
Economic downturns tend to disrupt the market for junk bonds and adversely
affect their values. Such economic downturns may be expected to result in
increased price volatility for junk bonds and of the value of shares of the
Fund, and increased issuer defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged, which
may impair their ability to meet their obligations. In some cases, junk bonds
are subordinated to the prior payment of senior indebtedness, which potentially
limits a Fund's ability to fully recover principal or to receive payments when
senior securities are subject to a default.
The credit rating of a debt security does not necessarily address its
market value risk, and ratings may from time to time change to reflect
developments regarding the issuer's financial condition. Junk bonds have
speculative characteristics which are likely to increase in number and
significance with each successive lower rating category. Credit ratings evaluate
the safety of principal and interest payments, not market value risk of high
yield bonds. Also, since credit rating agencies may fail to timely change the
credit ratings to reflect subsequent events, AIM continuously monitors the
issuers of high yield bonds in Income Fund's portfolio to determine if the
issuers will have sufficient cash flow and profits to meet required principal
and interest payments, and to attempt to assure the bonds' liquidity so that
Income Fund can meet redemption requests. The achievement of Income Fund's
investment objective may be more dependent on AIM's own credit analysis than
might be the case for a fund which invests in higher quality bonds. Income Fund
may retain a portfolio security whose ratings has been changed.
When the secondary market for junk bonds becomes more illiquid, or in the
absence of readily available market quotations for such securities, the relative
lack of reliable objective data makes it more difficult for the directors to
value a Fund's securities, and judgment plays a more important role in
determining such valuations. Increased illiquidity in the junk bond market also
may affect a Fund's ability to dispose of such securities at desirable prices.
In the event the Fund experiences an unexpected level of net redemptions,
the Fund could be forced to sell its junk bonds without regard to their
investment merits, thereby decreasing the asset base upon which the Fund's
expenses can be spread and possibly reducing the Fund's rate of return. Prices
19
<PAGE> 115
of junk bonds have been found to be less sensitive to fluctuations in interest
rates, and more sensitive to adverse economic changes and individual corporate
developments, than those of higher-rated debt securities.
Securities issued by the U.S. Treasury (notes, bonds and bills) are
supported by the full faith and credit of the United States government, while
certain securities issued or guaranteed by agencies or instrumentalities of the
U.S. Government may not be supported by the full faith and credit of the United
States. These agency securities include both obligations supported by the right
of the issuer to borrow from the U.S. Treasury (such as obligations of the
Federal Home Loan Bank) and obligations supported by the credit of the agency or
instrumentality (such as Federal National Mortgage Association bonds).
Similarly, obligations of foreign governments include obligations issued by
national, provincial, state or other governments that have taxing authority over
their local populations, or by agencies of such governments that may be
supported by the full faith and credit of the governmental entity, or solely by
the credit of such agency.
Supranational organizations include organizations formed and supported by
governmental entities to promote economic growth and development, or
international banking institutions, such as the International Bank of
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the Inter-American Development Bank.
Supranational organizations are generally formed and supported by the capital
contributions of governmental entities and, in their lending and other
activities, carry out the particular purposes designated by their member
governmental entities.
The value of the debt securities in which Income Fund invests will change
in response to interest rate changes and other factors. During periods of rising
interest rates, the values of outstanding long-term debt securities will
generally decline, and during periods of falling interest rates, the values of
such securities will generally rise. Such changes will affect the net asset
value per share of Income Fund. Longer-term fixed income securities tend to be
subject to greater fluctuations in price than shorter-term securities.
For a discussion of certain risks associated with investments in high yield
securities (i.e., "junk bonds"), foreign securities and non-diversified funds,
see "Principal Risks of Investing in the Fund" in the Fund's Prospectus. A
description of other investment strategies Income Fund may pursue follows after
the section below entitled "--Equity Fund."
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and manage
prepayment risk, Income Fund may engage in dollar roll transactions with respect
to mortgage securities issued by GNMA, FNMA and FHLMC. In a dollar roll
transaction, a Fund sells a mortgage security held in the portfolio to a
financial institution such as a bank or broker-dealer, and simultaneously agrees
to repurchase a substantially similar security (same type, coupon and maturity)
from the institution at a later date at an agreed upon price. The mortgage
securities that are repurchased will bear the same interest rate as those sold,
but generally will be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities sold. Proceeds of the sale will be invested in
short-term instruments, and the income from these investments, together with any
additional fee income received on the sale, could generate income for the Fund
exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by a Fund may decline below the price of the securities that
the Fund has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities. See "Borrowings," below for the applicable limitation on dollar
roll transactions.
20
<PAGE> 116
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES. Income Fund may invest
in U.S. Government Agency Mortgage Backed Securities. These securities are
obligations issued or guaranteed by the United States Government or by one of
its agencies or instrumentalities, including but not limited to the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA"), or the Federal Home Loan Mortgage Corporation ("FHLMC").
U.S. Government Agency Mortgage-Backed Certificates provide for the pass-through
to investors of their pro-rata share of monthly payments (including any
principal prepayments) made by the individual borrowers on the pooled mortgage
loans, net of any fees paid to the guarantor of such securities and the services
of the underlying mortgage loans. GNMA, FNMA, and FHLMC each guarantee timely
distributions of interest to certificate holders. GNMA and FNMA guarantee timely
distributions of scheduled principal. FHLMC has in the past guaranteed only the
ultimate collection of principal of the underlying mortgage loan; however, FHLMC
Gold Participation Certificates now guarantee timely payment of monthly
principal reductions. Although their close relationship with the U.S. Government
is believed to make them high-quality securities with minimal credit risks, the
U.S. Government is not obligated by law to support either FNMA or FHLMC.
However, historically there have not been any defaults of FNMA or FHLMC issues.
See Appendix C for a more complete description of these securities.
Mortgage-backed securities consist of interests in underlying mortgages
generally with maturities of up to thirty years. However, due to early
unscheduled payments of principal on the underlying mortgages, the securities
have a shorter average life and, therefore, less volatility than a comparable
thirty-year bond. The value of U.S. Government Agency Mortgage-Backed
Securities, like other traditional debt instruments, will tend to decline as
interest rates rise and increase as interest rates decline.
EQUITY FUND
The investment objective of the Equity Fund is to provide long-term growth
of capital by investing in a diversified portfolio of international equity
securities, the issuers of which are considered by AIM to have strong earnings
momentum. Any income realized by the Equity Fund will be incidental and will not
be an important criterion in the selection of portfolio securities.
Under normal market conditions the Equity Fund will invest at least 70% of
its total assets in marketable equity securities, including common stock,
preferred stock, depositary receipts for stock and other securities having the
characteristics of stock (such as an equity or ownership interest in a company)
of foreign companies which are listed on a recognized U.S. or foreign securities
exchange or traded in a U.S. OR foreign over-the-counter-market. The Equity Fund
may also satisfy the foregoing requirement in part by investing in the
securities of foreign issuers which are in the form of ADRs, EDRs, or other
securities representing underlying securities of foreign issuers. The Equity
Fund may also invest up to 20% of its total assets in securities exchangeable
for or convertible into equity securities of foreign companies which are listed
on a recognized U.S. or foreign securities exchange or traded in a U.S. or
foreign over-the-counter market.
Under normal market conditions, the Equity Fund intends to invest in the
securities of foreign companies located in at least four countries outside the
United States. The Equity Fund will emphasize investment in foreign companies in
the developed countries of Western Europe (such as Germany, France, Switzerland,
the Netherlands and the United Kingdom) and the Pacific Basin (such as Japan,
Hong Kong and Australia), and the Equity Fund may also invest in the securities
of companies located in developing countries (such as Turkey, Malaysia and
Mexico) in various regions of the world. A "developing country" is a country in
the initial stages of its industrial cycle.
Investment in the equity markets of developing countries involves exposure
to securities exchanges that may have substantially less trading volume and
greater price volatility, economic structures that are less diverse and mature,
and political systems that may be less stable than the equity markets of
developed countries. At the present time, AIM does not intend to invest more
than 20% of the Equity Fund's total assets in foreign companies in developing
countries.
21
<PAGE> 117
REAL ESTATE INVESTMENT TRUSTS ("REITS")
To the extent consistent with the Funds' investment objectives and
policies, the Funds may invest in equity and/or debt securities issued by REITs.
Such investments will not exceed 5% of the total assets of any of the Funds.
REITs are trusts which sell equity or debt securities to investors and use
the proceeds to invest in real estate or interests therein. A REIT may focus on
particular projects, such as apartment complexes, or geographic regions, such as
the Southeastern United States, or both.
To the extent that a Fund has the ability to invest in REITs, such Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. A Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate,
environmental liability risks, risks related to general and local economic
condition, adverse change in the climate for real estate, increases in property
taxes and operating expense, changes in zoning laws, casualty or condemnation
losses, limitations on rents, changes in neighborhood values, the appeal of
properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by
any changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of any credit extended. Equity and
mortgage REITs are dependent upon management skill, are not diversified, and are
therefore subject to the risk of financing single or a limited number of
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation, and the possibility of failing to maintain
exemption from the 1940 Act. Changes in interest rates may also affect the value
of debt securities held by a Fund. By investing in REITs indirectly through a
Fund, a shareholder will bear not only his/her proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the REITs.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements and reverse repurchase
agreements. The Fund may enter into repurchase agreements with institutions
believed by the Company's Board of Directors to present minimal credit risk. A
repurchase agreement is an instrument under which a Fund acquires ownership of a
debt security and the seller (usually a broker or bank) agrees, at the time of
the sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
reduced levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. A repurchase agreement is collateralized
by the security acquired by the Fund and its value is marked to market daily in
order to minimize the Fund's risk. Repurchase agreements usually are for short
periods, such as one or two days, but may be entered into for longer periods of
time. Repurchase agreements are considered to be loans by the Funds under the
1940 Act. Repurchase agreements will be secured by U.S. Treasury securities,
U.S. Government agency securities (including, but not limited to those which
have been stripped of their interest payments and mortgage backed securities)
and commercial paper.
A reverse repurchase agreement involves the sale of securities held by a
Fund, with an agreement that the Fund will repurchase such securities at an
agreed-upon price, date, and interest payment. Each Fund may employ reverse
repurchase agreements (i) for temporary emergency purposes, such as to meet
unanticipated net redemptions so as to avoid liquidating other portfolio
securities during unfavorable market conditions; (ii) to cover short-term cash
requirements resulting from the timing of trade settlements; or (iii) to take
advantage of market situations where the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of
22
<PAGE> 118
the transaction. During the time a reverse repurchase agreement is outstanding,
the applicable Fund will segregate liquid assets having a value equal to the
repurchase price under such reverse repurchase agreement. Any investment gains
made by a Fund with monies borrowed through reverse repurchase agreements will
cause the net asset value of the Fund's shares to rise faster than would be the
case if the Fund had no such borrowings. On the other hand, if the investment
performance resulting from the investment of borrowings obtained through reverse
repurchase agreements fails to cover the cost of such borrowings to the Fund,
the net asset value of the Fund will decrease faster than would otherwise be the
case. Aggressive Growth Fund, Asian Fund, Growth Fund, European Fund and Income
Fund may enter into reverse repurchase agreements in amounts not exceeding
33-1/3% of the value of its total assets. Equity Fund may enter into reverse
repurchase agreements in amounts not exceeding 10% of the value of its total
assets. Reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund in lieu of liquidation may decline below the
repurchase price of the securities sold by the Fund which it is obligated to
repurchase. This risk, if encountered, could cause a reduction in the net asset
value of the Fund's shares. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Funds may make secured
loans of portfolio securities amounting to not more than 33-1/3% of each Fund's
respective total assets. Securities loans are made to banks, brokers and other
financial institutions pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of
the securities lent marked to market on a daily basis. The collateral received
will consist of cash, U.S. Government securities, letters of credit or such
other collateral as may be permitted under the applicable Fund's investment
program. While the securities are being lent, the Fund will continue to receive
the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. The Funds have a right to call each of their respective loans
and obtain the securities on five business days' notice or, in connection with
securities trading on foreign markets, within such longer period of time which
coincides with the normal settlement period for purchases and sales of such
securities in such foreign markets. The Funds will not have the right to vote
securities while they are being lent, but each Fund will call a loan in
anticipation of any important vote. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially. Loans
will not be made unless, in the judgment of AIM, the consideration to be earned
from such loans would justify the risk.
BORROWINGS
Each Fund may borrow money to a limited extent from banks (including the
Funds' custodian bank) for temporary or emergency purposes subject to the
limitations under the 1940 Act. The current provisions of the 1940 Act restrict
borrowings (including reverse repurchase agreements and dollar roll
transactions) to an aggregate of 33-1/3% of the Fund's total assets at the time
of the transaction; however, Equity Fund's borrowings are limited to 10% of
total assets at the time of the transaction. In addition, the Funds, except for
Income Fund, do not intend to engage in leverage; therefore consistent with
current interpretations of the SEC, the Funds, except for Income Fund will not
purchase additional securities while borrowings from banks exceed 5% of each
Fund's total assets.
Reverse repurchase agreement transactions and dollar roll transactions are
considered borrowings under the 1940 Act. Any investment gains made by Income
Fund with the borrowed monies in excess of interest paid by Income Fund will
cause the net asset value of Income Fund's shares to rise faster than would
otherwise be the case. On the other hand, if the investment performance of the
additional securities purchased with the proceeds of such borrowings fails to
cover the interest paid by the money borrowed by Income Fund, the net asset
value of Income Fund will decrease faster than would otherwise be the case. This
speculative factor is known as "leveraging."
23
<PAGE> 119
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
Each Fund may purchase securities on a "when-issued" basis, that is,
delivery of and payment of the securities is not fixed at the date of purchase,
but is set after the securities are issued (normally within forty-five days
after the date of the transaction). Each Fund also may purchase or sell
securities on a delayed delivery basis. The payment obligation and the interest
rate that will be received on the delayed delivery securities are fixed at the
time the buyer enters into the commitment. Each Fund will only make commitments
to purchase when-issued or delayed delivery securities with the intention of
actually acquiring such securities, but each Fund may sell these securities
before the settlement date if it is deemed advisable. If a Fund purchases a
when-issued security or enters into a delayed delivery agreement, the Fund's
custodian bank will segregate cash or liquid securities in an amount at least
equal to the when-issued commitment or delayed delivery agreement commitment.
SHORT SALES
Each Fund may from time to time make short sales "against the box." A short
sale is a transaction in which a party sells a security it does not own in
anticipation of a decline in the market value of that security. A Fund will not
make short sales of securities or maintain a short position unless at all times
when a short position is open, the Fund owns an equal amount of such securities
or securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short. This is a technique known as selling short "against the
box." Such short sales will be used by the Funds for the purpose of deferring
recognition of gain or loss for federal income tax purposes. In no event may
more than 10% of the value of a Fund's total assets be deposited or pledged as
collateral for such sales at any time.
ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in securities that are
illiquid, including restricted securities which are illiquid. Illiquid
securities include securities that cannot be disposed of promptly (within seven
days) in the normal course of business at a price at which they are valued.
Illiquid securities may include securities that are subject to restrictions on
resale because they have not been registered under the Securities Act of 1933.
Although securities which may be resold only to "qualified institutional
buyers" in accordance with the provisions of Rule 144A under the Securities Act
of 1933 are unregistered securities, each Fund may purchase Rule 144A securities
without regard to the 15% limitation described above provided that a
determination is made that such securities have a readily available trading
market.
RULE 144A SECURITIES
The Funds may purchase privately placed securities that are eligible for
purchase and sale pursuant to Rule 144A under the Securities Act of 1933 (the
"1933 Act"). This Rule permits certain qualified institutional buyers, such as
the Funds, to trade in securities that have not been registered under the 1933
Act. AIM, under the supervision of the Company's Board of Directors, will
consider whether securities purchased under Rule 144A are illiquid and thus
subject to each Fund's restriction of investing no more than 15% of its net
assets in illiquid securities. Determination of whether a Rule 144A security is
liquid or not is a question of fact. In making this determination AIM will
consider the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition, AIM could consider the
(i) frequency of trades and quotes, (ii) number of dealers and potential
purchasers, (iii) dealer undertakings to make a market, and (iv) nature of the
security and of marketplace trades (for example, the time needed to dispose of
the security, the method of soliciting offers and the mechanics of transfer).
The liquidity of Rule 144A securities will also be monitored by AIM and, if as a
result of changed conditions, it is determined that a Rule 144A security is no
longer liquid, a Fund's holdings of illiquid securities will be reviewed to
determine what, if any, action is required to assure that the Fund does not
invest more than 15% of its net assets in illiquid securities. Investing in Rule
144A securities
24
<PAGE> 120
could have the effect of increasing the amount of the Fund's investments in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.
FOREIGN SECURITIES
Each of the Funds may invest in foreign securities. ADRs, EDRs and other
securities representing underlying securities of foreign issuers are treated as
foreign securities. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a United States bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe which evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are designed for use in the
United States securities markets, and EDRs, in bearer form, are designed for use
in European securities markets. ADRs and EDRs may be listed on stock exchanges,
or traded in OTC markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates.
To the extent a Fund invests in securities denominated in foreign
currencies, each Fund bears the risk of changes in the exchange rates between
U.S. currency and the foreign currency, as well as the availability and status
of foreign securities markets. These securities will be marketable equity
securities (including common and preferred stock, depositary receipts for stock
and fixed income or equity securities exchangeable for or convertible into
stock) of foreign companies which generally are listed on a recognized foreign
securities exchange or traded in a foreign over-the-counter market. Each of the
Funds may also invest in foreign securities listed on recognized U.S. securities
exchanges or traded in the U.S. over-the-counter market. Such foreign securities
may be issued by foreign companies located in developing countries in various
regions of the world. A "developing country" is a country in the initial stages
of its industrial cycle. As compared to investment in the securities markets of
developed countries, investment in the securities markets of developing
countries involves exposure to markets that may have substantially less trading
volume and greater price volatility, economic structures that are less diverse
and mature, and political systems that may be less stable.
Investments by a Fund in foreign securities, whether denominated in U.S.
currencies or foreign currencies, may entail all of the risks set forth below.
Investments by a Fund in ADRs, EDRs or similar securities also may entail some
or all of the risks as set forth below.
Currency Risk. The value of each Fund's foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and increases when the
value of the U.S. dollar falls against such currency.
On January 1, 1999, certain members of the European Economic and Monetary
Union ("EMU"), namely Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, the Netherlands, Portugal, and Spain established a common
European currency known as the "euro and each member's local currency became a
denomination of the euro." It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any
other European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by the Fund.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest are not as developed as the United States economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of each
Fund's investments. Individual foreign economies may also differ favorably or
unfavorably from the United States economy in areas such as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency, and
25
<PAGE> 121
balance of payments position, which may likewise affect the Fund's investments.
Moreover, foreign legal systems may be affected by the prevailing political
climate and the Fund may not be able to obtain legal remedies or enforce
judgments in those courts.
Regulatory Risk. Foreign companies are not registered with the SEC and are
generally not subject to the regulatory controls imposed on United States
issuers and, as a consequence, there is generally less publicly available
information about foreign securities than is available about domestic
securities. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic companies. Income from foreign securities owned by
the Funds may be reduced by a withholding tax at the source, which tax would
reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States. Further, the settlement period of securities transactions in foreign
markets may be longer than in domestic markets. These considerations generally
are more of a concern in developing countries. For example, the possibility of
revolution and the dependence on foreign economic assistance may be greater in
these countries than in developed countries. The management of the Funds seeks
to mitigate the risks associated with these considerations through
diversification and active professional management.
EMERGING MARKETS. General. A developing country or emerging market country
can be considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the developed European countries (primarily in
Western Europe), the United States, Canada, Japan, Australia, New Zealand, Hong
Kong and Singapore. The characteristics of markets can change over time.
Currently, investing in many emerging markets may not be desirable or feasible
because of the lack of adequate custody arrangements for the Funds' assets,
overly burdensome repatriation and similar restrictions, the lack of organized
and liquid securities markets, unacceptable political risks or other reasons. As
desirable opportunities to invest in securities in emerging markets develop, the
Funds may expand and further broaden the group of emerging markets in which it
invests. In the past, markets of developing countries have been more volatile
than the markets of developed countries; however, such markets often have
provided higher rates of return to investors. AIM believes that these
characteristics can be expected to continue in the future.
Many of the risks described above relating to foreign securities generally
will be greater for emerging markets than for developed countries. Many emerging
markets have experienced substantial rates of inflation for many years.
Inflation and rapid fluctuations in inflation rates have had and may continue to
have very negative effects on the economies and securities markets for certain
developing markets. Economies in emerging markets generally are heavily
dependent upon international trade and accordingly, have been and may continue
to be affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be affected adversely by economic conditions in the
countries with which they trade.
Also, the securities markets of developing countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the United States and other more developed countries. Disclosure,
regulatory and accounting standards in many respects are less stringent than in
the United States and other developed markets. There also may be a lower level
of monitoring and
26
<PAGE> 122
regulation of developing markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely limited.
In addition, brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive than in
the United States; this is particularly true with respect to emerging markets.
Such markets have different settlement and clearance procedures. In certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct such
transactions. Such settlement problems may cause emerging market securities to
be illiquid. The inability of the Funds to make intended securities purchases
due to settlement problems could cause the Funds to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Funds due to subsequent declines
in value of the portfolio security or, if the Funds have entered into contract
to sell the security, could result in possible liability to the purchaser.
Certain emerging markets may lack clearing facilities equivalent to those in
developed countries. Accordingly, settlements can pose additional risks in such
markets and ultimately can expose the Funds to the risk of losses resulting from
the Funds' inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Funds' portfolio securities in such
markets may not be readily available. The Funds' portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Directors.
Investment in certain emerging markets securities is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude foreign investment in certain emerging market securities and
increase the costs and expenses of the Fund. Emerging markets may require
governmental approval for the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. In addition, if a
deterioration occurs in an emerging market's balance of payments, the market
could impose temporary restrictions on foreign capital remittances.
Eastern European Markets. European Fund intends to invest in the securities
of issuers domiciled in Eastern European countries. Investment in the securities
of issuers in Eastern European markets involves certain additional risks not
involved in investment in securities of issuers in more developed markets, such
as (i) low or non-existent trading volume, resulting in a lack of liquidity and
increased volatility in prices for such securities, as compared to securities of
comparable issuers in more developed capital markets, (ii) uncertain national
policies and social, political and economic instability (including the
possibility that such countries could revert to a centralist planned
government), increasing the potential for expropriation of assets, confiscatory
taxation, high rates of inflation or unfavorable diplomatic developments, (iii)
possible fluctuations in exchange rates, differing legal systems and the
existence or possible imposition of exchange controls, custodial restrictions or
other foreign or U.S. governmental laws or restrictions applicable to such
investments, (iv) national policies which may limit European Fund's investment
opportunities such as restrictions on investment in issuers or industries deemed
sensitive to national interests, and (v) the lack of developed legal structures
governing private and foreign investments and private property.
Eastern European capital markets are emerging in a dynamic political and
economic environment brought about by the recent events there that have reshaped
political boundaries and traditional ideologies. In such a dynamic environment,
there can be no assurance that the Eastern Europe capital markets will continue
to present viable investment opportunities for European Fund. In the past,
Eastern European governments have expropriated substantial amounts of private
property, and most claims of the property owners have never been fully settled.
There is no assurance that such expropriations will not recur. In such an event,
it is possible that European Fund could lose the entire value of its investments
in the affected Eastern European markets.
27
<PAGE> 123
The currencies of Eastern European countries are not, at present, freely
convertible into other currencies. Also, certain Eastern European authorities
presently require that securities of certain Eastern European issuers be held by
custodians in Eastern Europe. At this time, it is possible that certain Eastern
European countries may not have available institutions qualified under the 1940
Act to hold European Fund assets. Therefore, European Fund may need to seek an
exemptive order from the SEC prior to investing in certain Eastern European
countries. There is no assurance that the SEC would issue such an order.
Reforms currently underway and anticipated throughout Eastern Europe are
directed at political and economic liberalization, with efforts to develop
increasingly market-oriented economies and to decentralize the economic and
political decision-making processes currently in the forefront. There can be no
assurance that these reforms will continue or, if continued, will achieve their
goals; in addition, there is the possibility that reforms may be reversed in the
future.
PORTFOLIO TURNOVER
Any particular security will be sold, and the proceeds reinvested, whenever
such action is deemed prudent from the viewpoint of the Fund's investment
objectives, regardless of the holding period of that security. A higher rate of
portfolio turnover may result in higher transaction costs, including brokerage
commissions. Also, to the extent that higher portfolio turnover results in a
higher rate of net realized capital gains to the Fund, the portion of the Fund's
distributions constituting taxable capital gains may increase. Portfolio
turnover is shown under "Financial Highlights" in the applicable Prospectus.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with foreign
currencies, and consequently the Funds may from time to time hold cash balances
in the form of foreign currencies, and multinational currency units. Such
foreign currencies and multinational currency units will usually be acquired on
a spot (i.e. cash) basis at the spot rate prevailing in foreign exchange markets
and will result in currency conversion costs to the Funds. The Funds attempt to
purchase and sell foreign currencies on as favorable a basis as practicable;
however, some price spread on foreign exchange transactions (to cover service
charges) may be incurred, particularly when the Funds change investments from
one country to another, or when U.S. dollars are used to purchase foreign
securities. Certain countries could adopt policies which would prevent the Funds
from transferring cash out of such countries, and the Funds may be affected
either favorably or unfavorably by fluctuations in relative exchange rates while
the Funds hold foreign currencies.
Each Fund has authority to deal in foreign exchange between currencies of
the different countries in which it will invest either for the settlement of
transactions or as a hedge against possible variations in the foreign exchange
rates between those currencies. This may be accomplished through direct
purchases or sales of foreign currency, purchases of futures contracts with
respect to foreign currency (and options thereon), and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. For hedging purposes, Asian
Fund, European Fund and Equity Fund may also purchase foreign currencies in the
form of bank deposits as well as other foreign money market instruments,
including, but not limited to, bankers' acceptances, certificates of deposit,
commercial paper, short-term government and corporate obligations and repurchase
agreements.
EQUITY-LINKED DERIVATIVES
Each of the funds other than Income Fund may invest in equity-linked
derivative products designed to replicate the composition and performance of
particular indices. Examples of such products include S&P Depositary Receipts
("SPDRs"), World Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares
("QQQs"), Dow Jones Industrial Average Instruments ("DIAMONDS") and Optimised
Portfolios as Listed Securities ("OPALS"). Investments in equity-
28
<PAGE> 124
linked derivatives involve the same risks associated with a direct investment in
the types of securities included in the indices such products are designed to
track. There can be no assurance that the trading price of the equity-linked
derivatives will equal the underlying value of the basket of securities
purchased to replicate a particular index or that such basket will replicate the
index. Investments in equity-linked derivatives may constitute investment in
other investment companies. See "Investment in Other Investment Companies."
INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds may invest in other investment companies, to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and, if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Funds have obtained an exemptive order
from the SEC allowing them to invest in money market funds that have AIM or an
affiliate of AIM as an investment adviser (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of such Fund. With respect to a Fund's purchase of shares of
the Affiliated Money Market Funds, the Fund will indirectly pay the advisory
fees and other operating expenses of the Affiliated Money Market Funds.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, each of the Funds may
temporarily hold all or a portion of its assets in cash, money market
instruments, bonds, or other debt securities. Each of the Funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes. For a description of the various rating categories of corporate bonds
and commercial paper in which the Funds may invest, see Appendix B to this
Statement of Additional Information.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
The Funds may each use forward contracts, futures contracts, options on
securities, options on indices, options on currencies, and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with each Fund's investments. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as security, currency or an index of
securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Funds of options, futures contracts and forward currency
contracts involves special considerations and risks, as described below. Risks
pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to
correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies.
29
<PAGE> 125
While AIM is experienced in the use of these instruments, there can be no
assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between
the price movements of an instrument (such as an option contract) and the price
movements of the investments being hedged. For example, if a "protective put" is
used to hedge a potential decline in a security and the security does decline in
price, the put option's increased value may not completely offset the loss in
the underlying security. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as changing
interest rates, market liquidity, and speculative or other pressures on the
markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any
particular option, futures contract, forward contract or option thereon at any
particular time.
(5) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For
example, if a Fund determines that the cost of hedging will exceed the potential
benefit to the Fund, the Fund will not enter into such transaction.
COVER
Transactions using forward contracts, futures contracts and options (other
than options purchased by a Fund) expose a Fund to an obligation to another
party. A Fund will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities, currencies, or other
options, forward contracts or futures contracts or (2) cash, liquid assets
and/or short-term debt securities with a value sufficient at all times to cover
its potential obligations not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities. To the extent that a
futures contract, forward contract or option is deemed to be illiquid, the
assets used to "cover" the Fund's obligation will also be treated as illiquid
for purposes of determining the Fund's maximum allowable investment in illiquid
securities.
Even though options purchased by the Funds do not expose the Funds to an
obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the Fund will treat the
market value of the option (i.e., the amount at risk to the Fund) as illiquid,
but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding
forward contract, futures contract or option is open, unless they are replaced
with other appropriate assets. If a large portion of a Fund's assets is used for
cover or otherwise set aside, it could affect portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
30
<PAGE> 126
WRITING CALL OPTIONS
Each of the Funds may write (sell) covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
call option, a Fund would have the obligation to deliver the underlying
security, cash or currency (depending on the type of derivative) to the holder
(buyer) at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of a Fund continues, it may be assigned an exercise notice,
requiring it to deliver the underlying security, cash or currency against
payment of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option a Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund has written expires, it
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security, contract or
currency, which will be increased or offset by the premium received.
Writing call options can serve as a limited hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
WRITING PUT OPTIONS
Each of the Funds may write (sell) covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
put option, a Fund would have the obligation to buy the underlying security,
contract or currency (depending on the type of derivative) at the exercise price
at any time until (American style) or on (European style) the expiration date.
This obligation terminates upon the expiration of the put option, or such
earlier time at which a Fund effects a closing purchase transaction by
purchasing an option identical to that previously sold.
A Fund would write a put option at an exercise price that, reduced by the
premium received on the option, reflects the lower price it is willing to pay
for the underlying security, contract or currency. The risk in such a
transaction would be that the market price of the underlying security, contract
or currency would decline below the exercise price less the premium received.
PURCHASING PUT OPTIONS
Each of the Funds may purchase covered put options on securities, futures
contracts, forward contracts, indices and currencies. As the holder of a put
option, a Fund would have the right to sell the underlying security, contract or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
31
<PAGE> 127
A Fund may purchase a put option on an underlying security, contract or
currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon exercise of
said option. Conversely, if the underlying security, contract or currency does
not decline in value, the option may expire worthless and the premium paid for
the protective put would be lost.
A Fund may also purchase put options on underlying securities, contracts or
currencies against which it has written other put options. For example, where a
Fund has written a put option on an underlying security, rather than entering a
closing transaction of the written option, it may purchase a put option with a
different exercise price and/or expiration date that would eliminate some or all
of the risk associated with the written put. Used in combinations, these
strategies are commonly referred to as "put spreads." Likewise, a Fund may write
call options on underlying securities, contracts or currencies against which it
has purchased protective put options. This strategy is commonly referred to as a
"collar."
PURCHASING CALL OPTIONS
Each of the Funds may purchase covered call options on securities, futures
contracts, forward contracts, indices and currencies. As the holder of a call
option, a Fund would have the right to purchase the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying security, contract or currency for its portfolio. Utilized in this
fashion, the purchase of call options would enable a Fund to acquire the
security, contract or currency at the exercise price of the call option plus the
premium paid. So long as it holds such a call option, rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security, contract or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
Each of the Funds may also purchase call options on underlying securities,
contracts or currencies against which it has written other call options. For
example, where a Fund has written a call option on an underlying security,
rather than entering a closing transaction of the written option, it may
purchase a call option with a different exercise price and/or expiration date
that would eliminate some or all of the risk associated with the written call.
Used in combinations, these strategies are commonly referred to as "call
spreads."
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (i.e., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. A Fund will not purchase an OTC option unless it believes that daily
valuations for such options are readily obtainable. OTC options differ from
exchange-traded options in that OTC options are transacted with dealers directly
and not through a clearing corporation (which guarantees performance).
Consequently, there is a risk of non-performance by the dealer. Since no
exchange is involved, OTC options are valued on the basis of an average of the
last bid prices obtained from dealers, unless a quotation from only one dealer
is available, in which case only that dealer's price will be used. In the case
of OTC options, there can be no assurance that a liquid secondary market will
exist for any particular option at any specific time. Although a Fund will enter
into OTC options only with dealers that are expected to be capable of entering
into closing transactions with it, there is no assurance that the Fund will in
fact be able to close out an
32
<PAGE> 128
OTC option position at a favorable price prior to expiration. In the event of
insolvency of the dealer, a Fund might be unable to close out an OTC option
position at any time prior to its expiration.
The staff of the SEC considers purchased OTC options (i.e., the market
value of the option) to be illiquid securities. A Fund may also sell OTC options
and, in connection therewith, segregate assets or cover its obligations with
respect to OTC options written by it. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call or put times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
LIMITATIONS ON OPTIONS
A Fund will not write options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
any time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may enter into interest rate, currency or stock index
futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of interest rates, currency exchange rates
or stock price levels, respectively, in order to establish more definitely the
effective return on securities or currencies held or intended to be acquired by
it. A Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
33
<PAGE> 129
The Funds will only enter into Futures Contracts that are traded
(either domestically or internationally) on futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC").
Foreign futures exchanges and trading thereon are not regulated by the CFTC and
are not subject to the same regulatory controls. For a further discussion of the
risks associated with investments in foreign securities, see "Foreign
Securities" in this Statement of Additional Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If a Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the forward
contract. A Fund may also, if its contra party agrees prior to maturity, enter
into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter,
34
<PAGE> 130
and not on organized commodities or securities exchanges. As a result, it may be
more difficult to value such contracts, and it may be difficult to enter into
closing transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward contracts with respect to a specific purchase or
sale of a security, or with respect to its portfolio positions generally. When a
Fund purchases a security denominated in a foreign currency for settlement in
the near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure an exchange rate between the trade and
settlement dates for that purchase or sale transactions. This practice is
sometimes referred to as "transaction hedging." Position hedging is the purchase
or sale of foreign currency with respect to portfolio security positions
denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while forward contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on
Futures Contracts and options on foreign currencies traded on an CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the total assets of the Fund, after taking into account unrealized
profits and unrealized losses on any contracts it has entered into. This
guideline may be modified by the Board, without a shareholder vote. This
limitation does not limit the percentage of the Fund's assets at risk to 5%.
INVESTMENT RESTRICTIONS
AGGRESSIVE GROWTH FUND, GROWTH FUND, AND INCOME FUND
The following fundamental policies and investment restrictions have
been adopted by Aggressive Growth Fund, Growth Fund and Income Fund and, except
as noted, such policies cannot be changed without approval by the vote of a
majority of the outstanding voting securities of the applicable Fund, as defined
in the 1940 Act. See "Submission of Matters to Shareholders."
The Funds may not:
1. Purchase or sell real estate or interests in real estate
(except that this restriction does not preclude investments in
marketable securities of companies engaged in real estate
activities).
2. Purchase or sell commodities or commodity contracts, except
that the Funds may purchase and sell stock index and currency
options, stock index futures, interest rate futures, financial
futures and currency futures contracts and related options on
such futures.
3. Purchase any security on margin, except that the Funds may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio
35
<PAGE> 131
securities. The payment by the Fund of initial or variation
margin in connection with futures or related options
transactions shall not be considered the purchase of a security
on margin.
4. Make loans, although the Funds may (a) purchase money market
securities and enter into repurchase agreements, (b) acquire
bonds, debentures, notes and other debt securities,
governmental obligations and certificates of deposit, and (c)
lend portfolio securities.
5. Issue senior securities, except to the extent permitted by the
1940 Act, including permitted borrowings.
6. Underwrite securities of other persons, except to the extent
that a Fund may be deemed to be an underwriter within the
meaning of the 1933 Act in connection with the purchase and
sale of its portfolio securities in the ordinary course of
pursuing its investment program.
7. Purchase or sell interests in oil, gas or other mineral
exploration or development programs.
8. Purchase the securities of any issuer if, as a result, more
than 25% of the value of a Fund's total assets, taken at market
value, would be invested in the securities of issuers having
their principal business activities in the same industry. This
restriction does not apply to obligations issued or guaranteed
by the U.S. Government or by any of its agencies or
instrumentalities but will (unless and until SEC changes its
position) apply to foreign government obligations unless the
SEC permits their exclusion.
9. Purchase a security if, as a result, with respect to 75% of the
value of a Fund's total assets, taken at market value, more
than 5% of a Fund's total assets, taken at market value, would
be invested in the securities of any one issuer (including
repurchase agreements with any one entity), except securities
issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and except that a Fund may
purchase securities of other investment companies to the extent
permitted by applicable law or exemptive order. This
restriction does not apply to the Income Fund.
10. Purchase a security if, as a result, with respect to 50% of the
value of the Fund's total assets taken at market value, more
than 5% of the value of the Fund's total assets, taken at
market value, would be invested in securities of any one
issuer, except securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities and
except that a Fund may purchase securities of other investment
companies to the extent permitted by applicable law or
exemptive order. This restriction applies only to the Income
Fund.
11. Purchase a security if, as a result, more than 10% of the
outstanding voting securities of any issuer would be held by a
Fund, except that a Fund may purchase securities of other
investment companies to the extent permitted by applicable law
or exemptive order.
12. Borrow money, except that the Fund may borrow from banks
(including the Fund's custodian bank) and enter into reverse
repurchase agreements and dollar roll transactions (Income Fund
only). With respect to Aggressive Growth Fund and Growth Fund,
such permitted borrowings shall be used as a temporary
defensive measure for extraordinary or emergency purposes.
Permitted borrowings shall be in amounts not exceeding 33-1/3%
of a Fund's total assets, taken at market value, and each Fund
may pledge amounts of up to 20% of its total assets, taken at
market value, to secure such borrowings. Whenever bank
borrowings exceed 5% of the value of the total assets of
Aggressive Growth Fund or Growth Fund, such Fund will not make
any additional purchases of securities for investment purposes.
36
<PAGE> 132
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, the Funds will not:
13. Make investments for the purpose of exercising control or
management.
14. Lend portfolio securities in excess of 33-1/3% of total assets,
taken at market value; provided that loans of portfolio
securities shall be made in accordance with the guidelines set
forth under the heading "Lending of Portfolio Securities."
15. Invest in securities which are illiquid if more than 15% of a
Fund's net assets, taken at market value, would be invested in
such securities.
16. Effect short sales of securities, except that a Fund may make
short sales "against the box" to the extent that the value of
the securities sold short, in the aggregate, does not represent
more than 10% of the Fund's total assets, taken at market
value, at any given time.
Percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total
assets.
EQUITY FUND
The following fundamental policies and investment restrictions have been
adopted by Equity Fund and, except as noted, such policies cannot be changed
without approval by the vote of a majority of the outstanding voting securities
of the Fund, as defined in the 1940 Act. See "Submission of Matters to
Shareholders."
The Fund may not:
1. Purchase or sell real estate or interests in real estate
(except that this restriction does not preclude investments in
marketable securities of companies engaged in real estate
activities).
2. Purchase or sell commodities or commodity contracts, except
that the Fund may purchase and sell stock index and currency
options, stock index futures, financial futures and currency
futures contracts and related options on such futures.
3. Purchase any security on margin, except that the Fund may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities. The
payment by the Fund of initial or variation margin in
connection with futures or related options transactions shall
not be considered the purchase of a security on margin.
4. Make loans, although the Fund may (a) purchase money market
securities and enter into repurchase agreements, (b) acquire
bonds, debentures, notes and other debt securities,
governmental obligations and certificates of deposit, and (c)
lend portfolio securities.
5. Borrow money, except that the Fund may borrow from banks
(including the Fund's custodian bank) and enter into reverse
repurchase agreements as a temporary defensive measure for
extraordinary or emergency purposes, and then only in amounts
not exceeding 10% of its total assets, taken at market value,
and may pledge amounts of up to 20% of its total assets, taken
at market value, to secure such borrowings. For purposes of
this restriction, collateral arrangements with respect to the
writing of options, futures contracts, options on futures
contracts, and collateral arrangements with respect to initial
37
<PAGE> 133
and variation margin are not deemed to be a pledge of assets,
and neither such arrangements nor the purchase and sale of
options, futures or related options shall be deemed to be the
issuance of a senior security. Whenever bank borrowings and the
value of the Fund's reverse repurchase agreements exceed 5% of
the value of the Fund's total assets, the Fund will not make
any additional purchases of securities for investment purposes.
6. Underwrite securities of other persons, except to the extent
that the Fund may be deemed to be an underwriter within the
meaning of the 1933 Act in connection with the purchase and
sale of its portfolio securities in the ordinary course of
pursuing its investment program.
7. Purchase or sell interests in oil, gas or other mineral
exploration or development programs.
8. Purchase the securities of any issuer if, as a result, more
than 25% of the value of the Fund's total assets, taken at
market value, would be invested in the securities of issuers
having their principal business activities in the same
industry. This restriction does not apply to obligations issued
or guaranteed by the U.S. Government or by any of its agencies
or instrumentalities but will apply to foreign government
obligations unless the SEC permits their exclusion.
9. Purchase a security if, as a result, with respect to 75% of the
value of the Fund's total assets, taken at market value, more
than 5% of the Fund's total assets, taken at market value,
would be invested in the securities of any one issuer
(including repurchase agreements with any one entity), except
securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities, and except that the Fund
may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order.
10. Purchase a security if, as a result, more than 10% of the
outstanding voting securities of any issuer would be held by
the Fund, except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law
or exemptive order.
11. Issue senior securities, except as provided in restriction
number 5 above.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, the Fund will not:
12. Make investments for the purpose of exercising control or
management.
13. Lend its portfolio securities in excess of 33-1/3% of its total
assets, taken at market value; provided that loans of portfolio
securities shall be made in accordance with the guidelines set
forth under the heading "Lending of Portfolio Securities."
14. Invest in securities which are illiquid if more than 15% of the
Fund's net assets, taken at market value, would be invested in
such securities.
15. Effect short sales of securities, except that the Fund may make
short sales "against the box" to the extent that the value of
the securities sold short, in the aggregate, does not represent
more than 10% of the Fund's total assets, taken at market
value, at any given time.
Percentage restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or total
assets.
38
<PAGE> 134
ASIAN FUND AND EUROPEAN FUND
The following fundamental policies and investment restrictions have been
adopted by Asian Fund and European Fund and, except as noted, such policies
cannot be changed without approval by the vote of a majority of the outstanding
voting securities of the applicable Fund, as defined in the 1940 Act. See
"Submission of Matters to Shareholders."
The Funds may not:
1. Purchase or sell real estate or interests in real estate
(except that this restriction does not preclude investments in
marketable securities of companies engaged in real estate
activities).
2. Purchase or sell commodities or commodity contracts, except
that the Funds may purchase and sell stock index and currency
options, stock index futures, interest rate futures, financial
futures and currency futures contracts and related options on
such futures.
3. Purchase any security on margin, except that the Funds may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities. The
payment by the Fund of initial or variation margin in
connection with futures or related options transactions shall
not be considered the purchase of a security on margin.
4. Make loans, although the Funds may (a) purchase money market
securities and enter into repurchase agreements, (b) acquire
bonds, debentures, notes and other debt securities,
governmental obligations and certificates of deposit, and (c)
lend portfolio securities.
5. Issue senior securities, except to the extent permitted by the
1940 Act, including permitted borrowings.
6. Underwrite securities of other persons, except to the extent
that a Fund may be deemed to be an underwriter within the
meaning of the 1933 Act in connection with the purchase and
sale of its portfolio securities in the ordinary course of
pursuing its investment program.
7. Purchase the securities of any issuer if, as a result, more
than 25% of the value of a Fund's total assets, taken at market
value, would be invested in the securities of issuers having
their principal business activities in the same industry. This
restriction does not apply to obligations issued or guaranteed
by the U.S. Government or by any of its agencies or
instrumentalities but will (unless and until SEC changes its
position) apply to foreign government obligations unless the
SEC permits their exclusion.
8. Purchase a security if, as a result, with respect to 75% of the
value of a Fund's total assets, taken at market value, more
than 5% of a Fund's total assets, taken at market value, would
be invested in the securities of any one issuer, except
securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities and except that a Fund may
purchase securities of other investment companies to the extent
permitted by applicable law or exemptive order.
9. Purchase a security if, as a result, more than 10% of the
outstanding voting securities of any issuer would be held by a
Fund, except that a Fund may purchase securities of other
investment companies to the extent permitted by applicable law
or exemptive order.
The following restrictions are non-fundamental and may be changed by the
Company's Board of Directors. Pursuant to such restrictions, each of the Funds
will not:
39
<PAGE> 135
10. Make investments for the purpose of exercising control or
management.
11. Lend its portfolio securities in excess of 33-1/3% of its total
assets, taken at market value; provided that loans of portfolio
securities shall be made in accordance with the guidelines set
forth under the heading "Lending of Portfolio Securities."
12. Invest in securities which are illiquid if more than 15% of a
Fund's net assets, taken at market value, would be invested in
such securities.
13. Effect short sales of securities, except that the Fund may make
short sales "against the box" to the extent that the value of
the securities sold short, in the aggregate, does not represent
more than 10% of the Fund's total assets, taken at market
value, at any given time.
The following non-fundamental policies apply to all Funds. Subject to
the investment restriction on lending portfolio securities (number 13 for
Aggressive Growth Fund, Equity Fund, Growth Fund and Income Fund and number 11
for Asian Fund and European Fund), the Funds may from time to time lend
securities from their respective portfolios to brokers, dealers and financial
institutions such as banks and trust companies and receive collateral in cash or
securities issued or guaranteed by the U.S. Government which will be maintained
in an amount equal to at least 100% of the current market value of the loaned
securities. Such cash will be invested in short-term securities, which will
increase the current income of the applicable Fund. Such loans will not be for
more than 30 days and will be terminable at any time. The Funds will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. The Funds may pay reasonable fees to persons
unaffiliated with the Funds for services in arranging such loans. With respect
to the lending of portfolio securities, there is the risk of failure by the
borrower to return the securities involved in such transactions.
Each Fund's ability and decisions to purchase or sell portfolio
securities may be affected by laws or regulations relating to the convertibility
and repatriation of assets. Because the shares of a Fund are redeemable on a
daily basis in U.S. dollars, the Funds intend to manage their portfolios so as
to give reasonable assurance that they will be able to obtain U.S. dollars to
the extent necessary to meet anticipated redemptions. Under present conditions,
it is not believed that these considerations will have any significant effect on
the Funds' portfolio strategies.
MANAGEMENT
The overall management of the business and affairs of the Funds is
vested with the Company's Board of Directors. The Board of Directors approves
all significant agreements between the Company and persons or companies
furnishing services to a Fund, including the investment advisory agreement with
AIM, the administrative services agreement with AIM, the agreement with AIM
Distributors regarding the distribution of the shares of the Funds, the
agreement with State Street Bank and Trust Company as custodian and the
agreement with A I M Fund Services, Inc. ("AFS" or the "Transfer Agent") as
transfer agent. The day-to-day operations of each Fund are delegated to its
officers of the Company and to AIM, subject always to the objectives and
policies of the Fund and to the general supervision of the Company's Board of
Directors. Certain directors and officers of the Company are affiliated with AIM
and A I M Management Group Inc. ("AIM Management"), the parent corporation of
AIM.
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during at least the last five years are set forth below. Unless
otherwise indicated, the address of each director and officer is 11
40
<PAGE> 136
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. All of the Company's
executive officers hold similar offices with some or all of the other AIM Funds.
<TABLE>
<CAPTION>
======================================================================================================================
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5
NAME, ADDRESS AND AGE REGISTRANT YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (80) Director and Chairman Chairman of the Board of Directors,
A I M Management Group Inc., A I M Advisors,
Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services,
Inc. and Fund Management Company; and Vice
Chairman and Director, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (55) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation; and Chairman, Board
of Governors of INTELSAT (international
communications company).
- ----------------------------------------------------------------------------------------------------------------------
OWEN DALY II (75) Director Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel Corp.,
Baltimore, MD 21210 Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the
Board of Equitable Bancorporation.
- ----------------------------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (64) Director Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 8TH Floor, Mortgage Corp.; Formerly, Vice Chairman of the
Suite 805 Board of Directors, President and Chief
Baltimore, MD 21201 Operating Officer, Mercantile - Safe Deposit &
Trust Co.; and President, Mercantile Bankshares.
======================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------
JACK FIELDS (48) Director Chief Executive Officer, Texana Global, Inc.
Jetero Plaza, Suite E (foreign trading company) and Twenty First
8810 Will Clayton Parkway Century, Inc. (a governmental affairs company).
Humble, TX 77338 Formerly, Member of the U.S. House of
Representatives.
- ----------------------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (63) Director Partner, Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue (law firm).
New York, NY 10022
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
41
<PAGE> 137
<TABLE>
<CAPTION>
======================================================================================================================
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5
NAME, ADDRESS AND AGE REGISTRANT YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (53) Director and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and
Director, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Chief Executive Officer, YWCA of the USA.
350 Fifth Avenue, Suite 301
New York, NY 10118
- ----------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Director Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
- ----------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Director Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
- ----------------------------------------------------------------------------------------------------------------------
GARY T. CRUM (52) Senior Vice President Director and President, A I M Capital Management,
Inc.; Director and Executive Vice President,
A I M Management Group Inc.; Director and Senior
Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP
PLC.
======================================================================================================================
</TABLE>
- --------
** A director who is an "interested person" of the Company as defined in the
1940 Act.
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
42
<PAGE> 138
<TABLE>
<CAPTION>
======================================================================================================================
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5
NAME, ADDRESS AND AGE REGISTRANT YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAROL F. RELIHAN (45)
Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management
Company; Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.;
and General Counsel and Vice President,
A I M Fund Services, Inc.
- ----------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President and Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
- ----------------------------------------------------------------------------------------------------------------------
ROBERT G. ALLEY (51) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer,
A I M Advisors, Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company.
- ----------------------------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (59) Vice President Vice President, A I M Capital Management, Inc.
======================================================================================================================
</TABLE>
The standing committees of the Board of Directors are the Audit
Committee, the Capitalization Committee, the Investments Committee and the
Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock, Sklar and Dr. Mathai-Davis. The Audit
Committee is responsible for: (i) considering management's recommendations of
independent accountants for each fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the funds' independent accountants, and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the funds' independent
accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for: (i)
increasing or decreasing the aggregate number of shares of any class of the
company's common stock by classifying and reclassifying the company's authorized
but unissued shares of common stock, up to the company's authorized capital;
(ii) fixing the terms of such classified or reclassified shares of common stock;
and (iii) issuing such classified or reclassified shares of
43
<PAGE> 139
common stock upon the terms set forth in the applicable fund's prospectus, up to
the company's authorized capital.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock, Sklar (Chairman) and Dr. Mathai-Davis.
The Investments Committee is responsible for: (i) overseeing AIM's investment
related compliance systems and procedures to ensure their continued adequacy;
and (ii) considering and acting, on an interim basis, between meetings of the
full Board, on investment related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock, Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for: (i) considering
and nominating individuals to stand for election as independent directors as
long as the company maintains a distribution plan pursuant to Rule 12b-1 under
the 1940 Act; (ii) reviewing from time to time the compensation payable to the
independent directors; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent directors.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as directors, provided (i) that such
person is a shareholder of record at the time he or she submits such names and
is entitled to vote at the meeting of shareholders at which directors will be
elected, and (ii) that the nominating and Compensation Committee or the Board of
Directors, as applicable, shall make the final determination of persons to be
nominated.
All of the company's directors also serve as directors or trustee of
some or all of the investment companies managed or advised by AIM. All of the
company's executive offices hold similar offices with some or all of the other
investment companies managed or advised by AIM.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in attending each
meeting of the Board of Directors or any committee thereof. Each director who is
not also an officer of the Company is compensated for his services according to
a fee schedule which recognizes the fact that such director also serves as a
director or trustee of other AIM Funds. Each such director receives a fee,
allocated among the AIM Funds for which he serves as a director or trustee,
which consists of an annual retainer component and a meeting fee component.
44
<PAGE> 140
Set forth below is information regarding compensation paid or accrued
for each director of the Company:
<TABLE>
<CAPTION>
======================================================================================================================
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED COMPENSATION
COMPENSATION BY ALL APPLICABLE FROM ALL APPLICABLE
DIRECTOR FROM COMPANY(1) AIM FUNDS(2) AIM FUNDS(3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett 8,166 37,485 103,500
- ----------------------------------------------------------------------------------------------------------------------
Owen Daly Ii 8,166 122,898 103,500
- ----------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. 8,166 55,565 103,500
- ----------------------------------------------------------------------------------------------------------------------
Jack Fields 8,009 15,826 101,500
- ----------------------------------------------------------------------------------------------------------------------
Carl Frischling(4) 8,122 97,791 103,500
- ----------------------------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ----------------------------------------------------------------------------------------------------------------------
John F. Kroeger(5) 0 40,461 0
- ----------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis 8,166 11,870 101,500
- ----------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock 8,122 45,766 103,500
- ----------------------------------------------------------------------------------------------------------------------
Ian W. Robinson(6) 3,557 94,442 25,000
- ----------------------------------------------------------------------------------------------------------------------
Louis S. Sklar 8,122 90,232 101,500
======================================================================================================================
</TABLE>
(1) The total amount of compensation deferred by all directors of the
Company during the fiscal year ended October 31, 1999, including
interest earned thereon, was $51,056.
(2) During the fiscal year ended October 31, 1999, the total amount of
expenses allocated to the Company in respect of such retirement benefits
was $31,707. Data reflect compensation earned for the calendar year
ended December 31, 1999.
(3) Each Director serves as director or trustee of a total of twelve
registered investment companies advised by AIM. Data reflect total
compensation earned during the calendar year ended December 31, 1999.
(4) The Company paid the law firm of Kramer, Levin, Naftalis & Frankel LLP
$28,914 in legal fees for services provided to the Funds during the
fiscal year ended October 31, 1999. Mr. Frischling, a Director of the
Company, is a partner in such firm.
(5) Mr. Kroeger was a director until June 11, 1998. Mr. Kroeger passed away
on November 26, 1998. Mr. Kroeger's widow will receive his pension as
described below under "AIM Funds Retirement Plan for Eligible
Directors/Trustees."
(6) Mr. Robinson was a director until March 12, 1999, when he retired.
45
<PAGE> 141
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees, each director (who is not an employee of any of the AIM
Funds, AIM Management or any of their affiliates) may be entitled to certain
benefits upon retirement from the Board of Directors. Pursuant to such plan, a
director becomes eligible to retire and to receive full benefits under the plan
when he or she has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the applicable
AIM Funds). Each eligible director is entitled to receive an annual benefit from
the applicable AIM Funds commencing on the first day of the calendar quarter
coincident with or following his date of retirement equal to a maximum of 75% of
the annual retainer paid or accrued by the applicable AIM Funds for such
director during the twelve-month period immediately preceding the directors
retirement (including amounts deferred under a separate agreement between the
applicable AIM Funds and the director) and based on the number of such
director's years of service (not in excess of 10 years of service) completed
with respect to any of the applicable AIM Funds. Such benefit is payable to each
eligible director in quarterly installments. If an eligible director dies after
attaining the normal retirement date but before receipt of all benefits under
the plan, the director's surviving spouse (if any) shall receive a quarterly
survivor's benefit equal to 50% of the amount payable to the deceased director
for no more than ten years beginning the first day of the calendar quarter
following the date of the director's death. Payments under the plan are not
secured or funded by any applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson, Sklar and Dr. Mathai-Davis are 13,13, 2, 3, 22, 20, 18, 11, 10 and 1
years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
========================================================================
Number of Years of Annual Retirement Compensation
Service with the Paid by all Applicable AIM Funds
Applicable AIM
Funds
========================================================================
<S> <C>
10 $67,500
------------------------------------------------------------------------
9 $60,750
------------------------------------------------------------------------
8 $54,000
------------------------------------------------------------------------
7 $47,250
------------------------------------------------------------------------
6 $40,500
------------------------------------------------------------------------
5 $33,750
========================================================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(the deferring directors) have each executed a deferred compensation agreement.
Pursuant to the agreements, the deferring directors may elect to defer receipt
of up to 100% of their compensation payable by the Company, and such amounts are
placed into a deferral account. Currently, the deferring directors may select
various AIM Funds in which all or part of their deferral accounts shall be
deemed to be invested. Distributions from the deferring directors' deferral
accounts will be paid in cash, in generally equal
46
<PAGE> 142
quarterly installments over a period of five (5) or ten (10) years (depending on
the agreement) beginning on the date the deferring director's retirement
benefits commence under the plan. The Company's Board of Directors, in its sole
discretion, may accelerate or extend the distribution of such deferral accounts
after the deferring director's termination of service as a director of the
Company. If a deferring director dies prior to the distribution of amounts in
his or her deferral account, the balance of the deferral account will be
distributed to his or her designated beneficiary in a single lump sum payment as
soon as practicable after such deferring director's death. The agreements are
not funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring directors have the status of unsecured creditors of the
Company and of each other AIM Fund from which they are deferring compensation.
INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
AIM is a wholly owned subsidiary of AIM Management, a holding company
that has been engaged in the financial services business since 1976. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London EC2M 4YR, United Kingdom. AMVESCAP PLC and its subsidiaries are
an independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. Certain of the directors and officers of AIM are also
executive officers of the Company and their affiliations are shown under
"Management" herein.
AIM and the Company have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, unless the securities qualifies for the De minimus exemption. The
De minimus exemption would allow the trade if the issuer of the security has a
market capitalization of $2 billion or more. In addition, such a request can
only be granted once every thirty days for no more than 2,000 shares total, and
(iii) transactions involving securities being considered for investment by an
AIM Fund, unless the security qualifies for the De minimus exemption, as
previously explained, for which the personal security trade would be allowed
even if the security is being considered for investment by an AIM Fund, and (d)
to abide by certain other provisions under the Code of Ethics. The Code of
Ethics also prohibits investment personnel and all other AIM employees from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Directors reviews quarterly
and annual reports (including information on any substantial violations of the
Code of Ethics). Sanctions for violations of the Code of Ethics may include
censure, monetary penalties, suspension or termination of employment.
The Company, on behalf of the Funds, has entered into a Master
Investment Advisory Agreement ("Investment Advisory Agreement") and a Master
Administrative Services Agreement ("Administrative Services Agreement"), as
amended, with AIM. In addition, AIM has entered into a Master Sub-Advisory
Agreement (the "Sub-Advisory Agreement") with INVESCO Global Asset Management
Limited ("IGAM") with respect to Asian Fund and European Fund. In addition, IGAM
has entered into a Sub-Sub-Advisory Agreement with INVESCO Asia Limited ("IAL")
with respect to Asian Fund and a Sub-Sub-Advisory Agreement with INVESCO Asset
Management Limited ("IAML") with respect to European Fund. See "Fund Management"
in each Fund's Prospectus.
Under the terms of the Investment Advisory Agreement, AIM supervises
aspects of the Funds' operations and provides investment advisory services to
the Funds. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the Funds. AIM
will not be liable to the Funds or their shareholders except in the case of
AIM's willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
Pursuant to the Administrative Services Agreement, AIM has agreed to
provide or arrange for the provision of certain accounting and other
administrative services to the Funds, including the services of a
47
<PAGE> 143
principal financial officer of the Funds and related staff. As compensation to
AIM for its services under the Administrative Service Agreements, the Funds
reimburse AIM for expenses incurred by AIM or its subsidiaries in connection
with such services.
By the terms of the Sub-Advisory Agreement and Sub-Sub-Advisory
Agreement, AIM has appointed IGAM and IGAM has appointed IAL to provide AIM with
international economic and market research, securities analyses and investment
recommendations with respect to the Fund's investment portfolio. IGAM has
delegated certain of its responsibilities to IAL through the Sub-Sub-Advisory
Agreement. IAL provides international economic and market research, securities
analyses and investment recommendations with respect to the Fund's investment
portfolio. The Sub-Advisor Agreement and Sub-Sub-Advisor Agreement provide that
neither IGAM nor IAL are responsible for the actual portfolio investment
decisions of the Fund or for the execution of portfolio transactions on behalf
of the Fund. The Fund's portfolio investment decisions and the execution of
securities transactions to carry out such decisions are solely the
responsibility of AIM as the Fund's investment advisor. The professional
investment staffs of IGAM and IAL include experienced portfolio managers and
research staffs.
The Investment Advisory Agreement and, with respect to Asian Fund and
European Fund, the Sub-Advisory Agreement and Sub-Sub-Advisory Agreements
provide that each Fund will pay or cause to be paid all expenses of the Fund not
assumed by AIM (or IGAM, IAL and IAML), including, without limitation: brokerage
commissions; taxes, legal, accounting, auditing or governmental fees; the cost
of preparing share certificates; custodian, transfer and shareholder service
agent costs; expenses of issue, sale, redemption and repurchase of shares;
expenses of registering and qualifying shares for sale; expenses relating to
directors and shareholders meetings; the cost of preparing and distributing
reports and notices to shareholders; the fees and other expenses incurred by the
Company on behalf of a Fund in connection with membership in investment company
organizations; the cost of printing copies of prospectuses and statements of
additional information distributed to each Fund's shareholders; and all other
charges and costs of a Fund's operations unless otherwise expressly provided.
The Investment Advisory Agreement for the Funds and the Sub-Advisory
Agreement and Sub-Sub-Advisory Agreements for Asian Fund and European Fund, each
provides that such agreement will continue in effect for two years, and from
year to year thereafter only if such continuance is specifically approved at
least annually by the Company's Board of Directors and by the affirmative vote
of a majority of the directors who are not parties to the agreement or
"interested persons" of any such party (the "Non-Interested Directors") by votes
cast in person at a meeting called for such purpose. The Investment Advisory
Agreement and the Sub-Advisory Agreement each provides that the Funds or AIM
and, with respect to the Sub-Sub-Advisory Agreements each provides that the
applicable Fund, Sub-Sub-Advisor or the Sub-Advisor, may terminate such
agreement on sixty (60) days' written notice without penalty. The Investment
Advisory Agreement, Sub-Advisory Agreement and Sub-Sub-Advisory Agreements each
terminates automatically in the event of its assignment. Under the Investment
Advisory Agreement, AIM is entitled to receive from each Fund a fee calculated
at the following annual rates based on the average daily net assets of the Fund:
AIM ASIAN GROWTH FUND
AIM EUROPEAN DEVELOPMENT FUND
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C>
First $ 500 million...................... 0.95%
Over $ 500 million....................... 0.90%
</TABLE>
48
<PAGE> 144
AIM GLOBAL AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
Net Assets Annual Rate
---------- -----------
First $1 billion.......................... 0.90%
Over $1 billion........................... 0.85%
</TABLE>
AIM GLOBAL GROWTH FUND
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C>
First $1 billion.......................... 0.85%
Over $1 billion........................... 0.80%
</TABLE>
AIM GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C>
First $1 billion.......................... 0.70%
Over $1 billion........................... 0.65%
</TABLE>
AIM INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C>
First $1 billion.......................... 0.95%
Over $1 billion........................... 0.90%
</TABLE>
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
AIM has agreed to waive advisory fees under the Investment Advisory
Agreement in order to achieve the following annual fee structure for Equity
Fund: 0.95% of the first $500 million of Equity Fund's average daily net assets;
0.90% of the next $500 million of Equity Fund's average daily net assets; and
0.85% of Equity Fund's average daily net assets exceeding $1 billion.
For the fiscal years ended October 31, 1999, 1998 and 1997, and for the
fiscal year ended October 31, 1999 and the period November 3, 1997 (inception
date) through October 31, 1998 relating to Asian Fund and European Fund, AIM
received advisory fees, net of advisory fee waivers, from each Fund as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 15,416,368 $ 20,126,609 $19,996,061
Asian Fund $ 39,283 $ 11,388 $ -0-
Equity Fund $ 24,083,233 $ 21,628,803 $17,546,102
European Fund $ 1,607,698 $ 410,537 $ -0-
Growth Fund $ 5,898,665 $ 4,042,472 $ 2,895,282
Income Fund $ 280,344 $ 152,633 $ 44,375
</TABLE>
49
<PAGE> 145
Under the Sub-Advisory Agreement, IGAM is entitled to receive from AIM
with respect to each of Asian Fund and European Fund, a fee calculated at the
following annual rates based on the average daily net assets of the Fund:
<TABLE>
<CAPTION>
Net Assets Annual Rate
---------- -----------
<S> <C> <C>
First $ 500 million................................................. 0.20%
Over $ 500 million.................................................. 0.175%
</TABLE>
Under the Sub-Sub-Advisory Agreements IAL, with respect to Asian Fund,
and IAML, with respect to European Fund, are each entitled to receive from IGAM
an annual fee equal to 100% of the fee received by the Sub-Advisor with respect
to the applicable Fund.
For the fiscal years ended October 31, 1999, 1998 and 1997 and for the
fiscal year ended October 31, 1999 and the period November 3, 1997 (inception
date) through October 31, 1998 relating to Asian Fund and European Fund, AIM
waived advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ -0- $ -0- $ -0-
Asian Fund $ 207,130 $ 51,040 $ -0-
Equity Fund $ 1,122,543 $ 978,165 $ 738,005
European Fund $ -0- $ 114,120 $ -0-
Growth Fund $ -0- $ -0- $ -0-
Income Fund $ 423,180 $ 365,730 $ 302,278
</TABLE>
Although these fees are higher than those paid by most mutual funds
which invest in domestic securities, they are competitive with such fees paid by
mutual funds which invest primarily in foreign securities. The Company believes
such fees are justified due to the higher costs and additional expenses
associated with managing and operating funds holding primarily foreign
securities.
For the fiscal year ended October 31, 1999, AIM waived advisory fees
for Asian Fund, Equity Fund and Income Fund which represented 0.80%, 0.04% and
0.42% of such Fund's average daily net assets.
For the fiscal year ended October 31, 1999, each Fund reimbursed AIM
for administrative services in the following amounts, stated as a percentage of
the Fund's average daily net assets:
<TABLE>
<CAPTION>
Reimbursement
Payments
-------------
<S> <C>
Aggressive Growth Fund........................... 0.01%
Asian Fund....................................... 0.29%
Equity Fund...................................... 0.01%
European Fund.................................... 0.04%
Growth Fund...................................... 0.01%
Income Fund...................................... 0.07%
</TABLE>
The Administrative Services Agreement for the Funds provides that AIM
may perform, or arrange for the performance of, certain accounting and other
administrative services to each Fund which are not required to be performed by
AIM under the Investment Advisory Agreement. For such services, AIM is
50
<PAGE> 146
entitled to receive from each Fund reimbursement of AIM's costs or such
reasonable compensation as may be approved by the Company's Board of Directors.
The Administrative Services Agreement will continue in effect from year to year
only if such continuance is specifically approved at least annually by the
Company's Board of Directors, and by the affirmative vote of the Non-Interested
Directors by votes cast in person at a meeting called for such purpose.
For the fiscal years ended October 31, 1999, 1998 and 1997 and for the
fiscal year ended October 31, 1999 and the period November 3, 1997 (inception
date) through October 31, 1998 relating to Asian Fund and European Fund, AIM
received reimbursement of administrative service costs from each Fund as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth Fund $ 127,117 $ 116,964 $ 109,161
Asian Fund $ 74,007 $ 74,604 $ --
Equity Fund $ 150,312 $ 115,146 $ 105,163
European Fund $ 75,332 $ 69,060 $ --
Growth Fund $ 97,142 $ 80,267 $ 87,673
Income Fund $ 66,799 $ 81,456 $ 74,031
</TABLE>
In addition, the Transfer Agency and Service Agreement for the Funds
provides that AFS, P.O. Box 4739, Houston, Texas 77210-4739, a registered
transfer agent and wholly owned subsidiary of AIM, will perform certain
shareholder services for the Funds for a fee per account serviced. The Transfer
Agency and Service Agreement provides that AFS will process orders for
purchases, redemptions and exchanges of shares, prepare and transmit payments
for dividends and distributions declared by the Funds, maintain shareholder
accounts and provide shareholders with information regarding the Funds and their
accounts.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Company has adopted a Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to the Class A and Class C shares of the Funds
(the "Class A and C Plan"). The Class A and C Plan provides that for Aggressive
Growth Fund, Growth Fund and Income Fund the Class A shares pay 0.50% per annum
of their average daily net assets, for Equity Fund the Class A shares pay 0.30%
per annum of their average daily net assets and for Asian Fund and European Fund
the Class A shares pay 0.35% per annum of their average daily net assets as
compensation to AIM Distributors for the purpose of financing any activity which
is primarily intended to result in the sale of Class A shares. Under the Class A
and C Plan, Class C shares of each Fund pay compensation to AIM Distributors at
an annual rate of 1.00% of the average daily net assets attributable to Class C
shares. The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of a Fund. Payments can
also be directed by AIM Distributors to selected institutions who have entered
into service agreements with respect to Class A and Class C shares of each Fund
and who provide continuing personal services to their customers who own Class A
and Class C shares of each Fund and who provide continuing personal services to
their customers who own Class A and Class C shares of the Fund. The service fees
payable to selected institutions are calculated at the annual rate of 0.25% of
the average daily net asset value of those Fund shares that are held in such
institution's customers' accounts which were purchased on or after a prescribed
date set forth in the Plan. Activities appropriate for financing under the Class
A and C Plan include, but are not limited to, the following: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders; overhead; preparation and distribution of advertising
material and sales
51
<PAGE> 147
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs of
administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Company with respect to the
Fund.
THE CLASS B PLAN
The Company has also adopted a Master Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act relating to Class B shares of the Funds (the
"Class B Plan", and collectively with the Class A and C Plan, the "Plans").
Under the Class B Plan, each Fund pays compensation to AIM Distributors at an
annual rate of 1.00% of the average daily net assets attributable to Class B
shares. Of such amount, each Fund pays a service fee of 0.25% of the average
daily net assets attributable to Class B shares to selected dealers and other
institutions which furnish continuing personal shareholder services to their
customers who purchase and own Class B shares. Any amounts not paid as a service
fee would constitute an asset-based sales charge. Amounts paid in accordance
with the Class B Plan may be used to finance any activity primarily intended to
result in the sale of Class B shares, including but not limited to printing of
prospectuses and statements of additional information and reports for other than
existing shareholders; overhead; preparation and distribution of advertising
material and sales literature; expenses of organizing and conducting sales
seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class B Plan.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of the Funds' shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Funds' shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding a Fund and
the Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy
52
<PAGE> 148
statements, reports and notices to bank clients who hold Fund shares; and such
other administrative services as a Fund reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Similar agreements may be
permitted under the Plans for institutions which provide recordkeeping for and
administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
Under a Shareholder Service Agreement, a Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment period
for each business day of the Funds during such period at the annual rate of
0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only to
those selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments made
to dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the Funds
to no more than 0.25% per annum of the average daily net assets of the funds
attributable to the customers of such dealers or financial institutions, and by
imposing a cap on the total sales charges, including asset based sales charges,
that may be paid by the Funds and their respective classes.
AIM Distributors may from time to time waive or reduce any portion of
its 12b-1 fee for Class A and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Fund, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Fund and not of AIM Distributors.
For the fiscal year ended October 31, 1999, the Funds paid the
following amounts under the Class A and C Plan and the Class B Plan:
<TABLE>
<CAPTION>
% of Class
Average Daily
Net Assets
-------------
Class A Class B Class C Class A Class B Class C
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund $4,209,929 $8,987,826 $ 140,985 0.50% 1.00% 1.00%
Asian Fund $ 61,006 $ 64,087 $ 20,619 0.35% 1.00% 1.00%
Equity Fund $5,566,448 $8,024,805 $ 871,229 0.30% 1.00% 1.00%
European Fund $ 332,066 $ 625,126 $ 118,428 0.35% 1.00% 1.00%
Growth Fund $1,585,224 $3,564,027 $ 205,127 0.50% 1.00% 1.00%
Income Fund $ 300,260 $ 385,265 $ 19,247 0.50% 1.00% 1.00%
</TABLE>
53
<PAGE> 149
An estimate by category of actual fees paid by the Funds with regard to
the Class A shares under the Class A and C Plan during the year ended October
31, 1999 follows:
<TABLE>
<CAPTION>
AGGRESSIVE ASIAN EQUITY EUROPEAN GROWTH INCOME
GROWTH FUND FUND FUND FUND FUND FUND
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Advertising ............................. $ 71,446 $ 7,880 $ 455,333 $ 63,247 $ 33,812 $ 1,993
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) ........................... $ 6,820 $ 756 $ 43,412 $ 6,135 $ 3,252 $ 185
SEMINARS ................................ $ 19,801 $ 2,568 $ 128,153 $ 18,258 $ 9,967 $ 605
Compensation to Underwriters to partially
offset upfront dealer commissions and
other marketing costs ................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Compensation to Dealers ................. $4,111,862 $ 49,802 $4,939,550 $ 244,426 $1,538,194 $ 297,478
(INCLUDES FINDER'S FEES)
Compensation to Sales Personnel ......... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Report Total ..................... $4,209,929 $ 61,006 $5,566,448 $ 332,066 $1,585,225 $ 300,261
</TABLE>
An estimate by category of actual fees paid by the Funds under the
Class B Plan during the year ended October 31, 1999 as follows:
<TABLE>
<CAPTION>
AGGRESSIVE ASIAN EQUITY EUROPEAN GROWTH INCOME
GROWTH FUND FUND FUND FUND FUND FUND
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Advertising ............................. $ 190,907 $ 5,128 $ 219,428 $ 47,290 $ 96,312 $ 15,684
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) ........................... $ 17,786 $ 327 $ 20,589 $ 4,058 $ 9,087 $ 1,652
SEMINARS ................................ $ 51,109 $ 909 $ 60,004 $ 11,272 $ 27,457 $ 4,079
Compensation to Underwriters to partially
offset upfront dealer commissions and
other marketing costs ................... $6,740,869 $ 48,065 $6,018,604 $ 468,844 $2,673,020 $ 288,949
Compensation to Dealers ................. $1,987,155 $ 9,657 $1,706,180 $ 93,661 $ 758,151 $ 74,902
Compensation to Sales Personnel ......... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Report Total ..................... $8,987,826 $ 64,086 $8,024,805 $ 625,125 $3,564,027 $ 385,266
</TABLE>
An estimate by category of actual fees paid by the Funds with regard to
the Class C shares under the Class A and C Plan during the year ended October
31, 1999 as follows:
54
<PAGE> 150
<TABLE>
<CAPTION>
AGGRESSIVE ASIAN EQUITY EUROPEAN GROWTH INCOME
GROWTH FUND FUND FUND FUND FUND FUND
----------- ----- ------ -------- ------ -------
CLASS C
<S> <C> <C> <C> <C> <C> <C>
Advertising ............................. $ 0 $ 396 $ 0 $ 4,827 $ 0 $ 64
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) ........................... $ 0 $ 39 $ 0 $ 420 $ 0 $ 0
SEMINARS ................................ $ 0 $ 0 $ 0 $ 1,166 $ 0 $ 0
Compensation to Underwriters to partially
offset upfront dealer commissions and
other marketing costs ................... $ 64,526 $ 15,408 $510,473 $ 83,930 $116,390 $ 11,019
Compensation to Dealers ................. $ 76,458 $ 4,776 $360,757 $ 28,085 $ 88,737 $ 8,163
Compensation to Sales Personnel ......... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Report Total ..................... $140,984 $ 20,619 $871,230 $118,428 $205,127 $ 19,246
</TABLE>
The Plans require AIM Distributors to provide the Board of Directors at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Directors reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Directors, including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
of the Company and who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to the Plans ("Qualified
Directors"). In approving the Plans in accordance with the requirements of Rule
12b-1, the directors considered various factors and determined that there is a
reasonable likelihood that the Plans would benefit each class of the Funds and
their respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms,
the Plans continue in effect as long as such continuance is specifically
approved at least annually by the Board of Directors, including a majority of
the Qualified Directors.
The Plans may be terminated by the vote of a majority of the
Independent Directors, or, with respect to a particular class, by the vote of a
majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the directors, including a majority of the Qualified
Directors, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Directors is committed to the discretion of the
Qualified Directors. In the event the Class A and C Plan is amended in a manner
which the Board of Directors determines would materially increase the charges
paid under the Class A and C Plan, the Class B shares of the Funds will no
longer convert into Class A shares of the same Funds unless the Class B shares,
voting separately, approve such amendment. If the
55
<PAGE> 151
Class B shareholders do not approve such amendment, the Board of Directors will
(i) create a new class of shares of the Funds which is identical in all material
respects to the Class A shares as they existed prior to the implementation of
the amendment and (ii) ensure that the existing Class B shares of the Funds will
be exchanged or converted into such new class of shares no later than the date
the Class B shares were scheduled to convert into Class A shares.
The principal differences between the Class A and C Plan, on the one
hand, and the Class B Plan, on the other hand, are: (i) the Class A and C Plan
allows payment to AIM Distributors or to dealers or financial institutions of up
to 0.50% of average daily net assets of the Class A shares of Aggressive Growth
Fund, Income Fund, and Growth Fund, of up to 0.35% of average daily net assets
of the Class A shares of Asian Fund and European Fund, and of up to 0.30% of
average daily net assets of the Class A shares of Equity Fund, as compared to
1.00% of such assets of each Fund's Class B shares; (ii) the Class B Plan
obligates the Class B shares to continue to make payments to AIM Distributors
following termination of the Class B shares Distribution Agreement with respect
to Class B shares sold by or attributable to the distribution efforts of AIM
Distributors unless there has been a complete termination of the Class B Plan
(as defined in such Plan) and (iii) the Class B Plan expressly authorizes AIM
Distributors to assign, transfer or pledge its rights to payments pursuant to
the Class B Plan.
THE DISTRIBUTOR
The Company has entered into distribution arrangements with AIM
Distributors, P. O. Box 4739, Houston, Texas 77210-4739, a registered
broker-dealer and a wholly owned subsidiary of AIM, to act as the distributor in
the continuous offering of Class A, Class B and Class C shares of the Funds.
Certain directors and officers of the Company are affiliated with AIM
Distributors. A Master Distribution Agreement with AIM Distributors relating to
the Class A and Class C shares of the Funds was approved by the Board of
Directors on June 11, 1997. A Master Distribution Agreement with AIM
Distributors relating to the Class B shares of the Funds was also approved by
the Board of Directors on December 11, 1996. Both such Master Distribution
Agreements are hereinafter collectively referred to as the "Distribution
Agreements."
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds directly and through institutions with
whom AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of the Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset based
sales charges in respect of the outstanding Class B shares attributable to AIM
Distributors; provided, however, that a complete termination of the Class B
shares master distribution plan (as defined in the Plan) would terminate all
payments to AIM Distributors. Termination of the Class B shares distribution
plan or Distribution Agreement does not affect the obligation of Class B
shareholders to pay Contingent Deferred Sales Charges.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Funds' shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
56
<PAGE> 152
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of the
Funds at the time of such sales. Payments with respect to Class B shares will
equal 4.0% of the purchase price of the Class B shares sold by the dealer or
institution, and will consist of a sales commission equal to 3.75% of the
purchase price of the Class B shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. The portion of the payments to
AIM Distributors under the Class B Plan which constitutes an asset-based sales
charge (0.75%) is intended in part to permit AIM Distributors to recoup a
portion of such sales commissions plus financing costs. AIM Distributors
anticipates that it will require a number of years to recoup from Class B Plan
payments the sales commissions paid to dealers and institutions in connection
with sales of Class B shares. In the future, if multiple distributors serve a
Fund, each such distributor (or its assignee or transferee) would receive a
share of the payments under the Class B Plan based on the portion of the Fund's
Class B shares sold by or attributable to the distribution efforts of that
distributor.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record.
The Company (on behalf of any class of the Funds) or AIM Distributors
may terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate automatically in the
event of their assignment. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset based distribution fees in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors; provided, however,
that a complete termination of the Class B Plan (as defined in such Plan) would
terminate all payments to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligation of the Funds and their
Class B shareholders to pay contingent deferred sales charges.
From time to time, AIM Distributors may transfer and sell its right to
payments under the Distribution Agreements relating to Class B shares in order
to finance distribution expenditures in respect of Class B shares.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the fiscal years ended October 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Sales Amount Sales Amount Sales Amount
Charges Retained Charges Retained Charges Retained
------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Fund $ 1,335,400 $ 267,534 $ 3,546,968 $ 622,054 $ 12,462,271 $ 2,200,552
Asian Fund* $ 251,652 $ 43,007 $ 180,148 $ 27,913 $ 0 $ 0
Equity Fund $ 2,227,910 $ 446,482 $ 3,608,107 $ 592,247 $ 7,481,513 $ 1,172,508
European Fund* $ 870,792 $ 143,067 $ 1,357,500 $ 207,603 $ 0 $ 0
Growth Fund $ 1,035,250 $ 195,571 $ 1,200,898 $ 208,115 $ 1,621,736 $ 286,414
Income Fund $ 159,748 $ 28,250 $ 285,983 $ 50,768 $ 348,033 $ 59,763
</TABLE>
- ---------------------
57
<PAGE> 153
* Asian Fund and European Fund commenced operations November 3, 1997.
The following chart reflects the contingent deferred sales charges paid
by Class A, Class B and Class C shareholders for the fiscal years ended October
31, 1999, 1998 and 1997 for Class A, Class B and Class C shares:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ----------
<S> <C> <C> <C>
Aggressive Growth Fund $ 101,594 $ 200,802 $ 133,018
Asian Fund* $ 240,319 $ 496 $ 0
Equity Fund $ 157,129 $ 208,603 $ 91,984
European Fund* $ 50,219 $ 7,299 $ 0
Growth Fund $ 24,812 $ 29,133 $ 25,870
Income Fund $ 3,743 $ 9,510 $ 3,397
</TABLE>
- ---------------------
* Asian Fund and European Fund commenced operations November 3, 1997.
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large Cap Value Fund,
AIM Aggressive Growth Fund, AIM Asian Growth Fund, AIM Basic Value Fund, AIM
Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM
Constellation Fund, AIM Dent Demographic Trends Fund, AIM European Development
Fund, AIM Euroland Growth Fund, AIM Global Utilities Fund, AIM Global Growth &
Income Fund, AIM International Equity Fund, AIM Japan Growth Fund, AIM Large Cap
Basic Value Fund, AIM Large Cap Growth Fund, AIM Large Cap Opportunities Fund,
AIM Mid Cap Equity Fund, AIM Mid Cap Growth Fund, AIM Mid Cap Opportunities
Fund, AIM New Pacific Growth Fund, AIM Select Growth Fund, AIM Small Cap Growth
Fund, AIM Small Cap Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge As a
------------------------------- --------------
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
- ----------------
* AIM Small Cap Opportunities Fund will not accept any single purchase in excess
of $250,000.
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A
58
<PAGE> 154
shares of each of AIM Advisor Real Estate Fund, AIM Balanced Fund, AIM
Developing Markets Fund, AIM Emerging Markets Debt Fund, AIM Global Aggressive
Growth Fund, AIM Global Consumer Products and Services Fund, AIM Global
Financial Services Fund, AIM Global Government Income Fund, AIM Global Growth
Fund, AIM Global Health Care Fund, AIM Global Income Fund, AIM Global
Infrastructure Fund, AIM Global Resources Fund, AIM Global Telecommunications
and technology Fund, AIM Global Trends Fund, AIM High Income Municipal Fund, AIM
High Yield Fund, AIM High Yield Fund II, AIM Income Fund, AIM Intermediate
Government Fund, AIM Latin American Growth Fund, AIM Municipal Bond Fund, AIM
Strategic Income Fund and AIM Tax-Exempt Bond Fund of Connecticut.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge As a
------------------------------- --------------
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $ 1,000,000 2.00 2.04 1.60
</TABLE>
CATEGORY III. Certain AIM Funds are currently sold with a sales charge
ranging from 1.00% to 0.50% of the offering price on purchases of less than
$1,000,000. These AIM Funds are the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge As a
------------------------------- --------------
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more of Category
I, II or III Funds; however, AIM Distributors may pay a dealer concession and/or
advance a service fee on such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the
entire initial sales charge to dealers for all sales with respect to which
orders are placed with AIM Distributors during a particular period. Dealers to
whom substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. At the option of the dealer, such
incentives may take the form of payment for travel expenses,
59
<PAGE> 155
including lodging, incurred in connection with trips taken by qualifying
registered representatives and their families to places within or outside the
United States. The total amount of such additional bonus payments or other
consideration shall not exceed 0.25% of the public offering price of the shares
sold. Any such bonus or incentive programs will not change the price paid by
investors for the purchase of the applicable AIM Fund's shares or the amount
that any particular AIM Fund will receive as proceeds from such sales. Dealers
may not use sales of the AIM Funds' shares to qualify for any incentives to the
extent that such incentives may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are
dealers of record for purchases of $1 million or more of Class A shares (or
shares which normally involve payment of initial sales charges), which are sold
at net asset value and are subject to a contingent deferred sales charge, for
all AIM Funds other than Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $17 million of such purchases, plus 0.25% of amounts in excess
of $20 million of such purchases. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class B shares of the AIM Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. These
commissions are not paid on sales to investors exempt from the CDSC, including
shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who
purchase additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
Exchanges of AIM Cash Reserve Shares of AIM Money Market Fund for Class
B shares or Class C shares are considered sales of such Class B or Class C
shares for purposes of the sales charges and dealer concessions discussed above.
AIM Distributors may pay investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan as follows: 1% of the first $2 million of such purchases, plus 0.80% of the
next $1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases and
up to 0.10% of the net asset value of any Class A shares
60
<PAGE> 156
of AIM Limited Maturity Treasury Fund sold at net asset value to an employee
benefit plan in accordance with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including any
trust established exclusively for the benefit of any such person;
or a pension, profit-sharing, or other benefit plan established
exclusively for the benefit of any such person, such as an IRA,
Roth IRA, a single-participant money-purchase/profit-sharing plan
or an individual participant in a 403(b) plan (unless such 403(b)
plan qualifies as the purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution transmittal
(i.e., the Funds will not accept contributions submitted with
respect to individual participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by
submitting an application on behalf of each new participant
with the contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or
single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Code) and 457 plans, although more than
one beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a
Savings Incentive Match Plans for Employees IRA (SIMPLE IRA),
where the employer has notified the distributor in writing that
all of its related employee SEP, SAR-SEP or SIMPLE IRA accounts
should be linked; or
o any other organized group of persons, whether incorporated
or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase at a
discount of redeemable securities of a registered investment
company.
Investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
61
<PAGE> 157
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
privilege is also available to holders of the Connecticut General Guaranteed
Account, established for tax qualified group annuities, for contracts purchased
on or before June 30, 1992. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund, and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) SHARES
OF AIM Floating Rate Fund) within the following 13 consecutive months. By
marking the LOI section on the account application and by signing the account
application, the purchaser indicates that he understands and agrees to the terms
of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales
charge made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "Sales Charges and Dealer Concessions." It is the
purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "Rights of
Accumulation" if the Transfer Agent is advised of all other accounts at the time
of the investment. Shares acquired through reinvestment of dividends and capital
gains distributions will not be applied to the LOI. At any time during the
13-month period after meeting the original obligation, a purchaser may revise
his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the
initial purchase (or subsequent purchases if necessary) the Transfer Agent will
escrow in the form of shares an appropriate dollar amount (computed to the
nearest full share). All dividends and any capital gain distributions on the
escrowed shares will be credited to the purchaser. All shares purchased,
including those escrowed, will be registered in the purchaser's name. If the
total investment specified under this LOI is completed within the 13-month
period, the escrowed shares will be promptly released. If the intended
investment is not completed, the purchaser will pay the Transfer Agent the
difference between the sales charge on the specified amount and the amount
actually purchased. If the purchaser does not pay such difference within 20 days
of the expiration date, he irrevocably constitutes and appoints the Transfer
Agent as his attorney to surrender for redemption any or all shares, to make up
such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes
to cancel the agreement, he must give written notice to AIM Distributors. If at
any time before completing the LOI Program the purchaser requests the Transfer
Agent to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may
also qualify for reduced initial sales charges based upon such purchaser's
existing investment in shares of any of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) SHARES
OF AIM Floating Rate Fund) at the time of the proposed purchase. Rights of
Accumulation are also available to
62
<PAGE> 158
holders of the Connecticut General Guaranteed Account, established for
tax-qualified group annuities, for contracts purchased on or before June 30,
1992. To determine whether or not a reduced initial sales charge applies to a
proposed purchase, AIM Distributors takes into account not only the money which
is invested upon such proposed purchase, but also the value of all shares of the
AIM Funds (except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM
Cash Reserve Shares of AIM Money Market Fund, (ii) Class B and Class C shares
of the AIM Funds and (iii) shares of AIM floating rate fund) owned by such
purchaser, calculated at their then current public offering price. If a
purchaser so qualifies for a reduced sales charge, the reduced sales charge
applies to the total amount of money then being invested by such purchaser and
not just to the portion that exceeds the breakpoint above which a reduced sales
charge applies. For example, if a purchaser already owns qualifying shares of
any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000
in a fund, with a maximum initial sales charge of 5.50%, the reduced initial
sales charge of 5.25% will apply to the full $20,000 purchase and not just to
the $15,000 in excess of the $25,000 breakpoint. To qualify for obtaining the
discount applicable to a particular purchase, the purchaser or his dealer must
furnish AFS with a list of the account numbers and the names in which such
accounts of the purchaser are registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM
Funds at net asset value (without payment of an initial sales charge) may be
made in connection with: (a) the reinvestment of dividends and distributions
from a fund; (b) exchanges of shares of certain funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members
of their immediate family) of AIM Management, its affiliates or
The AIM Family of Funds --Registered Trademark--; and any
foundation, trust or employee
benefit plan established exclusively for the benefit of, or by,
such persons;
o Any current or retired officer, director, or employee (and members
of their immediate family), of CIGNA Corporation or its
affiliates, or of First Data Investor Services Group; and any
deferred compensation plan for directors of investment companies
sponsored by CIGNA Investments, Inc. or its affiliates;
o Sales representatives and employees (and members of their
immediate family) of selling group members or financial
institutions that have arrangements with such selling group
members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined above,
and non-qualified plans offered in conjunction therewith, provided
the initial investment in the plan(s) is at least $1 million; the
sponsor signs a $1 million LOI; the employer-sponsored plan(s) has
at least 100 eligible employees; or all plan transactions are
executed through a single omnibus account per Fund and the
financial institution or service organization has entered into the
appropriate agreements with the distributor. Section 403(b) plans
sponsored by public educational institutions are not eligible for
a sales charge exception based on the aggregate investment made by
the plan or the number of eligible employees. Purchases of AIM
Small Cap Opportunities Fund by such plans are subject to initial
sales charges;
o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or AIM
Constellation Fund on September 8, 1986, or of AIM
63
<PAGE> 159
Charter Fund on November 17, 1986, who have continuously owned
shares having a market value of at least $500 and who purchase
additional shares of the same Fund;
o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on February
12, 1999 who have continuously owned shares of the AIM Funds;
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or AIM
Constellation Fund; provided, however, prior to the termination
date of the trusts, a unitholder may invest proceeds from the
redemption or repurchase of his units only when the investment in
shares of AIM Weingarten Fund and AIM Constellation Fund is
effected within 30 days of the redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM
Fund or that sells its assets to an AIM Fund in exchange for
shares of an AIM Fund;
o Shareholders of the GT Global Funds as of April 30, 1987 who since
that date continually have owned shares of one or more of these
funds; and
o Certain former AMA Investment Advisers' shareholders who became
shareholders of the AIM Global Health Care Fund in October 1989,
and who have continuously held shares in the GT Global Funds since
that time.
o Shareholders of record of advisor class shares of an AIM Fund on
February 11, 2000 who have continuously owned shares of that AIM
Fund, and who purchase additional shares of that AIM Fund.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global Funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
Funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global Funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or
64
<PAGE> 160
for the benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global Funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption in addition to the waivers provided for
redemptions of currently issued Class B shares as described in a Prospectus: (1)
total or partial redemptions resulting from a distribution following retirement
in the case of a tax-qualified employer-sponsored retirement; (2) minimum
required distributions made in connection with an IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (3) redemptions pursuant to distributions from a
tax-qualified employer-sponsored retirement plan, which is invested in the
former GT Global Funds, which are permitted to be made without penalty pursuant
to the Code, other than tax-free rollovers or transfers of assets, and the
proceeds of which are reinvested in the former GT Global Funds; (4) redemptions
made in connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (5) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (6) redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of Section
72(t)(2) of the Code, and the regulations promulgated thereunder; (7)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (8) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex Fund,
AIM Advisor International Value Fund, AIM Advisor Large Cap Value
Fund and AIM Advisor Real Estate Fund by shareholders of record on
April 30, 1995, of these Funds, except that shareholders whose
broker-dealers maintain a single omnibus account with AFS on
behalf of those shareholders, perform sub-accounting functions
with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995, from shareholders
whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of (1)
any registered shareholders on an account or (2) a settlor of a
living trust, of shares held in the account at the time of death
or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts, Section
403(b) retirement plans, Section 457 deferred compensation plans
and Section 401 qualified plans, where redemptions result from (i)
required minimum distributions to plan participants or
beneficiaries who are age 70-1/2 or older, and only with respect
to that portion of such distributions that does not exceed 12%
annually of the participant's or beneficiary's account value in a
particular AIM Fund; (ii) in kind transfers of assets where the
participant or beneficiary notifies the distributor of the
transfer no later than the time the transfer occurs; (iii)
tax-free rollovers or transfers of assets to another plan of the
type described above invested in Class B or Class C shares of one
or more of the AIM Funds; (iv) tax-free returns of excess
contributions or returns of excess deferral amounts; and (v)
distributions on the death or disability (as defined in the
Internal Revenue Code of 1986, as amended) of the participant or
beneficiary;
65
<PAGE> 161
o Amounts from a Systematic Withdrawal Plan of up to an annual
amount of 12% of the account value on a per fund basis, at the
time the withdrawal plan is established, provided the investor
reinvests his dividends;
o Liquidation by the Fund when the account value falls below the
minimum required account size of $500;
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer of record notifies the
distributor prior to the time of investment that the dealer waives
the payment otherwise payable to him.
Upon the redemption of shares of funds in sales charge Categories I and
II (see "Sales Charges and Dealer Concessions") purchased in amounts of $1
million or more, no CDSC will be applied in the following situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as qualified
purchasers, as defined above, where the redemptions are in
connection with employee terminations or withdrawals, provided the
total amount invested in the plan is at least $1,000,000; the
sponsor signs a $1 million LOI; or the employer-sponsored plan has
at least 100 eligible employees; provided, however, that 403(b)
plans sponsored by public educational institutions shall qualify
for the CDSC waiver on the basis of the value of each plan
participant's aggregate investment in the AIM Funds, and not on
the aggregate investment made by the plan or on the number of
eligible employees;
o Private foundations or endowment funds;
o Redemption of shares by the investor where the investor's dealer
waives the amounts otherwise payable to it by the distributor and
notifies the distributor prior to the time of investment; and
o Shares acquired by exchange from Class A shares of funds in sales
charge Categories I and II unless the shares acquired by exchange
are redeemed within 18 months of the original purchase of the
Class A shares.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of each Fund may
be purchased appears in the Prospectus under the heading "Purchasing Shares."
The sales charge normally deducted on purchases of Class A shares of
each Fund is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of the Fund's Class
A shares. Since there is little expense associated with unsolicited orders
placed directly with AIM Distributors by persons who, because of their
relationship with the Funds or with AIM and its affiliates, are familiar with
the Funds, or whose programs for purchase involve little expense (e.g., because
of the size of the transaction and shareholder records required), AIM
Distributors believes that it is appropriate and in the Funds' best interest
that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase Class A shares
of the Funds through AIM Distributors without payment of a sales charge. The
persons who may purchase Class A shares of the Funds without a sales charge are
under the caption "Reduction in Initial Sales Charges - Purchases at Net Asset
Value."
66
<PAGE> 162
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in each Prospectus under
the heading "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the heading "Redeeming Shares - How to Redeem Shares."
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the Funds' obligation to redeem shares, AIM Distributors may also
repurchase shares as an accommodation to shareholders. To effect a repurchase,
those dealers who have executed Selected Dealer Agreements with AIM Distributors
must phone orders to the order desk of the Fund (Telephone: (800) 959-4246) and
guarantee delivery of all required documents in good order. A repurchase is
effected at the net asset value per share of a Fund next determined after the
repurchase order is received. Such arrangement is subject to timely receipt by
AFS, the Funds' transfer agent, of all required documents in good order. If such
documents are not received within a reasonable time after the order is placed,
the order is subject to cancellation. While there is no charge imposed by the
Funds or by AIM Distributors (other than any applicable CDSC) when shares are
redeemed or repurchased, dealers may charge a fair service fee for handling the
transaction. AIM may redeem all shares of Aggressive Growth Fund, Asian Fund,
European Fund, Equity Fund and Growth Fund in cash.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("the NYSE ") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations,
withhold 31% of redemption payments and reportable dividends (whether paid or
accrued) in the case of any shareholder who fails to provide the Fund with a
taxpayer identification number ("TIN") and a certification that he is not
subject to backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect
TIN, or
(3) the investor or the Fund is notified by the IRS that the investor
is subject to backup withholding because the investor failed to
report all of the interest and dividends on such investor's tax
return (for reportable interest and dividends only), or
(4) the investor fails to certify to the Fund that the investor is not
subject to backup withholding under (3) above (for reportable
interest and dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term distributions
are subject to backup withholding only if (1) (2) or (5) above applies.
Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
67
<PAGE> 163
o a corporation
o an organization exempt from tax under Section 501(a), an
individual retirement plan (IRA), or a custodial account under
Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United
States, or any of their political subdivisions or
instrumentalities
o a foreign government or any of its political subdivisions,
agencies or instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in the
U.S. or a possession of the U.S.
o a futures commission merchant registered with the Commodity
Futures Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the
1940 Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in Section
4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES - Investors who do not supply the AIM Funds with a
correct TIN will be subject to a $50 penalty imposed by the IRS unless such
failure is due to reasonable cause and not willful neglect. If an investor
falsifies information on this form or makes any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, such investor may be subject to a $500 penalty imposed by the IRS
and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities
are not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
federal income tax withholding at a 30% rate on ordinary income dividends and
distributions and return of capital distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
68
<PAGE> 164
NET ASSET VALUE DETERMINATION
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is determined once daily as of the close
of the customary trading session of the NYSE (generally 4:00 p.m. Eastern Time),
on each business day of the Fund. In the event the NYSE closes early (i.e.,
before 4:00 p.m. Eastern Time) on a particular day, the net asset value of a
Fund share is determined as of the close of the customary trading session of the
NYSE on such day. For purposes of determining net asset value per share, futures
and options contract closing prices which are available fifteen (15) minutes
after the close of the customary trading session on the NYSE will generally be
used. The net asset values per share of the Classes will differ because
different expenses are attributable to each class. The income or loss and the
expenses (except those listed below) of a Fund are allocated to each class on
the basis of the net assets of the Fund allocable to each such class, calculated
as of the close of business on the previous business day, as adjusted for the
current day's shareholder activity of each class. Distribution and service fees
and transfer agency fees (to the extent different rates are charged to different
classes) are allocated only to the class to which such expenses relate. The net
asset value per share of a class is determined by subtracting the liabilities
(e.g., the expenses) of the Fund allocated to the class from the assets of the
Fund allocated to the class and dividing the result by the total number of
shares outstanding of such class. Determination of each Fund's net asset value
per share is made in accordance with generally accepted accounting principles.
A security listed or traded on an exchange (except convertible bonds)
is valued at its last sales price on the exchange where the security is
principally traded or, lacking any sales on a particular day, the security is
valued at the closing bid price on that day, prior to the determination of net
asset value. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market system) is valued on
the basis of prices provided by independent pricing services. Each security
reported on the NASDAQ National Market System is valued at the last sales price
on the valuation date, or lacking a last sale, at the closing bid price on that
day; option contracts are valued at the mean between the closing bid and asked
prices on the exchange where the contracts are principally traded; futures
contracts are valued at final settlement price quotations from the primary
exchange on which they are traded. Debt obligations (including convertible
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by an independent pricing service may be determined
without exclusive reliance on quoted prices and may reflect appropriate factors
such as dividend rate, yield, type of issue, coupon rate and maturity date.
Securities for which market quotations are not readily available or for which
market quotations are not reflective of fair value are valued at fair value as
determined in good faith by or under the supervision of the Company's officers
in a manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having sixty (60) days or less to maturity are valued at
amortized cost, which approximates market value. (See also "Purchasing Shares-
How to Purchase Shares," and "Redeeming Shares - How to Redeem Shares" and
"Pricing of Shares" in each Prospectus.)
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the customary trading
session of the NYSE. The values of such securities used in computing the net
asset value of a Fund's shares are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the customary
trading session of the NYSE. 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 customary trading session of the NYSE which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors.
Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined
69
<PAGE> 165
only on business days of the Fund, the net asset value per share of a Fund may
be significantly affected on days when an investor can not exchange or redeem
shares of the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares of the same class of each Fund unless the
shareholder has requested in writing to receive such dividends and distributions
in cash or that they be invested in shares of another AIM Fund, subject to the
terms and conditions set forth in each Prospectus under the caption "Special
Plans - Automatic Investment Plan," and "Special Plans-Automatic Dividend
Investment." If a shareholder's account does not have any shares in it on a
dividend or capital gains distribution payment date, the dividend or
distribution will be paid in cash whether or not the shareholder has elected to
have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting each Fund and its shareholders that are not
described in each Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in each Fund's Prospectus is not intended as a substitute
for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund intends to qualify each year as a regulated investment
company under Part I of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for tax treatment as a regulated
investment company under the Code, each Fund is required, among other things, to
derive at least 90% of its gross income in each taxable year from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies and other
income (including but not limited to gains from options, futures or forward
contracts derived with respect to the Fund's business of investing in such
stock, securities or currencies) (the "Income Requirement"). Foreign currency
gains (including gains from options, futures or forward contracts on foreign
currencies) that are not "directly related" to a Fund's principal business may,
under regulations not yet issued, not be qualifying income for purposes of the
Income Requirement.
At the close of each quarter of its taxable year, at least 50% of the
value of each Fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which the Fund has not invested more than 5% of the
value of its total assets in securities of such issuer and as to which the Fund
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses (the "Asset Diversification Test"). For purposes of the Asset
Diversification Test, it is unclear under present law who should be treated as
the issuer of forward foreign currency exchange contracts, of options on foreign
currencies, or of foreign currency futures and related options. It has been
suggested that the issuer in each case may be the foreign central bank or
foreign government backing the particular currency. Consequently, a Fund may
find it necessary to seek a ruling from the Internal Revenue Service on this
issue or to curtail its trading in forward foreign currency exchange contracts
in order to stay within the limits of the Asset Diversification Test.
70
<PAGE> 166
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and
such distributions will be taxable as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions will be
eligible for the dividends received deduction in the case of corporate
shareholders.
FUND DISTRIBUTIONS
Under the Code, each Fund is exempt from U.S. federal income tax on its
net investment income and realized capital gains which it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (net investment income, net foreign currency ordinary
gain or loss and the excess of net short-term capital gain over net long-term
capital loss) and its net exempt-interest income for the year. Distributions of
investment company taxable income will be taxable to shareholders as ordinary
income, regardless of whether such distributions are paid in cash or are
reinvested in shares.
Each Fund also intends to distribute to shareholders substantially all
of the excess of its net long-term capital gain over net short-term capital loss
as a capital gain dividend. Capital gain dividends are taxable to shareholders
as a long-term capital gain, regardless of the length of time a shareholder has
held his shares.
Treasury regulations permit a regulated investment company, in
determining its investment company taxable income and undistributed net capital
gain for any taxable year, to elect to treat all or part of any net capital
loss, any net long-term capital loss, or any net foreign currency loss incurred
after October 31 as if it had been incurred in the succeeding year.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute in each calendar year an amount equal to 98%
of their ordinary taxable income for the calendar year plus 98% of their
"capital gain net income" (excess of capital gains over capital losses) for the
one-year period ending on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. For the foregoing
purposes, a regulated investment company is treated as having distributed any
amount on which it is subject to income tax for any taxable year ending in such
calendar year.
For purposes of the excise tax, a regulated investment company shall
(1) offset a net ordinary loss (but not below the net capital gain) for any
calendar year in determining its capital gain net income for the one-year period
ending on October 31 of such calendar year and (2) exclude foreign currency
gains and losses incurred after October 31 of any year in determining the amount
of ordinary taxable income for the current calendar year (and, instead, to
include such gains and losses in determining ordinary taxable income for the
succeeding calendar year). Each Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and capital gain net income
prior to the end of each calendar year to avoid liability for the excise tax.
INVESTMENT IN FOREIGN FINANCIAL INSTRUMENTS
Under Code Section 988, gains or losses from certain foreign currency
forward contracts or fluctuations in exchange rates will generally be treated as
ordinary income or loss. Such Code Section 988 gains or losses will increase or
decrease the amount of a Fund's investment company taxable income available to
be distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gains. Additionally, if Code
Section 988 losses exceed other investment company taxable income during a
taxable year, the Fund would not be able to pay any ordinary income dividends,
and any such dividends paid before the losses were realized, but in the same
taxable year, would be recharacterized as a return of capital to shareholders,
thereby reducing the tax basis of Fund shares.
71
<PAGE> 167
HEDGING TRANSACTIONS
Some of the forward foreign currency exchange contracts, options and
futures contracts that the Funds may enter into will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts are treated as if
they are sold for their fair market value on the last business day of the
taxable year, regardless of whether a taxpayer's obligations (or rights) under
such contracts have terminated (by delivery, exercise, entering into a closing
transaction or otherwise) as of such date. Any gain or loss recognized as a
consequence of the year-end deemed disposition of Section 1256 contracts is
combined with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. The net amount
of such gain or loss for the entire taxable year (including gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is deemed to be
60% long-term (taxable at a maximum 20% to non-corporate shareholders) and 40%
short-term gain or loss. However, in the case of Section 1256 contracts that are
forward foreign currency exchange contracts, the net gain or loss is separately
determined and (as discussed above) can be treated as ordinary income or loss.
The Funds may engage in certain hedging transactions (such as short
sales "against the box") that may be subject to special tax treatment as
"constructive sales" under Section 1259 of the Code if a Fund holds certain
"appreciated financial positions" (defined generally as any interest (including
a future or forward contract, short sale or option) with respect to stock,
certain debt instruments, or partnership interest if there would be a gain were
such interest sold, assigned, or otherwise terminated at its fair market value.)
Upon entering into a constructive sales transaction with respect to an
appreciated financial position, a Fund will be deemed to have constructively
sold such appreciated financial position and will recognize gain as if such
position were sold, assigned or otherwise terminated at its fair market value on
the date of such constructive sale (and will generally take into account any
gain in the taxable year which includes such date ).
Other hedging transactions in which the Funds may engage may result in
"straddles" or "conversion transactions" for U.S. federal income tax purposes.
The straddle and conversion transaction rules may affect the character of gains
(or in the case of the straddle rules, losses) realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules and the
conversion transaction rules have been promulgated, the tax consequences to the
Funds of hedging transactions are not entirely clear. The hedging transactions
may increase the amount of short-term capital gain realized by the Funds (and,
if they are conversion transactions, the amount of ordinary income) which is
taxed as ordinary income when distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of any of the foregoing rules governing Section
1256 contracts, constructive sales, straddle and conversion transactions may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected investment or straddle
positions, the amount which must be distributed to shareholders and which will
be taxed to shareholders as ordinary income or long-term capital gain may be
increased or decreased as compared to a fund that did not engage in such
transactions.
PFIC INVESTMENTS
Each Fund may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign company is classified as a PFIC if at least one-half of its
assets constitute investment-type assets or 75% or more of its gross income is
72
<PAGE> 168
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
Each Fund can elect alternative tax treatment with respect to PFIC
stock. Under one such election (the "QEF Election"), a Fund generally would be
required to include in its gross income its share of the earnings of a PFIC on a
current basis, regardless of whether any distributions are received from the
PFIC. Because the QEF Election imposes substantial requirements on the PFIC, it
is unlikely that a fund will be able to make the QEF Election. For taxable years
beginning after December 31, 1997, each Fund will alternatively be able to make
an election to mark any shares of PFIC stock that it holds to market (the
"Section 1296 Election"). If the Section 1296 election is made with respect to
any PFIC stock, a Fund will recognize ordinary income to the extent that the
fair market value of such PFIC stock at the close of any taxable year exceeds
its adjusted basis and will also recognize ordinary income in the event that it
disposes of any shares of such PFIC stock at a gain. In each case, such ordinary
income will be treated as dividend income for purposes of the Income
Requirement. A Fund making the Section 1296 Election with respect to any PFIC
stock will similarly recognize a deductible ordinary loss to the extent that the
adjusted basis of such PFIC stock exceeds its fair market value at the close of
any taxable year and will also recognize a deductible ordinary loss in the event
that it disposes of such PFIC stock at a loss. However, the amount of any
ordinary loss recognized by a Fund making a Section 1296 Election with respect
to any PFIC stock may not exceed the amount of ordinary income previously
recognized by such Fund by reason of marking such PFIC stock to market. If
either the QEF Election or the Section 1296 Election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. The Funds' intentions to qualify annually as regulated investment
companies may limit their ability to invest and hold PFIC stock.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject the Funds
themselves to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gains, may be increased or decreased substantially
as compared to a fund that did not invest in PFIC stock.
REDEMPTION OR EXCHANGE OF SHARES
Upon a redemption or exchange of shares, a shareholder will recognize
a taxable gain or loss depending upon his or her basis in the shares. Unless the
shares are disposed of as part of a conversion transaction, such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term, depending upon the
shareholder's holding period for the shares. Except to the extent otherwise
provided in future Treasury regulations any long-term capital gain recognized by
a non-corporate shareholder will be subject to tax at a maximum rate of 20%. Any
loss recognized by a shareholder on the sale of Fund shares held six months or
less will be treated as a long-term capital loss to the extent of any
distributions of net capital gains received by the shareholder with respect to
such shares.
If a shareholder exercises the exchange privilege within 90 days of
acquiring Class A shares, then the loss such shareholder recognizes on the
exchange will be reduced (or the gain increased) to the extent the sales charge
paid upon the purchase of Class A shares reduces any charge such shareholder
would have owed upon purchase of the new Class A shares in the absence of the
exchange privilege. Instead, such sales charge will be treated as an amount paid
for the new Class A shares. In addition, any loss recognized on a sale or
exchange will be disallowed to the extent that disposed Class A shares, Class B
shares or Class C shares are replaced within the 61-day period beginning 30 days
before and
73
<PAGE> 169
ending 30 days after the disposition of such shares. In such a case, the basis
of the shares acquired will be increased to reflect the disallowed loss.
Shareholders should particularly note that this loss disallowance rule applies
even where shares are automatically replaced under the dividend reinvestment
plan.
FOREIGN INCOME TAXES
Investment income received by each Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Funds to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of
each taxable year consists of the stock or securities of foreign corporations,
the Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign income taxes paid by the Fund (the "Foreign Tax Election"). Pursuant to
the Foreign Tax Election, shareholders will be required (i) to include in gross
income, even though not actually received, their respective pro-rata shares of
the foreign income taxes paid by the Fund that are attributable to any
distributions they receive; and (ii) either to deduct their pro-rata share of
foreign taxes in computing their taxable income, or to use it (subject to
various Code limitations) as a foreign tax credit against Federal income tax
(but not both). No deduction for foreign taxes may be claimed by a non-corporate
shareholder who does not itemize deductions or who is subject to alternative
minimum tax.
Unless certain requirements are met, a credit for foreign taxes is
subject to the limitation that it may not exceed the shareholder's U.S. tax
(determined without regard to the availability of the credit) attributable to
the shareholder's foreign source taxable income. In determining the source and
character of distributions received from a Fund for this purpose, shareholders
will be required to allocate Fund distributions according to the source of the
income realized by the Fund. Each Fund's gains from the sale of stock and
securities and certain currency fluctuation gains and losses will generally be
treated as derived from U.S. sources. In addition, the limitation on the foreign
tax credit is applied separately to foreign source "passive" income, such as
dividend income. Moreover, no foreign tax credits will be allowable to any
shareholder who has not held his shares of the Fund for at least 16 days during
the 30-day period beginning 15 days before the day such shares become
ex-dividend with respect to any Fund distribution to which foreign income taxes
are attributed (taking into account certain holding period reduction
requirements of the Code). Because of these limitations, shareholders may be
unable to claim a credit for the full amount of their proportionate shares of
the foreign income taxes paid by a Fund.
BACKUP WITHHOLDING
Under certain provisions of the Code, the Funds may be required to
withhold 31% of reportable dividends, capital gains distributions and redemption
payments ("backup withholding"). Generally, shareholders subject to backup
withholding will be those for whom a certified taxpayer identification number is
not on file with the Company or who, to the Company's knowledge, have furnished
an incorrect number, or who have been notified by the Internal Revenue Service
that they are subject to backup withholding. When establishing an account, an
investor must provide his or her taxpayer identification number and certify
under penalty of perjury that such number is correct and that he or she is not
otherwise subject to backup withholding. Corporate shareholders and other
shareholders specified in the Code are exempt from backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against a shareholder's U.S. federal income tax liability.
REINSTATEMENT PRIVILEGE
For federal income tax purposes, exercise of your reinstatement
privilege may increase the amount of gain or reduce the amount of loss
recognized in the original redemption transaction, because
74
<PAGE> 170
the initial sales charge will not be taken into account in determining such gain
or loss to the extent there has been a reduction in the initial sales charge
payable upon reinvestment. Wash sale rules may also limit the amount of loss
recognized.
FOREIGN SHAREHOLDERS
Dividends from a Fund's investment company taxable income and
distributions constituting returns of capital paid to a nonresident alien
individual, a foreign trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") generally will be subject to U.S.
withholding tax at a rate of 30% (or lower treaty rate) upon the gross amount of
the dividend. Foreign shareholders may be subject to U.S. withholding tax at a
rate of 30% on the income resulting from the Fund's election to treat any
foreign income taxes paid by it as paid by its shareholders, but may not be able
to claim a credit or deduction with respect to the withholding tax for the
foreign taxes treated as having been paid by them.
A foreign shareholder generally will not be subject to U.S. taxation
on gain realized upon the redemption or exchange of shares of a Fund or on
capital gain dividends. In the case of a foreign shareholder who is a
nonresident alien individual, however, gain realized upon the sale or redemption
of shares of a Fund and capital gain dividends ordinarily will be subject to
U.S. income tax if such individual is physically present in the U.S. for 183
days or more during the taxable year and certain other conditions are met. In
the case of a foreign shareholder who is a nonresident alien individual, the
Funds may be required to withhold U.S. federal income tax at a rate of 31%
unless proper notification of such shareholder's foreign status is provided.
Notwithstanding the foregoing, if distributions by the Funds are
effectively connected with a U.S. trade or business of a foreign shareholder,
then dividends from such Fund's investment company taxable income, capital
gains, and any gains realized upon the sale of shares of the Fund will be
subject to U.S. income tax at the graduated rates applicable to U.S. citizens or
domestic corporations.
Transfers by gift of shares of a Fund by a foreign shareholder who is
a nonresident alien individual will not be subject to U.S. federal gift tax. An
individual who, at the time of death, is a foreign shareholder will nevertheless
be subject to U.S. federal estate tax with respect to shares at the graduated
rates applicable to U.S. citizens and residents, unless a treaty exception
applies. In the absence of a treaty, there is a $13,000 statutory estate tax
credit.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in any of
the Funds.
MISCELLANEOUS CONSIDERATIONS; EFFECT OF FUTURE LEGISLATION
The foregoing general discussion of federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect at the date
of this SAI. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation of dividend and capital gain
distributions from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisors as to the consequences of these and other U.S. state
and local tax rules affecting investments in the Funds.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus
under the title "Shareholder Information."
75
<PAGE> 171
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
SHARES CERTIFICATES. AIM Funds will issue share certificates upon
written request to AFS. Otherwise, shares are held on the shareholder's behalf
and recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all
shares are to be held by the Transfer Agent and all dividends and distributions
are reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
Terms and Conditions of Exchanges. Normally, shares of an AIM Fund to
be acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with
certain dealers and investment advisory firms to accept telephone instructions
to exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the
Transfer Agent as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), or in any other account with any of the AIM Funds,
present or future, which has the identical registration as the designated
account(s), with full power of substitution in the premises.
76
<PAGE> 172
The Transfer Agent and AIM Distributors are thereby authorized and directed to
accept and act upon any telephone redemptions of shares held in any of the
account(s) listed, from any person who requests the redemption proceeds to be
applied to purchase shares in any one or more of the AIM Funds, provided that
such fund is available for sale and provided that the registration and mailing
address of the shares to be purchased are identical to the registration of the
shares being redeemed. An investor acknowledges by signing the form that he
understands and agrees that the Transfer Agent and AIM Distributors may not be
liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to modify or terminate the telephone exchange privilege
at any time without notice. An investor may elect not to have this privilege by
marking the appropriate box on the application. Then any exchanges must be
effected in writing by the investor.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints the Transfer Agent as his true and lawful attorney-in-fact to
surrender for redemption any and all unissued shares held by the Transfer Agent
in the designated account(s), present or future, with full power of substitution
in the premises. The Transfer Agent and AIM Distributors are thereby authorized
and directed to accept and act upon any telephone redemptions of shares held in
any of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's Prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
The AIM Funds may waive or modify any signature guarantee requirements at any
time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a Medallion Stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
77
<PAGE> 173
Transactions by Internet. An investor may effect transactions in his
account through the Internet by selecting the AIM Internet Connect option on his
completed account application form or completing an AIM Internet Connect
Authorization Form. By signing either form the investor acknowledges and agrees
that the Transfer Agent and AIM Distributors will not be liable for any loss,
expense or cost arising out of any internet transaction effected in accordance
with the instructions set forth in the forms if they reasonably believe such
request to be genuine. Procedures for verification of internet transactions
include requests for confirmation of the shareholder's personal identification
number and mailing of confirmations promptly after the transactions. The
investor also acknowledges that (1) if he no longer wants the AIM Internet
Contract option, he will notify the Transfer Agent in writing, and (2) the AIM
Internet Connect option may be terminated at any time by the AIM Funds.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital
gains, if any, available for distribution, net capital gains are offset against
available net capital losses, if any, carried forward from previous fiscal
periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares or AIM Cash Reserve Shares because of higher
distribution fees paid by Class B and Class C shares. Dividends on all shares
may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made
by the shareholder at any time by notice to the Transfer Agent and are effective
as to any subsequent payment if such notice is received by the Transfer Agent
prior to the record date of such payment. Any dividend and distribution election
remains in effect until the Transfer Agent receives a revised written election
by the shareholder.
Any dividend or distribution paid by a fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
CHANGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying changes for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
AUDIT REPORTS
The Board of Directors will issue to shareholders semi-annually the
Funds' financial statements. Financial statements, audited by independent
auditors, will be issued annually. The firm of KPMG LLP, 700 Louisiana, Houston,
Texas 77002, currently serves as the auditors of each Fund.
78
<PAGE> 174
LEGAL MATTERS
Legal matters for the Company are passed upon by Ballard Spahr Andrews
& Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. Under its contract with the Company relating to each Fund, the
Custodian is authorized to establish separate accounts in foreign currencies and
to cause foreign securities owned by each Fund to be held in its offices outside
the United States and with certain foreign banks and securities depositories.
The Custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by each Fund, and performs
certain other ministerial duties. AFS, a wholly owned subsidiary of AIM, P.O.
Box 4739, Houston, Texas 77210-4739, is the transfer and dividend disbursing
agent for the Class A, Class B and Class C shares of each of the Funds. Each
Fund pays the Custodian and the Transfer Agent such compensation as may be
agreed upon from time to time.
Chase Bank of Texas, N.A. (formerly, Texas Commerce Bank National
Association), 712 Main, Houston, Texas 77002, serves as Sub-Custodian for retail
purchases of the AIM Funds.
PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of each of the
Company's portfolios as of February 1, 2000, and the amount of outstanding
shares held by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- ---------------- ------------ --------------
<S> <C> <C> <C>
AIM International Merrill Lynch, Pierce, 35.92%** -0-
Equity Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
</TABLE>
- ------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund
may be presumed to be in "control" of such Fund, as defined in the 1940
Act.
79
<PAGE> 175
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- ---------------- ------------ --------------
<S> <C> <C> <C>
Class B shares Merrill Lynch, Pierce, 33.01%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 55.04%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
AIM Global Aggressive Merrill Lynch, Pierce 11.91% -0-
Growth Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 23.01% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 36.71%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
</TABLE>
- -------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund
may be presumed to be in "control" of such Fund, as defined in the 1940
Act.
80
<PAGE> 176
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- ---------------- ------------ --------------
<S> <C> <C> <C>
AIM Global Growth Merrill Lynch, Pierce, 9.22% -0-
Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 17.19% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce 28.07%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
AIM Global Income Fund -
Class B shares Merrill Lynch Pierce 5.39% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
Class C shares Lewco Securities Corp. 7.79% -0-
FBO a/c # WB5-800453-0-01
34 Exchange Place, 4th Floor
Jersey City, New Jersey 07311
Merrill Lynch Pierce 7.53% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
</TABLE>
- -----------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
81
<PAGE> 177
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- ---------------- ------------ --------------
<S> <C> <C> <C>
AIM European Merrill Lynch, Pierce, 5.84% -0-
Development Fund - Fenner & Smith
Class A shares FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch Pierce 9.90% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 14.02% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, FL 32246
AIM Asian Growth Fund - Merrill Lynch Pierce 6.67% -0-
Class A Shares Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch Pierce 7.94% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch Pierce 21.55% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
</TABLE>
- -----------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
82
<PAGE> 178
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
NAME AND ADDRESS OWNED OF OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- ---------------- ------------ --------------
<S> <C> <C> <C>
Robert A. Merkel and -0- 6.33%
Margaret M. Merkel Ttees
Robert A. Merkel and
Margaret M. Merkel Trust
Dtd. 05/27/94
5118 S. 288th Pl.
Auburn, WA 98001
</TABLE>
As of February 1, 2000, the directors and officers of the Company as a
group owned less than 1% of the outstanding shares of each class of Aggressive
Growth Fund, Growth Fund, Equity Fund, Income Fund, Asian Fund and European
Fund.
OTHER INFORMATION
Each Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the portfolios
of the Company have filed with the SEC under the 1933 Act and the 1940 Act, and
reference is hereby made to the Registration Statement for further information
with respect to each portfolio of the Company and the securities offered hereby.
The Registration Statement is available for inspection by the public at the
Securities and Exchange Commission in Washington, D.C.
- -----------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
83
<PAGE> 179
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all
Money Market Obligations, and the Funds reserve the right to invest in Money
Market Obligations other than those listed below:
1. GOVERNMENT OBLIGATIONS.
U.S. GOVERNMENT DIRECT OBLIGATIONS-- Bills, notes, and bonds issued by
the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES-- Certain federal agencies such as
the Government National Mortgage Association have been established as
instrumentalities of the U. S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
FOREIGN GOVERNMENT OBLIGATIONS -- These are U.S. dollar denominated
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Fund's investment advisor to be of comparable quality to the other
obligations in which the Fund may invest. Such securities also include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the European Coal and
Steel Community, the Asian Development Bank and the InterAmerican Development
Bank. The percentage of the Fund's assets invested in securities issued by
foreign governments will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.
2. BANK INSTRUMENTS.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and
accepted by a commercial bank. It is used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument
with a specific maturity. Certificates of deposit are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange
for the deposit of funds. Like a certificate of deposit, it earns a specified
rate of interest over a definite period of time; however, it cannot be traded in
the secondary market.
EURODOLLAR OBLIGATIONS -- A Eurodollar obligation is a U.S.
dollar-denominated obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS -- A Yankee dollar obligation is a U.S.
dollar-denominated obligation issued by a domestic branch of a foreign bank.
A-1
<PAGE> 180
3. COMMERCIAL INSTRUMENTS.
COMMERCIAL PAPER -- The term used to designate unsecured short-term
promissory notes issued by corporations and other entities. Maturities on these
issues vary from a few days to nine months.
MASTER DEMAND NOTES -- Master demand notes are demand notes that permit
investment of fluctuating amounts of money at variable rates of interest
pursuant to arrangements with the issuers. The interest rate on a master demand
note is periodically redetermined according to a prescribed formula. Although
there is no secondary market in master demand notes, the payee may demand
payment of the principal amount of the note on relatively short notice. Master
demand notes may be secured or unsecured.
4. REPURCHASE AGREEMENTS -- A repurchase agreement is a contractual
undertaking whereby the seller of securities (limited to U.S. Government
securities, including securities issued or guaranteed by the U.S. Treasury or
the various agencies and instrumentalities of the U.S. Government) agrees to
repurchase the securities at a specified price on a future date determined by
negotiations.
A-2
<PAGE> 181
APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF CORPORATE BOND RATINGS
Investment grade debt securities are those rating categories indicated
by an asterisk (*).
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS ARE AS FOLLOWS:
*Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
*Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
*A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
*Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
B-1
<PAGE> 182
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in the Aa and A
groups when assigning ratings to industrial development bonds and bonds secured
by either a letter of credit or bond insurance. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
STANDARD AND POOR'S RATINGS SERVICES CLASSIFICATIONS ARE AS FOLLOWS:
*AAA
Debt rated "AAA" has the highest rating assigned by Standard & Poor's
("S&P"). Capacity to pay interest and repay principal is extremely strong.
*AA
Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
*A
Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
*BBB
Debt rated "BBB" regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher categories.
BB, B, CCC, CC, C
Debt rated "BB", "B", "CCC", "CC" and "C" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
B-2
<PAGE> 183
BB
Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B
Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC
Debt rated "CCC" has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
CC
The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C
The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C1
The rating "C1" is reserved for income bonds on which no interest is
being paid.
D
Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal or principal payments are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
PLUS (+) OR MINUS (-)
The rating from "AA" to "CCC" may be modified by the addition of a plus
or minus sign to show relative standing within the major categories.
B-3
<PAGE> 184
DUFF & PHELPS FIXED-INCOME RATINGS ARE AS FOLLOWS:
*AAA
Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
*AA+, AA AND AA-
High credit quality. Protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions.
*A+, A AND A-
Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
*BBB+, BBB AND BBB-
Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
BB+, BB AND BB-
Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B AND B-
Below investment grade and possessing risk that obligations will not be
met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in quality rating within this category or into a higher or
lower quality rating grade.
CCC
Well below investment grade securities. May be in default or have
considerable uncertainty as to timely payment of interest, preferred dividends
and/or principal. Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable company
developments.
DD
Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP
Preferred stock with dividend arrearages.
B-4
<PAGE> 185
FITCH IBCA, INC.'S BOND RATINGS ARE AS FOLLOWS:
*AAA
Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
*AA
Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+."
*A
Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
*BBB
Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB
Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B
Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC
Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC
Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C
Bonds are in imminent default in payment of interest or principal.
B-5
<PAGE> 186
DDD, DD, AND D
Bonds are in default on interest and/or principal payments. Such bonds
are extremely speculative and should be valued on the basis of their ultimate
recovery value in liquidation or reorganization of the obligor. "DDD" represents
the highest potential for recovery on these bonds, and "D" represents the lowest
potential for recovery.
PLUS (+) MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the "AAA", "DDD", "DD", or "D" categories.
B-6
<PAGE> 187
APPENDIX C
- --------------------------------------------------------------------------------
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
The following list includes certain common securities, issued or
guaranteed by U.S. Government Agencies or Instrumentalities and does not purport
to be exhaustive.
EXPORT-IMPORT BANK CERTIFICATES--are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the United States.
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS--are bonds issued by a cooperatively
owned, nationwide system of banks and associations supervised by the Farm Credit
Administration, and independent agency of the U.S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS--are notes and bonds issued by the
Federal Home Loan Bank System.
FHA DEBENTURES--are debentures issued by the Federal Housing Authority of the
U.S. Government.
FHA INSURED NOTES--are bonds issued by the Farmers Home Administration of the
U.S. Government.
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS--are bonds issued and
guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The
Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its
funds by selling mortgages (as well as participation interests in the mortgages)
and by borrowing funds through the issuance of debentures and otherwise.
FHLMC PARTICIPATION CERTIFICATES OF "FREDDIE MACS"--represent undivided
interests in specified groups of conventional mortgage loans (and/or
participation interests in those loans) underwritten and owned by FHLMC. At
least 95% of the aggregate principal balance of the whole mortgage loans and/or
participations in a group formed by FHLMC typically consists of single-family
mortgage loans, and not more than 5% consists of multi-family loans. FHLMC
Participation Certificates are not guaranteed by, and do not constitute a debt
or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC
Participation Certificates are issued in fully registered form only, in original
unpaid principal balances of $25,000, $100,000, $200,00, $500,000, $1 million
and $5 million. FHLMC guarantees to each registered holder of a Participation
Certificate, to the extent of such holder's pro rata share (i) the timely
payment of interest accruing at the applicable certificate rate on the unpaid
principal balance outstanding on the mortgage loans, and (ii) collection of all
principal on the mortgage loans without any offset or deductions. Pursuant to
these guaranties, FHLMC indemnifies holders of Participation Certificates
against any reduction in principal by reason of charges for property repairs,
maintenance, and foreclosure.
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS--are bonds issued and
guaranteed by FNMA, a federally chartered and privately-owned corporation.
FNMA PASS-THROUGH CERTIFICATES OR "FANNIE-MAES"--are mortgage pass-through
certificates issued and guaranteed by FNMA. FNMA Certificates represent a
fractional undivided ownership interest in a pool of mortgage loans either
provided from FNMA's own portfolio or purchased from primary lenders. The
mortgage loans included in the pool are conventional, insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. FNMA
Certificates are not backed by, nor entitled to, the full faith and credit of
the U.S. Government.
Loans not provided from FNMA's own portfolio are purchased only from
primary lenders that satisfy certain criteria developed by FNMA, including depth
of mortgage origination experience, servicing
C-1
<PAGE> 188
experience and financial capacity. FNMA may purchase an entire loan pool from a
single lender, and issue Certificates backed by that loan pool alone, or may
package a pool made up of loans purchased from various lenders.
Various types of mortgage loans, and loans with varying interest rates,
may be included in a single pool, although each pool will consist of mortgage
loans related to one-family or two-to-four family residential properties.
Substantially all FNMA mortgage pools currently consist of fixed interest rate
and growing equity mortgage loans, although FNMA mortgage pools may also consist
of adjustable interest rate mortgage loans or other types of mortgage loans.
Each mortgage loan must conform to FNMA's published requirements or guidelines
with respect to maximum principal amount, loan-to-loan value ratio, loan term,
underwriting standards and insurance coverage.
All mortgage loans are held by FNMA as trustee pursuant to a trust
indenture for the benefit of Certificate holders. The trust indenture gives FNMA
responsibility for servicing and administering the loans in a pool. FNMA
contracts with the lenders or other servicing institutions to perform all
services and duties customary to the servicing of mortgages, as well as duties
specifically prescribed by FNMA, all under FNMA supervision. FMNA may remove
service providers for cause.
The pass-through rate on FNMA Certificates is the lowest annual
interest rate borne y an underlying mortgage loan in the pool, less a fee to
FNMA as compensation for servicing and for FNMA's guarantee. Lenders servicing
the underlying mortgage loans receive as compensation a portion of the fee paid
to FNMA, the excess yields on pooled loans with coupon rates above the lowest
rate borne by any mortgage loan and certain other amounts collected, such as
late charges.
The minimum size of a FNMA pool is $1 million of mortgage loans.
Registered holders purchase Certificates in amounts not less than $25,000.
FNMA Certificates are marketed by the servicing lender banks, usually
through securities dealers. The lender of a single lender pool typically markets
all Certificates based on that pool, and lenders of multiple lender pools market
Certificates based on a pro rata interest in the aggregate pool. The amount of
FNMA Certificates currently outstanding is limited.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE
MAES"--are mortgage-backed securities which represent a partial ownership
interest in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan included
in the pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgages
is assembled, and, after being approved by GNMA, is offered to investors through
securities dealers. GNMA is a U.S. Government corporation within the Department
of Housing and Urban Development.
GNMA Certificates differ from bonds in that the principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity. GNMA Certificates are called "modified pass-through" securities
because they entitle the holder to receive its proportionate share of all
interest and principal payments owed on the mortgage pool, net of fees paid to
the issuer and GNMA, regardless of whether or not the mortgagor actually makes
the payment. Payment of principal of and interest on GNMA Certificates of the
"modified pass-through" type is guaranteed by GNMA and backed by the full faith
and credit of the U.S. Government.
The average life of a GNMA Certificate is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose little risk to
principal investment because of the GNMA guarantee.
C-2
<PAGE> 189
As the prepayment rates of individual mortgage pools will vary widely,
it is not possible to accurately predict the average lie of a particular issue
of GNMA Certificates. However, statistics published by the Federal Housing
Authority indicate that the average life of a single-family dwelling mortgage
with 25- to 30-year maturity, the type of mortgage which backs the vast majority
of GNMA Certificates, is approximately 12 years. It is therefore customary
practice to treat GNMA Certificates as 30-year mortgage-backed securities which
prepay fully in the twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA
Certificates, the coupon rate of interest rate of interest of GNMA Certificates
is lower than the interest paid on the VA-guaranteed or FHA-insured mortgages
underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their
coupon rates for the following reasons: (i) Certificates may be issued at a
premium or discount, rather than at par; (ii) Certificates may trade in the
secondary market at a premium or discount after issuance; (iii) interest is
earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by prepayment of mortgages included in the mortgage pool underlying
the Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Fund.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GENERAL SERVICES ADMINISTRATION ("GSA") PARTICIPATION CERTIFICATES--are
participation certificates issued by the General Services Administration of the
U.S. Government.
MARITIME ADMINISTRATION BONDS--are bonds issued and provided by the Department
of Transportation of the U.S. Government.
NEW COMMUNITIES DEBENTURES--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS--are short-term project notes and long-term bonds
issued by public housing and urban renewal agencies in connection with programs
administered by the Department of Housing and Urban Development of the U.S.
Government, the payment of which is secured by the U.S. Government.
SBA DEBENTURES--are debentures fully guaranteed as to principal and interest by
the Small Business Administration of the U.S. Government.
SLMA DEBENTURES--are debentures backed by the Student Loan Marketing
Association.
TITLE XI BONDS--are bonds issued in accordance with the provisions of Title XI
of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BOND--are bonds issued by
Washington Metropolitan Area Transit Authority and are guaranteed by the
Secretary of Transportation of the U.S. Government.
C-3
<PAGE> 190
FINANCIAL STATEMENTS
FS
<PAGE> 191
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Asian Growth Fund (a portfolio of
AIM International Funds, Inc.) including the schedule of
investments, as of October 31, 1999, the related statement
of operations for the year then ended, the statement of
changes in net assets and financial highlights for the year
then ended and the period November 3, 1997 (date operations
commenced) through October 31, 1998. 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, 1999, 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 the AIM Asian
Growth Fund as of October 31, 1999, the results of its
operations for the year then ended, changes in its net
assets and financial highlights for the year then ended and
the period November 3, 1997 (date operations commenced)
through October 31, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
December 3, 1999
Houston, Texas
FS-1
<PAGE> 192
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-90.31%
AUSTRALIA-13.85%
Austar United Communications Ltd.
(Broadcasting-Television, Radio &
Cable)(a) 51,700 $ 168,195
- --------------------------------------------------------------
Brambles Industries Ltd. (Air
Freight) 25,800 725,790
- --------------------------------------------------------------
BRL Hardy Ltd. (Beverages-Alcoholic) 167,000 729,726
- --------------------------------------------------------------
Computershare Ltd.
(Computers-Software & Services) 196,800 715,571
- --------------------------------------------------------------
ERG Ltd. (Electrical Equipment) 325,000 1,281,222
- --------------------------------------------------------------
Foster's Brewing Group Ltd.
(Beverages-Alcoholic) 255,000 677,986
- --------------------------------------------------------------
James Hardie Industries Ltd.
(Building Materials) 212,000 513,892
- --------------------------------------------------------------
TABCORP Holdings Ltd. (Leisure Time
Products) 87,058 552,011
- --------------------------------------------------------------
Telstra Corp. Ltd. (Telephone) 162,700 522,045
- --------------------------------------------------------------
5,886,438
- --------------------------------------------------------------
HONG KONG-26.33%
ASM Pacific Technology Ltd.
(Machinery-Diversified) 600,000 706,737
- --------------------------------------------------------------
China Telecom Ltd.
(Telecommunications-
Cellular/Wireless)(a) 204,000 697,236
- --------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 630,000 446,055
- --------------------------------------------------------------
Dah Sing Financial Group
(Banks-Regional) 182,800 729,496
- --------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banks-Regional) 148,500 674,817
- --------------------------------------------------------------
Esprit Asia Holdings Ltd.
(Retail-Stores) 820,000 770,587
- --------------------------------------------------------------
Giordano International Ltd.
(Retail-Specialty-Apparel) 839,500 891,579
- --------------------------------------------------------------
Guangdong Kelon Electrical Holdings
Co. Ltd. (Household Furniture &
Appliances) 446,000 396,159
- --------------------------------------------------------------
HKR International Ltd. (Land
Development) 516,600 392,366
- --------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail-Food
Chains) 74,000 743,039
- --------------------------------------------------------------
Johnson Electric Holdings Ltd.
(Electrical Equipment) 137,000 740,722
- --------------------------------------------------------------
Kerry Properties Ltd. (Land
Development) 441,000 437,134
- --------------------------------------------------------------
Li & Fung Ltd. (Distributors-Food &
Health) 482,000 837,657
- --------------------------------------------------------------
Shenzhen Expressway Co. Ltd.
(Services-Commercial & Consumer) 2,402,000 358,687
- --------------------------------------------------------------
Shui On Construction and Materials
Ltd. (Construction-Cement &
Aggregates) 486,000 675,686
- --------------------------------------------------------------
Television Broadcasts Ltd.
(Broadcasting-Television, Radio &
Cable) 133,000 710,534
- --------------------------------------------------------------
Wing Hang Bank Ltd. (Banks-Major
Regional) 190,500 621,667
- --------------------------------------------------------------
Zhejiang Expressway Co. Ltd.
(Services-Commercial & Consumer) 2,356,000 357,884
- --------------------------------------------------------------
11,188,042
- --------------------------------------------------------------
INDIA-3.76%
ITC Ltd. (Tobacco) 19,600 371,420
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INDIA-(CONTINUED)
Satyam Infoway Ltd.-ADR
(Computers-Software & Services)(a) 12,000 $ 465,000
- --------------------------------------------------------------
Videsh Sanchar Nigam Ltd.-GDR
(Telecommunications-Cellular/Wireless) 47,600 760,410
- --------------------------------------------------------------
1,596,830
- --------------------------------------------------------------
INDONESIA-2.42%
Gulf Indonesia Resources Ltd.
(Oil-International Integrated)(a) 49,700 394,494
- --------------------------------------------------------------
PT Indofood Sukses Makmur Tbk
(Foods)(a) 536,000 633,348
- --------------------------------------------------------------
1,027,842
- --------------------------------------------------------------
NEW ZEALAND-1.21%
Sky Network Television Ltd.
(Broadcasting-Television, Radio,
Cable)(a) 283,000 430,698
- --------------------------------------------------------------
Sky Network Television Ltd.-ADR
(Broadcasting-Television, Radio &
Cable)(a) 5,400 81,675
- --------------------------------------------------------------
512,373
- --------------------------------------------------------------
PHILIPPINES-6.48%
Bank of the Philippine Islands
(Banks-Major Regional) 209,110 552,760
- --------------------------------------------------------------
Equitable PCI Bank (Banks-Major
Regional) 131,350 232,565
- --------------------------------------------------------------
International Container Terminal
Services, Inc. (Air Freight)(a) 2,873,000 275,837
- --------------------------------------------------------------
Jollibee Foods Corp. (Restaurants),
Wts., expiring 03/24/03(b) 1,605,000 610,380
- --------------------------------------------------------------
Manila Electric Co. (Electric Power) 181,300 497,332
- --------------------------------------------------------------
SM Prime Holdings, Inc. (Land
Development) 3,304,900 585,157
- --------------------------------------------------------------
2,754,031
- --------------------------------------------------------------
SINGAPORE-15.43%
Allgreen Properties Ltd.
(Homebuilding)(a) 690,000 585,133
- --------------------------------------------------------------
Datacraft Asia Ltd. (Communications
Equipment) 155,600 715,760
- --------------------------------------------------------------
DBS Group Holdings Ltd. (Banks-Money
Center) 63,127 713,771
- --------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 231,000 627,967
- --------------------------------------------------------------
Keppel Land Ltd. (Land Development) 419,000 592,199
- --------------------------------------------------------------
Natsteel Electronics Ltd.
(Computers-Hardware) 105,500 412,432
- --------------------------------------------------------------
NatSteel Ltd. (Iron & Steel) 396,000 662,104
- --------------------------------------------------------------
OMNI Industries Ltd.
(Electronics-Component Distributors) 625,000 593,913
- --------------------------------------------------------------
Singapore Airlines Ltd. (Airlines) 57,000 603,356
- --------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing-Newspapers) 38,000 651,350
- --------------------------------------------------------------
Venture Manufacturing Ltd.
(Electronics-Component Distributors) 45,000 400,553
- --------------------------------------------------------------
6,558,538
- --------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 193
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SOUTH KOREA-10.20%
Kookmin Bank (Banks-Major Regional) 52,000 $ 810,671
- --------------------------------------------------------------
Kookmin Bank (Banks-Major Regional),
Rts., expiring 11/04/99 5,223 31,787
- --------------------------------------------------------------
Korea Electric Power Corp.-ADR
(Electric Companies) 37,400 589,050
- --------------------------------------------------------------
Korea Telecom Corp.-ADR
(Telephone)(a) 21,904 772,116
- --------------------------------------------------------------
L.G. Chemical Ltd.
(Chemicals-Specialty) 23,800 720,250
- --------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 19,800 660,825
- --------------------------------------------------------------
Samsung Electronics
(Electronics-Component
Distributors) 4,500 750,313
- --------------------------------------------------------------
4,335,012
- --------------------------------------------------------------
TAIWAN-6.16%
Compal Electronics, Inc.
(Computers-Hardware) 193,550 649,845
- --------------------------------------------------------------
Far Eastern Textile Ltd.
(Chemicals-Diversified) 581,010 794,951
- --------------------------------------------------------------
Hon Hai Precision Industry Co. Ltd.
(Electronics-Component
Distributors)(a) 112,000 766,204
- --------------------------------------------------------------
Ritek Inc. (Consumer-Jewelry,
Novelties & Gifts)(a) 62,000 406,557
- --------------------------------------------------------------
2,617,557
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
THAILAND-4.47%
Advanced Info Service Public Co.
Ltd. (Telephone)(a) 56,000 $ 652,765
- --------------------------------------------------------------
PTT Exploration and Production
Public Co. Ltd. (Oil &
Gas-Exploration & Production) 77,000 562,466
- --------------------------------------------------------------
Siam Commercial Bank PLC, 5.25% Pfd.
(Banks-Regional)(a) 605,000 685,630
- --------------------------------------------------------------
1,900,861
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$31,193,627) 38,377,524
- --------------------------------------------------------------
MONEY MARKET FUNDS-7.33%
STIC Liquid Assets Portfolio(c) 1,557,615 1,557,615
- --------------------------------------------------------------
STIC Prime Portfolio(c) 1,557,615 1,557,615
- --------------------------------------------------------------
Total Money Market Funds (Cost
$3,115,230) 3,115,230
- --------------------------------------------------------------
TOTAL INVESTMENTS-97.64% 41,492,754
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.36% 1,004,345
- --------------------------------------------------------------
NET ASSETS-100.00% $42,497,099
- --------------------------------------------------------------
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Pfd. - Preferred
Rts. - Rights
Wts. - Warrants
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(c)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-3
<PAGE> 194
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$34,308,857) $41,492,754
- -----------------------------------------------------------
Foreign currencies, at value (cost $1,066,940) 1,062,360
- -----------------------------------------------------------
Receivables for:
Investments sold 451,237
- -----------------------------------------------------------
Capital stock sold 434,594
- -----------------------------------------------------------
Dividends and interest 10,643
- -----------------------------------------------------------
Investment for deferred compensation plan 7,658
- -----------------------------------------------------------
Other assets 26,195
- -----------------------------------------------------------
Total assets 43,485,441
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 754,485
- -----------------------------------------------------------
Capital stock reacquired 101,659
- -----------------------------------------------------------
Deferred compensation 7,658
- -----------------------------------------------------------
Accrued advisory fees 48,172
- -----------------------------------------------------------
Accrued administrative services fees 4,247
- -----------------------------------------------------------
Accrued directors' fees 716
- -----------------------------------------------------------
Accrued distribution fees 22,071
- -----------------------------------------------------------
Accrued transfer agent fees 15,101
- -----------------------------------------------------------
Accrued operating expenses 34,233
- -----------------------------------------------------------
Total liabilities 988,342
- -----------------------------------------------------------
Net assets applicable to shares outstanding $42,497,099
- -----------------------------------------------------------
NET ASSETS:
Class A $25,419,567
- -----------------------------------------------------------
Class B $12,069,543
- -----------------------------------------------------------
Class C $ 5,007,989
- -----------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,361,340
- -----------------------------------------------------------
Class B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 1,133,253
- -----------------------------------------------------------
Class C:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 471,104
- -----------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 10.76
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $10.76
divided by 94.50%) $ 11.39
- -----------------------------------------------------------
Class B:
Net asset value and offering price per share $ 10.65
- -----------------------------------------------------------
Class C:
Net asset value and offering price per share $ 10.63
- -----------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $99,541 foreign withholding
tax) $ 302,917
- -----------------------------------------------------------
Interest 65,008
- -----------------------------------------------------------
Total investment income 367,925
- -----------------------------------------------------------
EXPENSES:
Advisory fees 246,413
- -----------------------------------------------------------
Administrative services fees 74,007
- -----------------------------------------------------------
Custodian fees 62,478
- -----------------------------------------------------------
Directors' fees 7,780
- -----------------------------------------------------------
Distribution fees-Class A 61,006
- -----------------------------------------------------------
Distribution fees-Class B 64,087
- -----------------------------------------------------------
Distribution fees-Class C 20,619
- -----------------------------------------------------------
Transfer agent fees-Class A 61,457
- -----------------------------------------------------------
Transfer agent fees-Class B 36,637
- -----------------------------------------------------------
Transfer agent fees-Class C 11,787
- -----------------------------------------------------------
Registration and filing fees 61,091
- -----------------------------------------------------------
Other 71,023
- -----------------------------------------------------------
Total expenses 778,385
- -----------------------------------------------------------
Less: Fees waived and reimbursed by advisor (207,130)
- -----------------------------------------------------------
Expenses paid indirectly (853)
- -----------------------------------------------------------
Net expenses 570,402
- -----------------------------------------------------------
Net investment income (loss) (202,477)
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 935,968
- -----------------------------------------------------------
Foreign currencies (9,786)
- -----------------------------------------------------------
926,182
- -----------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 6,895,666
- -----------------------------------------------------------
Foreign currencies 1,173
- -----------------------------------------------------------
6,896,839
- -----------------------------------------------------------
Net gain from investment securities and
foreign currencies 7,823,021
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $7,620,544
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-4
<PAGE> 195
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 1999 and the period November 3, 1997 (date
operations commenced)
through October 31, 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (202,477) $ 30,244
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 926,182 (1,687,076)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 6,896,839 288,673
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 7,620,544 (1,368,159)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (43,024) --
- -----------------------------------------------------------------------------------------
Class B (3,910) --
- -----------------------------------------------------------------------------------------
Class C (898) --
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 12,107,278 8,755,042
- -----------------------------------------------------------------------------------------
Class B 7,604,535 3,340,169
- -----------------------------------------------------------------------------------------
Class C 3,780,454 705,068
- -----------------------------------------------------------------------------------------
Net increase in net assets 31,064,979 11,432,120
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 11,432,120 --
- -----------------------------------------------------------------------------------------
End of period $42,497,099 $11,432,120
- -----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $36,066,914 $12,781,818
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (7,889) 45,035
- -----------------------------------------------------------------------------------------
Undistributed net realized (loss) from investment
securities and foreign currencies (747,438) (1,683,406)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 7,185,512 288,673
- -----------------------------------------------------------------------------------------
$42,497,099 $11,432,120
- -----------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Asian Growth Fund (the "Fund") is a series portfolio of AIM International
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six separate
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be 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 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 the 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 its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are
FS-5
<PAGE> 196
valued at the last bid price in the case of equity securities and in the case
of debt obligations, the mean between the last bid and asked prices.
Securities for which market quotations are not readily available or are
questionable are valued at fair value as determined in good faith by or under
the supervision of the Company's officers in a manner specifically authorized
by the Board of Directors of the Company. Short-term obligations having 60
days or less to maturity are valued at amortized cost which approximates
market value. For purposes of determining net asset value per share, futures
and options contracts generally will be valued 15 minutes after the close of
trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
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. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales 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 the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$197,385, undistributed net realized gains increased by $9,786 and paid-in
capital decreased $207,171 as a result of differing book/tax treatment of
foreign currency transactions and net operating loss reclassifications 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 reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $350,698 as of October 31, 1999 which may be carried forward
to offset future taxable gains, if any, which expires, if not previously
utilized, in the year 2006.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. 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.
F. Expenses -- Distribution expenses 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 investment advisory agreement,
the Fund pays an advisory fee to AIM 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. Under the terms of a
sub-advisory agreement between AIM and INVESCO Global Asset Management Limited
("IGAM"), AIM pays IGAM a fee at an annual rate of 0.20% of the first $500
million of the Fund's average daily net assets, plus 0.175% of the Fund's
average daily net assets in excess of $500 million. During the year ended
October 31, 1999, AIM waived fees of $207,130.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $74,007 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $64,165 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under
FS-6
<PAGE> 197
the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class
C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.35% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C 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 Class 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 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, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $61,006, $64,087 and $20,619,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $43,007 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. 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, 1999,
AIM Distributors received $240,319 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, 1999, the Fund paid legal fees of $3,540 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$339 and $514, respectively, under expense offset arrangements. The effect of
the above arrangements resulted in a reduction of the Fund's total expenses of
$853 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. 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, 1999 was
$53,369,215 and $31,161,990, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 7,981,120
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,193,961)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 6,787,159
- ---------------------------------------------------------
Cost of investments for tax purposes is $34,705,595.
</TABLE>
FS-7
<PAGE> 198
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 7,418,728 $ 73,010,343 2,150,231 $ 17,226,640
- -------------------------------------------------------------------------------------------------------------------
Class B 1,590,485 15,858,499 516,509 4,177,886
- -------------------------------------------------------------------------------------------------------------------
Class C 1,155,486 11,034,900 268,694 2,084,897
- -------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 5,228 39,837 -- --
- -------------------------------------------------------------------------------------------------------------------
Class B 494 3,756 -- --
- -------------------------------------------------------------------------------------------------------------------
Class C 118 897 -- --
- -------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (6,066,544) (60,942,902) (1,146,303) (8,471,598)
- -------------------------------------------------------------------------------------------------------------------
Class B (854,740) (8,257,720) (119,495) (837,717)
- -------------------------------------------------------------------------------------------------------------------
Class C (774,549) (7,255,343) (178,645) (1,379,829)
- -------------------------------------------------------------------------------------------------------------------
2,474,706 $ 23,492,267 1,490,991 $ 12,800,279
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B and
Class C capital stock outstanding for the year ended October 31, 1999 and the
period November 3, 1997 (date operations commenced) through October 31, 1998.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------- ------------------- -------------------
1999(A) 1998 1999(A) 1998 1999(A) 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.69 $ 10.00 $ 7.63 $ 10.00 $ 7.61 $ 10.00
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Income from investment operations:
Net investment income (loss) (0.03) 0.05 (0.13) (0.01) (0.13) (0.01)
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Net gains (losses) on securities (both realized and
unrealized) 3.14 (2.36) 3.16 (2.36) 3.16 (2.38)
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Total from investment operations 3.11 (2.31) 3.03 (2.37) 3.03 (2.39)
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Less distributions:
Dividends from net investment income (0.04) -- (0.01) -- (0.01) --
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Net asset value, end of period $10.76 $ 7.69 $10.65 $ 7.63 $10.63 $ 7.61
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Total return(b) 40.66% (23.10)% 39.76% (23.70)% 39.86% (23.90)%
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,420 $ 7,716 $12,070 $ 3,030 $5,008 $ 686
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Ratio of expenses to average net assets(c) 1.92%(d) 1.92%(e) 2.79%(d) 2.80%(e) 2.79%(d) 2.80%(e)
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Ratio of net investment income (loss) to average net
assets(f) (0.50)%(d) 0.70%(e) (1.37)%(d) (0.18)%(e) (1.37)%(d) (0.18)%(e)
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
Portfolio turnover rate 142% 79% 142% 79% 142% 79%
- ---------------------------------------------------------- ------- ------- ------- ------- ------ -------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct 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
2.72% and 4.88% (annualized) for Class A for 1999-1998, 3.59% (annualized)
and 5.75% (annualized) for Class B for 1999-1998; and 3.59% (annualized) and
5.75% (annualized) for Class C for 1999-1998.
(d) Ratios are based on average net assets of $17,430,236, $6,408,688 and
$2,061,860 for Class A, 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 (1.30)% and (2.27)% (annualized) for Class A for
1999-1998, (2.17)% and (3.15)% (annualized) for Class B for 1999-1998,
(2.17)% and (3.15)% (annualized) for Class C for 1999-1998.
FS-8
<PAGE> 199
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM International Funds, Inc.
We have audited the accompanying statement of assets and
liabilities of the AIM European Development Fund (a
portfolio of AIM International Funds, Inc.), including the
schedule of investments, as of October 31, 1999, and the
related statement of operations for the year then ended,
and the statement of changes in net assets and financial
highlights for the year then ended and the period November
3, 1997 (date operations commenced) through October 31,
1998. 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, 1999, 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 the AIM
European Development Fund as of October 31, 1999, the
results of its operations for the year then ended, changes
in its net assets and financial highlights for the year
then ended and the period November 3, 1997 (date operations
commenced) through October 31, 1998, in conformity with
generally accepted accounting principles.
KPMG LLP
December 3, 1999
Houston, Texas
FS-9
<PAGE> 200
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
STOCKS & OTHER EQUITY
INTERESTS-93.25%
DENMARK-2.36%
Damgaard A/S (Computers-Software &
Services)(a) 15,000 $ 795,964
- --------------------------------------------------------------
De Sammensluttede Vognmaend A/S
(Truckers) 9,400 904,498
- --------------------------------------------------------------
Vestas Wind Systems A/S
(Manufacturing- Specialized)(a) 19,090 2,498,726
- --------------------------------------------------------------
4,199,188
- --------------------------------------------------------------
FINLAND-5.57%
JOT Automation Group Oyj
(Manufacturing- Specialized)(a) 627,000 3,232,213
- --------------------------------------------------------------
Nokia Oyj (Communications Equipment) 38,680 4,427,837
- --------------------------------------------------------------
Perlos Oyj
(Electronics-Semiconductors)(a) 81,400 1,335,935
- --------------------------------------------------------------
Sonera Oyj
(Telecommunications-Cellular/
Wireless) 30,850 926,611
- --------------------------------------------------------------
9,922,596
- --------------------------------------------------------------
FRANCE-21.34%
Accor S.A. (Lodging-Hotels) 4,200 945,583
- --------------------------------------------------------------
Alstom (Engineering & Construction) 8,350 252,997
- --------------------------------------------------------------
ALTEN (Computers-Software &
Services)(a) 20,000 2,186,160
- --------------------------------------------------------------
Altran Technologies, S.A.
(Services-Commercial & Consumer) 7,300 2,502,901
- --------------------------------------------------------------
AXA (Insurance-Multi-Line) 16,750 2,363,088
- --------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 20,100 1,765,708
- --------------------------------------------------------------
Bertrand Faure S.A. (Auto Parts &
Equipment)(a) 13,000 785,040
- --------------------------------------------------------------
BRICE (Retail-Specialty-Apparel) 12,200 798,338
- --------------------------------------------------------------
Carrefour Supermarche S.A.
(Retail-Food Chains) 25,900 4,795,665
- --------------------------------------------------------------
Galeries Lafayette
(Retail-Department Stores) 9,600 1,413,955
- --------------------------------------------------------------
GFI Informatique (Computers-Software
& Services) 24,400 2,181,952
- --------------------------------------------------------------
Havas Advertising S.A.
(Services-Advertising/ Marketing) 9,900 2,775,676
- --------------------------------------------------------------
M6 Metropole Television
(Broadcasting- Television, Radio &
Cable) 9,400 2,571,210
- --------------------------------------------------------------
NRJ S.A. (Broadcasting-Television,
Radio & Cable)(a) 6,600 2,055,285
- --------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 9,600 1,831,072
- --------------------------------------------------------------
PSA Peugeot Citreon (Automobiles) 4,400 844,796
- --------------------------------------------------------------
Renault S.A. (Automobiles) 15,000 776,413
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Societe Television Francaise 1
(Broadcasting- Television, Radio &
Cable) 7,900 $ 2,476,736
- --------------------------------------------------------------
Total Fina S.A.-Class B (Oil &
Gas-Refining & Marketing) 23,438 3,168,609
- --------------------------------------------------------------
Unilog S.A. (Services-Commercial &
Consumer)(a) 22,200 1,522,779
- --------------------------------------------------------------
38,013,963
- --------------------------------------------------------------
GERMANY-9.26%
Beate Uhse A.G. (Entertainment)(a) 79,650 1,441,287
- --------------------------------------------------------------
Deutsche Bank A.G. (Banks-Major
Regional)(a) 24,000 1,721,995
- --------------------------------------------------------------
EM.TV & Merchandising A.G.
(Broadcasting- Television, Radio &
Cable) 17,500 865,311
- --------------------------------------------------------------
EM.TV & Merchandising A.G.-Rts.,
expiring 11/12/99
(Broadcasting-Television, Radio &
Cable) 17,500 184
- --------------------------------------------------------------
GPK A.G. (Services-Commercial &
Consumer)(a) 50,000 1,412,377
- --------------------------------------------------------------
Kamps A.G. (Retail-Food Chains) 46,000 2,574,577
- --------------------------------------------------------------
Mannesmann A.G.
(Machinery-Diversified) 17,400 2,736,698
- --------------------------------------------------------------
Porsche A.G.-Pfd. (Automobiles) 925 2,520,449
- --------------------------------------------------------------
PrimaCom A.G.
(Broadcasting-Television, Radio, &
Cable)(a) 23,500 1,169,406
- --------------------------------------------------------------
Steag Hamatech A.G. (Manufacturing-
Specialized)(a) 48,200 1,196,728
- --------------------------------------------------------------
Zapf Creation A.G. (Leisure
Time-Products)(a) 25,000 861,366
- --------------------------------------------------------------
16,500,378
- --------------------------------------------------------------
GREECE-1.87%
M.J. Maillis S.A. (Containers &
Packaging-Paper) 64,500 2,437,219
- --------------------------------------------------------------
Panafon Hellenic Telecom S.A.-GDR
(Telecommunications-Cellular/Wireless)
(Acquired 11/20/98-04/23/99; Cost
$765,458)(a)(b) 71,200 890,000
- --------------------------------------------------------------
3,327,219
- --------------------------------------------------------------
IRELAND-2.59%
Bank of Ireland (Banks-Major
Regional) 106,000 828,574
- --------------------------------------------------------------
CRH PLC (Construction-Cement &
Aggregates) 79,500 1,501,302
- --------------------------------------------------------------
Esat Telecom Group PLC-ADR
(Telecommunications-Long
Distance)(a) 35,000 1,566,250
- --------------------------------------------------------------
Ryanair Holdings PLC-ADR
(Airlines)(a) 17,600 726,000
- --------------------------------------------------------------
4,622,126
- --------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 201
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ISRAEL-0.45%
Partner Communications Co. Ltd.-ADR
(Telecommunications-Cellular/Wireless)(a) 51,500 $ 811,125
- --------------------------------------------------------------
ITALY-0.43%
Credito Italiano S.p.A. (Banks-Major
Regional) 163,600 765,913
- --------------------------------------------------------------
NETHERLANDS-6.92%
Aegon N.V. (Insurance Brokers) 18,400 1,698,640
- --------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 27,000 1,042,476
- --------------------------------------------------------------
Detron Group N.V. (Communications
Equipment)(a) 56,000 706,978
- --------------------------------------------------------------
Draka Holding N.V. (Metal
Fabricators)(a) 7,065 254,571
- --------------------------------------------------------------
Equant N.V.
(Computers-Networking)(a) 10,200 992,609
- --------------------------------------------------------------
Exact Holding N.V.
(Computers-Software & Services)(a) 30,000 1,129,902
- --------------------------------------------------------------
GTI Holding N.V. (Engineering &
Construction) 68,200 1,381,184
- --------------------------------------------------------------
Gucci Group N.V.-ADR-New York Shares
(Textiles) 20,900 1,687,675
- --------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. (Electrical
Equipment) 18,020 1,848,399
- --------------------------------------------------------------
Koninklijke Ahold N.V. (Retail-Food
Chains) 51,600 1,585,145
- --------------------------------------------------------------
12,327,579
- --------------------------------------------------------------
NORWAY-0.53%
Tomra Systems A.S.A. (Manufacturing-
Specialized) 24,500 936,365
- --------------------------------------------------------------
SPAIN-4.30%
Banco Popular Espanol S.A.
(Banks-Major Regional) 12,400 834,907
- --------------------------------------------------------------
Cortefiel S.A. (Retail-Department
Stores) 77,000 2,011,425
- --------------------------------------------------------------
NH Hoteles, S.A. (Investment
Management)(a) 206,600 2,336,550
- --------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 150,900 2,482,918
- --------------------------------------------------------------
7,665,800
- --------------------------------------------------------------
SWEDEN-4.67%
Europolitan Holdings A.B.
(Telecommunications-
Cellular/Wireless) 97,800 1,123,796
- --------------------------------------------------------------
Framtidsfabriken A.B.
(Computers-Software & Services)(a) 21,000 845,209
- --------------------------------------------------------------
Hennes & Mauritz A.B.-Class B
(Retail- Specialty-Apparel) 56,000 1,487,841
- --------------------------------------------------------------
Modern Times Group MTG A.B.-Class B
(Broadcasting-Television, Radio &
Cable)(a) 99,000 3,202,091
- --------------------------------------------------------------
NetCom A.B.
(Telecommunications-Cellular/
Wireless)(a) 20,800 863,716
- --------------------------------------------------------------
Teligent A.B. (Communications
Equipment)(a) 82,000 792,680
- --------------------------------------------------------------
8,315,333
- --------------------------------------------------------------
SWITZERLAND-5.57%
Compagnie Financiere Richemont A.G.
(Tobacco) 905 1,728,445
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWITZERLAND-(CONTINUED)
Fantastic Corp.-Ctfs.
(Computers-Software & Services)(a) 20,000 $ 1,409,747
- --------------------------------------------------------------
Kudelski S.A. (Electronics-Component
Distributors)(a) 310 1,289,041
- --------------------------------------------------------------
PubliGroupe S.A.
(Services-Advertising/ Marketing) 2,800 2,053,125
- --------------------------------------------------------------
Straumann A.G. (Health
Care-Specialized Services)(a) 4,210 1,863,809
- --------------------------------------------------------------
Zurich Allied A.G.
(Insurance-Multi-Line) 2,800 1,584,836
- --------------------------------------------------------------
9,929,003
- --------------------------------------------------------------
UNITED STATES-0.88%
UnitedGlobalCom Inc.-Class A
(Broadcasting- Television, Radio &
Cable)(a) 18,000 1,566,000
- --------------------------------------------------------------
UNITED KINGDOM-26.51%
Aggreko PLC (Services-Facilities &
Environmental) 292,000 1,466,636
- --------------------------------------------------------------
AMEC PLC (Construction-Cement &
Aggregates) 250,000 881,649
- --------------------------------------------------------------
ARM Holdings PLC (Electronics-
Semiconductors)(a) 28,000 795,481
- --------------------------------------------------------------
Barclays PLC (Banks-Major Regional) 75,200 2,303,345
- --------------------------------------------------------------
BP Amoco PLC (Oil & Gas-Refining &
Marketing) 165,600 1,607,713
- --------------------------------------------------------------
British Sky Broadcasting Group PLC
(Broadcasting-Television, Radio &
Cable) 172,000 1,848,001
- --------------------------------------------------------------
British Telecommunications PLC
(Communications Equipment) 107,000 1,941,263
- --------------------------------------------------------------
Eidos PLC-ADR (Computers
Software/Services)(a) 43,500 3,036,844
- --------------------------------------------------------------
eircom PLC (Telecommunication-Long
Distance)(a) 353,000 1,472,497
- --------------------------------------------------------------
Granada Group PLC (Leisure
Time-Products) 115,800 915,760
- --------------------------------------------------------------
Hays PLC (Services-Commercial &
Consumer) 186,000 2,129,915
- --------------------------------------------------------------
Iceland Group PLC (Retail-Food
Chains) 171,000 813,904
- --------------------------------------------------------------
J.D. Wetherspoon PLC (Leisure
Time-Products) 150,000 843,423
- --------------------------------------------------------------
JJB Sports PLC (Retail-General
Merchandise) 125,000 939,192
- --------------------------------------------------------------
Kewill Systems PLC
(Computers-Software & Services)(a) 195,000 2,180,077
- --------------------------------------------------------------
Kingston Communication (Hull) PLC
(Telecommunications-Long
Distance)(a) 647,300 4,746,448
- --------------------------------------------------------------
Logica PLC (Computer Software &
Services) 95,500 1,460,993
- --------------------------------------------------------------
Matalan PLC (Retail-Discounters) 157,000 3,536,295
- --------------------------------------------------------------
Nestor Healthcare Group PLC
(Services- Commercial & Consumer) 177,000 1,732,211
- --------------------------------------------------------------
Orange PLC (Telephone)(a) 142,000 3,541,622
- --------------------------------------------------------------
Pace Micro Technology PLC
(Communications Equipment) 524,000 2,354,072
- --------------------------------------------------------------
</TABLE>
FS-11
<PAGE> 202
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Sage Group PLC (The)
(Computers-Software & Services) 43,850 $ 2,250,047
- --------------------------------------------------------------
Shell Transport & Trading Co.
(Oil-International Integrated) 218,000 1,672,000
- --------------------------------------------------------------
Vodafone AirTouch PLC
(Telecommunications-
Cellular/Wireless) 595,000 2,768,418
- --------------------------------------------------------------
47,237,806
- --------------------------------------------------------------
Total Stocks & Other Equity
Interests (Cost $128,083,371) 166,140,394
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-6.01%
STIC Liquid Assets Portfolio(c) 5,351,762 $ 5,351,762
- --------------------------------------------------------------
STIC Prime Portfolio(c) 5,351,762 5,351,762
- --------------------------------------------------------------
Total Money Market Funds (Cost
$10,703,524) 10,703,524
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.26% 176,843,918
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.74% 1,316,649
- --------------------------------------------------------------
NET ASSETS-100.00% $178,160,567
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Ctfs. - Certificates
Pfd. - Preferred
Rts. - Rights
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 this security has been determined in accordance
with procedures established by the Board of Directors. The market value of
this security at 10/31/99 was $890,000 which represented 0.50% of the Fund's
net assets.
(c) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-12
<PAGE> 203
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$138,786,895) $176,843,918
- -----------------------------------------------------------
Foreign currencies, at value (cost
$1,645,977) 1,648,250
- -----------------------------------------------------------
Receivables for:
Investments sold 1,975,354
- -----------------------------------------------------------
Capital stock sold 550,867
- -----------------------------------------------------------
Dividends and interest 304,844
- -----------------------------------------------------------
Investment for deferred compensation plan 8,111
- -----------------------------------------------------------
Other assets 54,409
- -----------------------------------------------------------
Total assets 181,385,753
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,425,603
- -----------------------------------------------------------
Capital stock reacquired 431,336
- -----------------------------------------------------------
Deferred compensation 8,111
- -----------------------------------------------------------
Accrued advisory fees 138,587
- -----------------------------------------------------------
Accrued administrative services fees 4,110
- -----------------------------------------------------------
Accrued directors' fees 2,852
- -----------------------------------------------------------
Accrued distribution fees 101,932
- -----------------------------------------------------------
Accrued transfer agent fees 45,941
- -----------------------------------------------------------
Accrued operating expenses 66,714
- -----------------------------------------------------------
Total liabilities 3,225,186
- -----------------------------------------------------------
Net assets applicable to shares outstanding $178,160,567
- -----------------------------------------------------------
NET ASSETS:
Class A $ 99,148,218
- -----------------------------------------------------------
Class B $ 67,074,079
- -----------------------------------------------------------
Class C $ 11,938,270
- -----------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 6,039,960
- -----------------------------------------------------------
Class B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 4,140,854
- -----------------------------------------------------------
Class C:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 736,702
- -----------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 16.42
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $16.42 divided
by 94.50%) $ 17.38
- -----------------------------------------------------------
Class B:
Net asset value and offering price per
share $ 16.20
- -----------------------------------------------------------
Class C:
Net asset value and offering price per
share $ 16.21
- -----------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $260,349 foreign withholding
tax) $ 1,625,502
- ------------------------------------------------------------
Interest 396,652
- ------------------------------------------------------------
Total investment income 2,022,154
- ------------------------------------------------------------
EXPENSES:
Advisory fees 1,607,698
- ------------------------------------------------------------
Administrative services fees 75,332
- ------------------------------------------------------------
Custodian fees 237,707
- ------------------------------------------------------------
Directors' fees 10,764
- ------------------------------------------------------------
Distribution fees-Class A 332,066
- ------------------------------------------------------------
Distribution fees-Class B 625,126
- ------------------------------------------------------------
Distribution fees-Class C 118,428
- ------------------------------------------------------------
Transfer agent fees-Class A 261,250
- ------------------------------------------------------------
Transfer agent fees-Class B 230,660
- ------------------------------------------------------------
Transfer agent fees-Class C 43,698
- ------------------------------------------------------------
Other 201,279
- ------------------------------------------------------------
Total expenses 3,744,008
- ------------------------------------------------------------
Less: Expenses paid indirectly (2,843)
- ------------------------------------------------------------
Net expenses 3,741,165
- ------------------------------------------------------------
Net investment income (loss) (1,719,011)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND
FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (5,917,105)
- ------------------------------------------------------------
Foreign currencies 122,677
- ------------------------------------------------------------
(5,794,428)
- ------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 43,122,813
- ------------------------------------------------------------
Foreign currencies 3,938
- ------------------------------------------------------------
43,126,751
- ------------------------------------------------------------
Net gain from investment securities and
foreign
currencies 37,332,323
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 35,613,312
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-13
<PAGE> 204
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 1999 and the period November 3, 1997 (date
operations commenced)
through October 31, 1998
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,719,011) $ (481,507)
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (5,794,428) (6,005,211)
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 43,126,751 (5,080,217)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 35,613,312 (11,566,935)
- ----------------------------------------------------------------------------------------------
Distribution from investment income -- Class A (80,229) --
- ----------------------------------------------------------------------------------------------
Share transactions -- net:
Class A 2,449,615 82,027,769
- ----------------------------------------------------------------------------------------------
Class B 3,977,973 55,436,905
- ----------------------------------------------------------------------------------------------
Class C (246,455) 10,548,612
- ----------------------------------------------------------------------------------------------
Net increase in net assets 41,714,216 136,446,351
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 136,446,351 --
- ----------------------------------------------------------------------------------------------
End of period $ 178,160,567 $ 136,446,351
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 152,753,815 $ 147,994,681
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (9,989) 19,453
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (12,629,793) (6,487,566)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies 38,046,534 (5,080,217)
- ----------------------------------------------------------------------------------------------
$ 178,160,567 $ 136,446,351
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-14
<PAGE> 205
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM European Development 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. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be 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 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 the 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 its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
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. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales 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 the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$1,769,798, undistributed net realized gains decreased by $347,799 and
paid-in capital decreased by $1,421,999 as a result of differing book/tax
treatment of foreign currency transactions and net operating
reclassifications 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 reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $12,347,306 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2007.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such
FS-15
<PAGE> 206
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
E. 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.
F. Expenses -- Distribution expenses 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 investment advisory agreement,
the Fund pays an advisory fee to AIM 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. Under the terms of a
sub-advisory agreement between AIM and INVESCO Global Asset Management Limited
("IGAM"), AIM pays IGAM a fee at an annual rate of 0.20% of the first $500
million of the Fund's average daily net assets, plus 0.175% of the Fund's
average daily net assets in excess of $500 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $75,332 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $336,086 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund ,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C 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 Class 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 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,
1999, the Class A, Class B and Class C shares paid AIM Distributors $332,066,
$625,126 and $118,428, respectively, as compensation under the Plans.
AIM Distributors received commissions of $143,067 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. 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, 1999,
AIM Distributors received $50,219 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, 1999, the Fund paid legal fees of $3,014 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$1,989 and $854, respectively, under expense offset arrangements. The effect of
the above arrangements resulted in a reduction of the Fund's total expenses of
$2,843 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
FS-16
<PAGE> 207
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, 1999 was
$201,019,098 and $192,916,235, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $40,275,044
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,500,509)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $37,774,535
=========================================================================
</TABLE>
Cost of investments for tax purposes is $139,069,383.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 7,243,646 $103,416,688 11,368,616 $156,555,432
- -------------------------------------------------------------------------------------------------------------------
Class B 3,045,028 43,081,822 4,734,982 66,433,513
- -------------------------------------------------------------------------------------------------------------------
Class C 2,148,542 29,835,245 1,685,991 25,251,599
- -------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 5,672 76,739 -- --
- -------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (7,125,444) (101,043,812) (5,452,530) (74,527,663)
- -------------------------------------------------------------------------------------------------------------------
Class B (2,797,703) (39,103,849) (841,453) (10,996,608)
- -------------------------------------------------------------------------------------------------------------------
Class C (2,160,106) (30,081,700) (937,724) (12,702,987)
- -------------------------------------------------------------------------------------------------------------------
359,635 $ 6,181,133 10,557,882 $150,013,286
===================================================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B and
Class C capital stock outstanding during the year ended October 31, 1999 and the
period November 3, 1997 (date operations commenced) through October 31, 1998.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------------- ----------------------- -----------------------
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.96 $ 10.00 $ 12.87 $ 10.00 $ 12.88 $10.00
- ------------------------------------------------ ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income (loss) (0.11) (0.08)(a) (0.22) (0.18)(a) (0.23) (0.18)(a)
- ------------------------------------------------ ------- ------- ------- ------- ------- ------
Net gains on securities (both realized and
unrealized) 3.58 3.04 3.55 3.05 3.56 3.06
- ------------------------------------------------ ------- ------- ------- ------- ------- ------
Total from investment operations 3.47 2.96 3.33 2.87 3.33 2.88
- ------------------------------------------------ ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income (0.01) -- -- -- -- --
- ------------------------------------------------ ------- ------- ------- ------- ------- ------
Net asset value, end of period $ 16.42 $ 12.96 $ 16.20 $ 12.87 $ 16.21 $12.88
================================================ ======= ======= ======= ======= ======= ======
Total return(b) 26.81% 29.60% 25.87% 28.70% 25.85% 28.80%
================================================ ======= ======= ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $99,148 $76,686 $67,074 $50,121 $11,938 $9,639
================================================ ======= ======= ======= ======= ======= ======
Ratio of expenses to average net assets 1.88%(c) 1.98%(d) 2.63%(c) 2.72%(d) 2.63%(c) 2.72%(d)
================================================ ======= ======= ======= ======= ======= ======
Ratio of net investment income (loss) to average
net assets (0.69)%(c) (0.58)%(e) (1.44)%(c) (1.32)%(e) (1.44)%(c) (1.32)%(e)
================================================ ======= ======= ======= ======= ======= ======
Portfolio turnover rate 122% 93% 122% 93% 122% 93%
================================================ ======= ======= ======= ======= ======= ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average net assets of $94,875,922, $62,512,593 and
$11,842,849, for Class A, Class B and Class C shares, respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.15% (annualized), 2.89% (annualized) and 2.89% (annualized) for Class A,
Class B and Class C, respectively, for 1998.
(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 (0.75)% (annualized), (1.49)% (annualized) and (1.49)%
(annualized) for Class A, Class B and Class C, respectively, for 1998.
FS-17
<PAGE> 208
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Global Aggressive Growth Fund (a
portfolio of AIM International Funds, Inc.), including the
schedule of investments, as of October 31, 1999, and the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended and the financial
highlights for each of the years in the 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, 1999, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Global
Aggressive Growth Fund as of October 31, 1999, 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 LLP
December 3, 1999
Houston, Texas
FS-18
<PAGE> 209
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-33.56%
BROADCASTING (TELEVISION, RADIO &
CABLE)-1.41%
Hispanic Broadcasting Corp.(a) 144,100 $ 11,672,100
- ---------------------------------------------------------------
UnitedGlobalCom Inc.-Class A(a) 157,100 13,667,700
- ---------------------------------------------------------------
25,339,800
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-10.15%
ANTEC Corp.(a) 125,000 6,062,500
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 150,000 17,025,000
- ---------------------------------------------------------------
Dycom Industries, Inc.(a) 210,800 6,864,175
- ---------------------------------------------------------------
Harmonic, Inc.(a) 500,000 29,687,500
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 734,994 122,652,124
- ---------------------------------------------------------------
182,291,299
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.49%
Emulex Corp.(a) 171,200 26,696,500
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.92%
Network Appliance, Inc.(a) 82,300 6,090,200
- ---------------------------------------------------------------
QLogic Corp.(a) 100,000 10,412,500
- ---------------------------------------------------------------
16,502,700
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-1.86%
Citrix Systems, Inc.(a) 231,600 14,851,350
- ---------------------------------------------------------------
Concord Communications, Inc.(a) 88,400 4,591,275
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 129,100 13,926,662
- ---------------------------------------------------------------
33,369,287
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.34%
Patterson Dental Co.(a) 133,550 6,018,097
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.39%
Cree Research, Inc.(a) 150,000 6,403,125
- ---------------------------------------------------------------
Sanmina Corp.(a) 136,700 12,311,544
- ---------------------------------------------------------------
Sawtek, Inc.(a) 150,000 6,150,000
- ---------------------------------------------------------------
24,864,669
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.22%
Power-One, Inc.(a) 200,000 4,000,000
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.38%
Alpha Industries, Inc.(a) 125,000 6,906,250
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-4.68%
ANADIGICS, Inc.(a) 200,000 7,700,000
- ---------------------------------------------------------------
Dallas Semiconductor Corp. 115,000 6,770,625
- ---------------------------------------------------------------
Micrel, Inc.(a) 195,800 10,646,625
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 225,000 14,990,625
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 154,700 14,580,475
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
SDL, Inc.(a) 130,000 $ 16,030,625
- ---------------------------------------------------------------
Semtech Corp.(a) 200,000 7,662,500
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 122,000 5,596,750
- ---------------------------------------------------------------
83,978,225
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.76%
Alpharma, Inc.-Class A 250,000 8,796,875
- ---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 160,100 4,883,050
- ---------------------------------------------------------------
13,679,925
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.18%
Province Healthcare Co.(a) 201,800 3,254,025
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.22%
Express Scripts, Inc.-Class A(a) 80,000 3,930,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.13%
ResMed, Inc.(a) 80,000 2,770,000
- ---------------------------------------------------------------
Sybron International Corp.(a) 344,300 8,198,644
- ---------------------------------------------------------------
VISX, Inc.(a) 150,000 9,384,375
- ---------------------------------------------------------------
20,353,019
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.18%
Advance Paradigm, Inc.(a) 75,000 3,196,875
- ---------------------------------------------------------------
RESTAURANTS-0.95%
CEC Entertainment, Inc.(a) 450,000 14,428,125
- ---------------------------------------------------------------
Papa John's International,
Inc.(a) 68,200 2,548,975
- ---------------------------------------------------------------
16,977,100
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.18%
CDW Computer Centers, Inc.(a) 343,000 21,180,250
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.82%
Footstar, Inc.(a) 94,500 3,307,500
- ---------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 217,300 9,479,712
- ---------------------------------------------------------------
Tuesday Morning Corp.(a) 86,300 1,984,900
- ---------------------------------------------------------------
14,772,112
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-2.26%
American Eagle Outfitters,
Inc.(a) 130,000 5,565,625
- ---------------------------------------------------------------
AnnTaylor Stores Corp.(a) 128,900 5,486,306
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 410,000 8,994,375
- ---------------------------------------------------------------
Pacific Sunwear of California(a) 414,750 12,520,266
- ---------------------------------------------------------------
</TABLE>
FS-19
<PAGE> 210
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-(CONTINUED)
Too Inc.(a) 500,000 $ 8,000,000
- ---------------------------------------------------------------
40,566,572
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.83%
Insight Enterprises, Inc.(a) 400,000 14,950,000
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.54%
Affiliated Computer Services,
Inc.-Class A(a) 149,100 5,665,800
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 599,407 16,221,452
- ---------------------------------------------------------------
NOVA Corp.(a) 221,500 5,759,000
- ---------------------------------------------------------------
27,646,252
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.36%
Powerwave Technologies, Inc.(a) 100,000 6,506,250
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.31%
Quicksilver, Inc.(a) 400,000 5,650,000
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $240,178,870) 602,629,207
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-62.47%
AUSTRALIA-1.34%
Brambles Industries Ltd. (Air
Freight) 235,000 6,610,877
- ---------------------------------------------------------------
ERG Ltd. (Electrical Equipment) 3,098,000 12,213,004
- ---------------------------------------------------------------
TABCORP Holdings Ltd. (Leisure
Time Products) 828,000 5,250,121
- ---------------------------------------------------------------
24,074,002
- ---------------------------------------------------------------
BELGIUM-0.34%
UCB S.A.
(Manufacturing-Diversified) 165,000 6,153,703
- ---------------------------------------------------------------
BRAZIL-1.53%
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar-Pfd. GDR (Retail-Food
Chains) 277,419 6,068,541
- ---------------------------------------------------------------
Embratel Participacoes S.A.-ADR
(Telephone) 285,200 3,671,950
- ---------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 70,200 11,166,547
- ---------------------------------------------------------------
Tele Centro Sul Participacoes
S.A.-ADR (Telephone) 63,700 3,806,075
- ---------------------------------------------------------------
Telesp Participacoes S.A.-ADR
(Telephone) 170,800 2,764,825
- ---------------------------------------------------------------
27,477,938
- ---------------------------------------------------------------
CANADA-4.10%
Biovail Corp. International
(Health Care- Drugs-Generic &
Other)(a) 114,300 6,307,931
- ---------------------------------------------------------------
Celestica Inc. (Electronics-
Semiconductors)(a) 134,000 7,453,750
- ---------------------------------------------------------------
Cinar Films, Inc.-Class B
(Entertainment)(a) 126,000 2,189,250
- ---------------------------------------------------------------
C-MAC Industries, Inc.
(Electronics- Component
Distributors)(a) 309,200 9,807,539
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Dorel Industries Inc. (Household
Furniture & Appliances)(a) 151,400 $ 2,699,348
- ---------------------------------------------------------------
Four Seasons Hotels, Inc.
(Lodging-Hotels) 185,900 7,749,706
- ---------------------------------------------------------------
Intertape Polymer Group, Inc.
(Chemicals- Specialty) 100,000 2,699,857
- ---------------------------------------------------------------
Onex Corp. (Investments) 138,000 2,601,032
- ---------------------------------------------------------------
Research in Motion Ltd.
(Communications Equipment) 500,000 15,502,955
- ---------------------------------------------------------------
Rogers Cantel Mobile
Communications Inc.
(Telecommunications-
Cellular/Wireless)(a) 95,200 2,715,751
- ---------------------------------------------------------------
Sears Canada, Inc.
(Retail-Department Stores) 323,000 7,130,001
- ---------------------------------------------------------------
Shaw Communications, Inc.
(Broadcasting- Television,
Radio & Cable) 223,000 6,778,000
- ---------------------------------------------------------------
73,635,120
- ---------------------------------------------------------------
CHILE-0.07%
Madeco S.A.-ADR (Metal
Fabricators) 129,000 1,273,875
- ---------------------------------------------------------------
DENMARK-0.67%
Vestas Wind Systems A/S
(Manufacturing- Specialized)(a) 92,500 12,107,501
- ---------------------------------------------------------------
FINLAND-0.98%
JOT Automation Group Oyj
(Manufacturing- Specialized)(a) 1,553,000 8,005,785
- ---------------------------------------------------------------
Sonera Oyj
(Telecommunications-Cellular/
Wireless) 320,000 9,611,529
- ---------------------------------------------------------------
17,617,314
- ---------------------------------------------------------------
FRANCE-4.89%
Altran Technologies, S.A.
(Services- Commercial &
Consumer) 54,900 18,823,184
- ---------------------------------------------------------------
Bertrand Faure S.A. (Auto Parts &
Equipment)(a) 100,000 6,038,767
- ---------------------------------------------------------------
Business Objects S.A.-ADR
(Computers- Software &
Services)(a) 100,000 7,200,000
- ---------------------------------------------------------------
Galeries Lafayette
(Retail-Department Stores) 70,000 10,310,090
- ---------------------------------------------------------------
GFI Informatique
(Computers-Software & Services) 67,000 5,991,425
- ---------------------------------------------------------------
Havas Advertising S.A.
(Services-Advertising/
Marketing) 44,000 12,336,338
- ---------------------------------------------------------------
M6 Metropole Television
(Broadcasting- Television,
Radio & Cable) 22,000 6,017,726
- ---------------------------------------------------------------
NRJ S.A.
(Broadcasting-Television, Radio
& Cable)(a) 11,000 3,425,475
- ---------------------------------------------------------------
Societe Television Francaise 1
(Broadcasting-Television, Radio
& Cable) 56,500 17,713,366
- ---------------------------------------------------------------
87,856,371
- ---------------------------------------------------------------
GERMANY-2.18%
EM.TV & Merchandising A.G.
(Broadcasting- Television,
Radio & Cable) 170,000 8,405,879
- ---------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 211
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY-(CONTINUED)
EM.TV & Merchandising A.G.-Rts.,
expiring 11/12/99
(Broadcasting-Television, Radio &
Cable) 170,000 $ 1,788
- ---------------------------------------------------------------
Kamps A.G. (Retail-Food Chains) 70,000 3,917,834
- ---------------------------------------------------------------
Marschollek, Lautenschlaeger and
Partner A.G.
(Services-Commercial &
Consumer) 30,000 6,328,081
- ---------------------------------------------------------------
Porsche A.G.-Pfd. (Automobiles) 6,270 17,084,556
- ---------------------------------------------------------------
PrimaCom A.G.
(Broadcasting-Television,
Radio, & Cable)(a) 67,000 3,334,052
- ---------------------------------------------------------------
39,072,190
- ---------------------------------------------------------------
GREECE-1.05%
M.J. Maillis S.A. (Containers &
Packaging- Paper) 210,000 7,935,132
- ---------------------------------------------------------------
Panafon Hellenic Telecom S.A.-GDR
(Telecommunications-Cellular/Wireless)
(Acquired 11/20/98-04/23/99;
Cost $3,591,542)(a)(b) 341,200 4,265,000
- ---------------------------------------------------------------
Titan Cement (Construction-Cement
& Aggregates) 60,000 6,652,436
- ---------------------------------------------------------------
18,852,568
- ---------------------------------------------------------------
HONG KONG-2.99%
China Telecom Ltd.
(Telecommunications-
Cellular/Wireless)(a) 3,428,000 11,716,301
- ---------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 12,224,000 8,654,883
- ---------------------------------------------------------------
Dao Heng Bank Group Ltd. (Banks-
Regional)(a) 3,047,000 13,846,256
- ---------------------------------------------------------------
Esprit Holdings Ltd.
(Retail-Stores) 3,506,000 3,294,731
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Retail-Food Chains) 1,615,000 16,216,321
- ---------------------------------------------------------------
53,728,492
- ---------------------------------------------------------------
HUNGARY-0.51%
Magyar Tavkozlesi Rt-ADR
(Telecommunications-Long
Distance) 320,000 9,220,000
- ---------------------------------------------------------------
INDONESIA-0.55%
Gulf Indonesia Resources Ltd.
(Oil- International
Integrated)(a) 606,600 4,814,887
- ---------------------------------------------------------------
PT Indofood Sukses Makmur Tbk
(Foods)(a) 4,247,000 5,018,337
- ---------------------------------------------------------------
9,833,224
- ---------------------------------------------------------------
IRELAND-0.96%
CRH PLC (Construction-Cement &
Aggregates) 490,000 9,253,306
- ---------------------------------------------------------------
Esat Telecom Group PLC-ADR
(Telecommunications-Long
Distance)(a) 110,500 4,944,875
- ---------------------------------------------------------------
Ryanair Holdings PLC-ADR
(Airlines)(a) 72,200 2,978,250
- ---------------------------------------------------------------
17,176,431
- ---------------------------------------------------------------
ISRAEL-0.79%
Orbotech, Ltd.
(Computers-Software &
Services)(a) 138,000 10,781,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ISRAEL-(CONTINUED)
Partner Communications Co.
Ltd.-ADR
(Telecommunications-
Cellular/Wireless)(a) 215,000 $ 3,386,250
- ---------------------------------------------------------------
14,167,500
- ---------------------------------------------------------------
ITALY-1.47%
Banca Popolare di Brescia (Banks-
Regional) 314,000 13,296,334
- ---------------------------------------------------------------
Gruppo Editoriale L'Espresso
(Publishing) 600,000 13,034,899
- ---------------------------------------------------------------
26,331,233
- ---------------------------------------------------------------
JAPAN-9.55%
Bellsystem 24, Inc.
(Services-Commercial &
Consumer) 42,000 40,285,838
- ---------------------------------------------------------------
Circle K Japan Co. Ltd.
(Retail-Food Chains) 244,200 9,790,955
- ---------------------------------------------------------------
Hokuto Corp. (Agricultural
Products) 240,750 14,201,837
- ---------------------------------------------------------------
Orix Corp.
(Financial-Diversified) 27,600 3,706,297
- ---------------------------------------------------------------
Sanix Inc. (Services-Commercial &
Consumer) 108,600 10,104,264
- ---------------------------------------------------------------
Shohkoh Fund & Co. Ltd.
(Financial- Diversified) 20,600 12,606,398
- ---------------------------------------------------------------
Softbank Corp.
(Computers-Software &
Services)(a) 68,000 28,242,291
- ---------------------------------------------------------------
Trend Micro Inc.
(Computers-Software &
Services)(a) 115,650 22,962,496
- ---------------------------------------------------------------
Yahoo Japan Corp.
(Computers-Software &
Services)(a) 5,600 29,542,948
- ---------------------------------------------------------------
171,443,324
- ---------------------------------------------------------------
MEXICO-6.02%
Cemex S.A. de C.V.-ADR
(Construction- Cement &
Aggregates)(a) 259,400 5,836,500
- ---------------------------------------------------------------
Cifra S.A. de C.V.
(Retail-General Merchandise)(a) 5,300,000 8,102,964
- ---------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR
(Beverages- Non-Alcoholic) 566,300 7,857,412
- ---------------------------------------------------------------
Controladora Comercial Mexicana
S.A. de C.V. (Retail-Department
Stores)(c) 5,079,000 4,204,768
- ---------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento S.A.
(Entertainment)(a) 3,288,144 8,891,497
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-ADR
(Beverages-Non-Alcoholic) 446,880 14,663,250
- ---------------------------------------------------------------
Grupo Financiero Banamex Accival,
S.A. de C.V. (Banacci)
(Financial-Diversified)(a) 2,368,000 5,923,079
- ---------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series
C (Beverages-Alcoholic) 3,161,000 7,725,793
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 323,000 13,727,500
- ---------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de
C.V.- Class A (Paper & Forest
Products) 2,014,000 6,451,503
- ---------------------------------------------------------------
Organizacion Soriana S.A. de C.V.
(Retail- Department Stores) 1,776,000 6,575,725
- ---------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Telephone) 142,000 12,141,000
- ---------------------------------------------------------------
</TABLE>
FS-21
<PAGE> 212
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO-(CONTINUED)
Tubos de Acero de Mexico S.A.-ADR
(Oil & Gas-Drilling & Equipment) 541,800 $ 5,925,937
- ---------------------------------------------------------------
108,026,928
- ---------------------------------------------------------------
NETHERLANDS-2.43%
CMG PLC (Computers-Software &
Services) 267,000 10,308,933
- ---------------------------------------------------------------
Draka Holding N.V. (Metal
Fabricators)(a) 21,573 777,334
- ---------------------------------------------------------------
Getronics N.V.
(Computers-Software & Services) 300,000 14,960,151
- ---------------------------------------------------------------
Gucci Group N.V.-New York Shares
(Textiles) 118,000 9,528,500
- ---------------------------------------------------------------
Nutreco Holding N.V.
(Agricultural Products) 235,000 8,035,032
- ---------------------------------------------------------------
43,609,950
- ---------------------------------------------------------------
NORWAY-1.45%
Merkantildata A.S.A
(Services-Commercial &
Consumer) 872,000 7,387,477
- ---------------------------------------------------------------
Tomra Systems A.S.A.
(Manufacturing- Specialized) 486,000 18,574,431
- ---------------------------------------------------------------
25,961,908
- ---------------------------------------------------------------
PHILIPPINES-0.35%
International Container Terminal
Services, Inc. (Air Freight)(a) 6,112,500 586,861
- ---------------------------------------------------------------
SM Prime Holdings, Inc. (Land
Development) 32,000,000 5,665,835
- ---------------------------------------------------------------
6,252,696
- ---------------------------------------------------------------
SINGAPORE-1.98%
Datacraft Asia Ltd.
(Communications Equipment) 834,500 3,838,700
- ---------------------------------------------------------------
DBS Group Holdings Ltd.
(Banks-Money Center)(a) 640,813 7,245,615
- ---------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 1,939,000 5,271,113
- ---------------------------------------------------------------
Keppel Land Ltd. (Land
Development) 3,413,000 4,823,811
- ---------------------------------------------------------------
NatSteel Ltd. (Iron & Steel) 3,946,000 6,597,630
- ---------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing- Newspapers) 459,000 7,867,625
- ---------------------------------------------------------------
35,644,494
- ---------------------------------------------------------------
SOUTH AFRICA-0.41%
Dimension Data Holdings Ltd.
(Computers- Software &
Services)(a) 1,519,563 7,372,076
- ---------------------------------------------------------------
SOUTH KOREA-2.80%
Hyundai Motor Co. Ltd.
(Automobiles)(a) 213,000 3,746,811
- ---------------------------------------------------------------
Korea Electric Power Corp.-ADR
(Electric Companies) 486,600 7,663,950
- ---------------------------------------------------------------
Korea Telecom Corp.-ADR
(Telephone)(a) 274,500 9,676,125
- ---------------------------------------------------------------
L.G. Chemical Ltd.
(Chemicals-Specialty) 357,000 10,803,752
- ---------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 301,900 10,075,913
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SOUTH KOREA-(CONTINUED)
Samsung Electronics
(Electronics-Component
Distributors) 50,000 $ 8,336,807
- ---------------------------------------------------------------
50,303,358
- ---------------------------------------------------------------
SPAIN-1.27%
Cortefiel S.A. (Retail-Department
Stores) 155,000 4,048,972
- ---------------------------------------------------------------
Mapfre Vida S.A.
(Insurance-Life/Health) 158,000 4,125,677
- ---------------------------------------------------------------
NH Hotels S.A. (Investment
Management)(a) 1,287,000 14,555,375
- ---------------------------------------------------------------
22,730,024
- ---------------------------------------------------------------
SWEDEN-2.15%
Assa Abloy A.B.-Class B (Metal
Fabricators) 920,000 10,235,895
- ---------------------------------------------------------------
Europolitan Holdings A.B.
(Telecommunications-
Cellular/Wireless) 484,200 5,563,825
- ---------------------------------------------------------------
Framtidsfabriken A.B.
(Computers-Software &
Services)(a) 86,000 3,461,333
- ---------------------------------------------------------------
Modern Times Group A.B.-Class B
(Broadcasting-Television, Radio
& Cable)(a) 469,000 15,169,504
- ---------------------------------------------------------------
NetCom A.B.
(Telecommunications-Cellular/
Wireless)(a) 102,600 4,260,445
- ---------------------------------------------------------------
38,691,002
- ---------------------------------------------------------------
SWITZERLAND-0.73%
Kudelski S.A.
(Electronics-Component
Distributors)(a) 1,220 5,072,998
- ---------------------------------------------------------------
PubliGroupe S.A.
(Services-Advertising/
Marketing) 11,000 8,065,849
- ---------------------------------------------------------------
13,138,847
- ---------------------------------------------------------------
TAIWAN-1.45%
Compal Electronics, Inc.
(Computers- Hardware) 2,801,000 9,404,366
- ---------------------------------------------------------------
Far Eastern Textile Ltd.
(Chemicals- Diversified) 5,641,040 7,718,195
- ---------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co.
(Electronics-Semiconductors)(a) 2,021,000 8,983,638
- ---------------------------------------------------------------
26,106,199
- ---------------------------------------------------------------
THAILAND-0.70%
Advanced Info Service Public Co.
Ltd. (Telephone)(a) 569,000 6,632,561
- ---------------------------------------------------------------
Siam Commercial Bank PLC, 5.25%
Pfd. (Banks-Regional)(a) 5,189,000 5,880,553
- ---------------------------------------------------------------
12,513,114
- ---------------------------------------------------------------
UNITED KINGDOM-6.76%
Aggreko PLC (Services-Facilities
& Environmental) 1,000,000 5,022,726
- ---------------------------------------------------------------
AMEC PLC (Construction-Cement &
Aggregates) 678,000 2,391,031
- ---------------------------------------------------------------
ARM Holdings PLC (Electronics-
Semiconductors)(a) 112,000 3,181,925
- ---------------------------------------------------------------
</TABLE>
FS-22
<PAGE> 213
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Avis Europe PLC
(Services-Commercial &
Consumer)(c) 1,484,550 $ 6,345,947
- ---------------------------------------------------------------
Cattles PLC (Consumer Finance) 1,020,000 4,779,399
- ---------------------------------------------------------------
Compass Group PLC
(Services-Commercial &
Consumer) 670,000 7,182,086
- ---------------------------------------------------------------
Eidos PLC-ADR (Computer Software/
Services)(a) 216,000 15,079,500
- ---------------------------------------------------------------
Iceland Group PLC (Retail-Food
Chains) 862,000 4,102,835
- ---------------------------------------------------------------
J.D. Wetherspoon PLC (Leisure
Time- Products) 1,000,000 5,622,822
- ---------------------------------------------------------------
Logica PLC (Computer Software &
Services) 775,000 11,856,222
- ---------------------------------------------------------------
Matalan PLC (Retail-Discounters) 160,000 3,603,867
- ---------------------------------------------------------------
Mayflower Corp. PLC (The) (Auto
Parts & Equipment) 2,240,000 7,733,846
- ---------------------------------------------------------------
Nestor Healthcare Group PLC
(Services- Commercial &
Consumer) 300,000 2,935,952
- ---------------------------------------------------------------
Pace Micro Technology PLC
(Communications Equipment) 1,360,000 6,109,804
- ---------------------------------------------------------------
Provident Financial PLC (Consumer
Finance) 964,912 10,779,668
- ---------------------------------------------------------------
Sage Group PLC (The)
(Computers-Software & Services) 369,150 18,941,958
- ---------------------------------------------------------------
Stagecoach Holdings PLC
(Shipping) 1,980,000 5,631,700
- ---------------------------------------------------------------
121,301,288
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$778,989,784) 1,121,672,670
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES-0.27%
MANUFACTURING (DIVERSIFIED)-0.27%
Shanghai Industrial Investment
Trust Co. (United Kingdom),
Conv. Gtd. Bonds, 1.00%,
02/24/03 (Acquired 03/05/98-
03/09/98; Cost $5,218,750)(b) $ 5,000,000 $ 4,762,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-4.34%
STIC Liquid Assets Portfolio(d) 38,938,805 38,938,805
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 38,938,805 38,938,805
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $77,877,610) 77,877,610
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.64% 1,806,941,987
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.64%) (11,446,930)
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,795,495,057
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Rts. - Rights
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of this security has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 10/31/99 was $9,027,500, which
represented 0.50% of the Fund's net assets.
(c) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(d) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-23
<PAGE> 214
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,102,265,014)) $ 1,806,941,987
- ------------------------------------------------------------
Foreign currencies, at value (cost
$12,540,812)) 12,603,459
- ------------------------------------------------------------
Receivables for:
Investments sold 2,533,659
- ------------------------------------------------------------
Capital stock sold 1,489,698
- ------------------------------------------------------------
Dividends and interest 1,340,732
- ------------------------------------------------------------
Foreign exchange contracts 11,893
- ------------------------------------------------------------
Investment for deferred compensation plan 36,447
- ------------------------------------------------------------
Other assets 46,712
- ------------------------------------------------------------
Total assets 1,825,004,587
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 22,853,421
- ------------------------------------------------------------
Capital stock reacquired 2,845,059
- ------------------------------------------------------------
Deferred compensation 36,447
- ------------------------------------------------------------
Foreign exchange contracts 1,869
- ------------------------------------------------------------
Accrued advisory fees 1,282,152
- ------------------------------------------------------------
Accrued administrative services fees 12,779
- ------------------------------------------------------------
Accrued directors' fees 4,950
- ------------------------------------------------------------
Accrued distribution fees 1,364,737
- ------------------------------------------------------------
Accrued transfer agent fees 671,017
- ------------------------------------------------------------
Accrued operating expenses 437,099
- ------------------------------------------------------------
Total liabilities 29,509,530
- ------------------------------------------------------------
Net assets applicable to shares outstanding $ 1,795,495,057
============================================================
NET ASSETS:
Class A $ 852,198,373
============================================================
Class B $ 926,971,942
============================================================
Class C $ 16,324,742
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 38,827,789
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 43,427,805
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 764,714
============================================================
Class A:
Net asset value and redemption price per
share $ 21.95
- ------------------------------------------------------------
Offering price per share:
(Net asset value $21.95 / 95.25%) $ 23.04
============================================================
Class B:
Net asset value and offering price per
share $ 21.35
============================================================
Class C:
Net asset value and offering price per
share $ 21.35
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,233,796 foreign
withholding tax) $ 9,907,460
- -------------------------------------------------------------
Interest 5,073,170
- -------------------------------------------------------------
Total investment income 14,980,630
- -------------------------------------------------------------
EXPENSES:
Advisory fees 15,416,368
- -------------------------------------------------------------
Administrative services fees 127,117
- -------------------------------------------------------------
Custodian fees 1,206,826
- -------------------------------------------------------------
Directors' fees 25,466
- -------------------------------------------------------------
Distribution fees-Class A 4,209,929
- -------------------------------------------------------------
Distribution fees-Class B 8,987,826
- -------------------------------------------------------------
Distribution fees-Class C 140,985
- -------------------------------------------------------------
Transfer agent fees-Class A 2,565,991
- -------------------------------------------------------------
Transfer agent fees-Class B 3,267,402
- -------------------------------------------------------------
Transfer agent fees-Class C 64,107
- -------------------------------------------------------------
Other 830,046
- -------------------------------------------------------------
Total expenses 36,842,063
- -------------------------------------------------------------
Less: Expenses paid indirectly (61,092)
- -------------------------------------------------------------
Net expenses 36,780,971
- -------------------------------------------------------------
Net investment income (loss) (21,800,341)
- -------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 197,468,014
- -------------------------------------------------------------
Foreign currencies (1,896,989)
- -------------------------------------------------------------
195,571,025
- -------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 394,282,624
- -------------------------------------------------------------
Foreign currencies 8,398
- -------------------------------------------------------------
394,291,022
- -------------------------------------------------------------
Net gain from investment securities and
foreign
currencies 589,862,047
- -------------------------------------------------------------
Net increase in net assets resulting from
operations $ 568,061,706
=============================================================
</TABLE>
See Notes to Financial Statements.
FS-24
<PAGE> 215
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (21,800,341) $ (19,250,738)
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 195,571,025 8,287,562
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 394,291,022 (163,765,028)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 568,061,706 (174,728,204)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (361,902,444) (230,924,075)
- ----------------------------------------------------------------------------------------------
Class B (307,272,112) (195,608,768)
- ----------------------------------------------------------------------------------------------
Class C (1,457,883) 10,146,858
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (102,570,733) (591,114,189)
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,898,065,790 2,489,179,979
- ----------------------------------------------------------------------------------------------
End of period $1,795,495,057 $1,898,065,790
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 992,683,210 $1,684,292,210
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (13,357,764) (10,598,077)
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies 111,551,104 (85,955,828)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 704,618,507 310,327,485
- ----------------------------------------------------------------------------------------------
$1,795,495,057 $1,898,065,790
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-25
<PAGE> 216
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Aggressive Growth Fund (the "Fund") is a series portfolio of AIM
International Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of six
separate portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be 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 above-average 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 the 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 its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
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. Securities Transactions, Investment Income and Distributions
-- Securities transactions are accounted for on a trade date basis. Realized
gains or losses on sales 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 the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$19,040,654, undistributed net realized gains increased by $1,935,907 and
paid-in capital decreased by $20,976,561 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications 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 reclassification discussed above.
C. 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.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
FS-26
<PAGE> 217
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. 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.
F. Bond Premiums -- It is the policy of the Fund not to amortize
market premiums on bonds for financial reporting purposes.
G. Expenses -- Distribution expenses 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 investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.90% of the first $1
billion of the Fund's average daily net assets, plus 0.85% of the Fund's average
daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $127,117 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $3,367,288 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C 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 Class 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 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,
1999, the Class A, Class B and Class C shares paid AIM Distributors $4,209,929,
$8,987,826 and $140,985, respectively, as compensation under the Plans.
AIM Distributors received commissions of $267,534 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. 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, 1999,
AIM Distributors received $101,594 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, 1999, the Fund paid legal fees of $6,959 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$21,196 and $39,896, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $61,092 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
FS-27
<PAGE> 218
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, 1999 was
$980,253,634 and $1,451,494,862, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $727,202,713
- --------------------------------------------------------------------------
Aggregate unrealized appreciation (depreciation) of
investment securities (35,792,955)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $691,409,758
==========================================================================
</TABLE>
Cost of investments for tax purposes is $1,115,532,229.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 44,392,973 $ 788,784,876 98,887,924 $ 1,735,509,689
- ---------------------------------------------------------------------------------------------------------------------
Class B 2,884,425 50,807,802 8,273,209 143,682,325
- ---------------------------------------------------------------------------------------------------------------------
Class C 812,924 14,207,396 839,541 14,593,832
- ---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Reacquired:
Class A (64,640,003) (1,150,687,320) (111,697,312) (1,966,433,764)
- ---------------------------------------------------------------------------------------------------------------------
Class B (20,494,580) (358,079,914) (20,304,373) (339,291,093)
- ---------------------------------------------------------------------------------------------------------------------
Class C (897,630) (15,665,279) (265,144) (4,446,974)
- ---------------------------------------------------------------------------------------------------------------------
(37,941,891) $ (670,632,439) (24,266,155) $ (416,385,985)
=====================================================================================================================
</TABLE>
FS-28
<PAGE> 219
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and Class B
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999 and for a share of Class C capital stock outstanding during
each of the years in the two-year period ended October 31, 1999 and the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.87 $ 17.28 $ 15.76 $ 13.09 $ 10.22
- ------------------------------------------------------------ -------- -------- ---------- -------- --------
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.10)(a) (0.15)(a) (0.09)(a) (0.09)(a)
- ------------------------------------------------------------ -------- -------- ---------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 6.25 (1.31) 1.67 2.81 2.96
- ------------------------------------------------------------ -------- -------- ---------- -------- --------
Total from investment operations 6.08 (1.41) 1.52 2.72 2.87
- ------------------------------------------------------------ -------- -------- ---------- -------- --------
Less distributions:
Distributions from net realized gains -- -- -- (0.05) --
- ------------------------------------------------------------ -------- -------- ---------- -------- --------
Net asset value, end of period $ 21.95 $ 15.87 $ 17.28 $ 15.76 $ 13.09
============================================================ ======== ======== ========== ======== ========
Total return(b) 38.31% (8.16)% 9.65% 20.83% 28.08%
============================================================ ======== ======== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $852,198 $937,587 $1,242,505 $919,319 $186,029
============================================================ ======== ======== ========== ======== ========
Ratio of expenses to average net assets 1.80%(c) 1.75% 1.75% 1.83% 2.11%
============================================================ ======== ======== ========== ======== ========
Ratio of net investment income (loss) to average net assets (0.95)%(c) (0.55)% (0.88)% (0.62)% (0.68)%
============================================================ ======== ======== ========== ======== ========
Portfolio turnover rate 60% 50% 57% 44% 64%
============================================================ ======== ======== ========== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average net assets of $841,985,823.
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------- -----------------------------
1999 1998 1997 1996 1995 1999 1998 1997
-------- -------- ---------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.52 $ 17.00 $ 15.58 $ 13.02 $ 10.21 $ 15.52 $ 17.00 $ 18.39
- ------------------------------------- -------- -------- ---------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.27)(a) (0.19)(a) (0.24)(a) (0.17)(a) (0.14)(a) (0.27)(a) (0.19)(a) (0.04)(a)
- ------------------------------------- -------- -------- ---------- -------- -------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 6.10 (1.29) 1.66 2.78 2.95 6.10 (1.29) (1.35)
- ------------------------------------- -------- -------- ---------- -------- -------- ------- ------- -------
Total from investment
operations 5.83 (1.48) 1.42 2.61 2.81 5.83 (1.48) (1.39)
- ------------------------------------- -------- -------- ---------- -------- -------- ------- ------- -------
Less distributions:
Distributions from net realized
gains -- -- -- (0.05) -- -- -- --
- ------------------------------------- -------- -------- ---------- -------- -------- ------- ------- -------
Net asset value, end of period $ 21.35 $ 15.52 $ 17.00 $ 15.58 $ 13.02 $ 21.35 $ 15.52 $ 17.00
===================================== ======== ======== ========== ======== ======== ======= ======= =======
Total return(b) 37.56% (8.71)% 9.11% 20.09% 27.52% 37.56% (8.71)% (7.56)%
===================================== ======== ======== ========== ======== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $926,972 $947,293 $1,241,999 $807,215 $118,199 $16,325 $13,186 $ 4,676
===================================== ======== ======== ========== ======== ======== ======= ======= =======
Ratio of expenses to average net
assets 2.37%(c) 2.32% 2.30% 2.37% 2.62% 2.37%(c) 2.34% 2.36%(d)
===================================== ======== ======== ========== ======== ======== ======= ======= =======
Ratio of net investment income (loss)
to average net assets (1.52)%(c) (1.11)% (1.44)% (1.16)% (1.19)% (1.52)%(c) (1.13)% (1.50)%(d)
===================================== ======== ======== ========== ======== ======== ======= ======= =======
Portfolio turnover rate 60% 50% 57% 44% 64% 60% 50% 57%
===================================== ======== ======== ========== ======== ======== ======= ======= =======
</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) Ratios are based on average net assets of $898,782,589 and $14,098,451 for
Class B and Class C, respectively.
(d) Annualized.
FS-29
<PAGE> 220
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Global Growth Fund (a portfolio of AIM
International Funds, Inc.), including the schedule of
investments, as of October 31, 1999, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and the financial
highlights for each of the years in the 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, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Global
Growth Fund as of October 31, 1999, 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 LLP
December 3, 1999
Houston, Texas
FS-30
<PAGE> 221
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-37.74%
BANKS (MONEY CENTER)-0.54%
Chase Manhattan Corp. (The) 52,500 $ 4,587,187
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.63%
Adelphia Communications Corp.(a) 64,500 3,523,312
- --------------------------------------------------------------
AT&T Corp. - Liberty Media
Group-Class A(a) 107,300 4,258,469
- --------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 57,000 4,581,375
- --------------------------------------------------------------
Comcast Corp.-Class A 115,700 4,873,862
- --------------------------------------------------------------
Infinity Broadcasting Corp.-Class
A(a) 145,000 5,011,562
- --------------------------------------------------------------
22,248,580
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.85%
Comverse Technology, Inc.(a) 61,800 7,014,300
- --------------------------------------------------------------
General Instrument Corp.(a) 91,500 4,923,844
- --------------------------------------------------------------
JDS Uniphase Corp.(a) 47,192 7,875,165
- --------------------------------------------------------------
Motorola, Inc. 43,600 4,248,275
- --------------------------------------------------------------
24,061,584
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-1.48%
Dell Computer Corp.(a) 93,500 3,751,687
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 83,000 8,782,437
- --------------------------------------------------------------
12,534,124
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-1.11%
Cisco Systems, Inc.(a) 126,900 9,390,600
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.71%
EMC Corp.(a) 131,400 9,592,200
- --------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 62,000 4,839,875
- --------------------------------------------------------------
14,432,075
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-4.82%
America Online, Inc.(a)(b) 64,000 8,300,000
- --------------------------------------------------------------
Intuit, Inc.(a) 127,500 3,713,437
- --------------------------------------------------------------
Microsoft Corp.(a) 87,600 8,108,475
- --------------------------------------------------------------
Novell, Inc.(a) 188,500 3,781,781
- --------------------------------------------------------------
Unisys Corp.(a) 108,000 2,619,000
- --------------------------------------------------------------
VERITAS Software Corp.(a) 91,000 9,816,625
- --------------------------------------------------------------
Yahoo! Inc.(a) 24,500 4,387,031
- --------------------------------------------------------------
40,726,349
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.17%
Conexant Systems, Inc.(a) 53,000 4,948,875
- --------------------------------------------------------------
Sanmina Corp.(a) 55,000 4,953,438
- --------------------------------------------------------------
9,902,313
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-2.94%
Intel Corp. 116,000 8,982,750
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
LSI Logic Corp.(a) 71,000 $ 3,776,313
- --------------------------------------------------------------
Texas Instruments, Inc. 62,000 5,564,500
- --------------------------------------------------------------
Xilinx, Inc.(a) 82,500 6,486,563
- --------------------------------------------------------------
24,810,126
- --------------------------------------------------------------
ENTERTAINMENT-0.63%
Time Warner Inc. 76,500 5,331,094
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.57%
Fannie Mae 100,000 7,075,000
- --------------------------------------------------------------
Freddie Mac 115,000 6,217,188
- --------------------------------------------------------------
13,292,188
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.43%
American Home Products Corp. 125,500 6,557,375
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 113,600 8,725,900
- --------------------------------------------------------------
Johnson & Johnson 84,000 8,799,000
- --------------------------------------------------------------
Warner-Lambert Co. 62,000 4,948,375
- --------------------------------------------------------------
29,030,650
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.04%
Pfizer, Inc. 222,900 8,804,550
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.90%
Guidant Corp. 154,400 7,623,500
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.08%
American International Group, Inc. 88,750 9,135,703
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.57%
Morgan Stanley, Dean Witter,
Discover & Co. 44,000 4,853,750
- --------------------------------------------------------------
LODGING-HOTELS-0.48%
Carnival Corp. 90,600 4,031,700
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.80%
Tyco International Ltd. 170,000 6,789,375
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.56%
Home Depot, Inc. (The) 114,000 8,607,000
- --------------------------------------------------------------
Lowe's Companies, Inc. 82,900 4,559,500
- --------------------------------------------------------------
13,166,500
- --------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-0.49%
Best Buy Co., Inc.(a) 75,200 4,178,300
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.31%
Kroger Co. (The)(a) 125,000 2,601,563
- --------------------------------------------------------------
</TABLE>
FS-31
<PAGE> 222
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-2.15%
Costco Wholesale Corp.(a) 54,000 $ 4,336,875
- --------------------------------------------------------------
Dayton Hudson Corp. 68,900 4,452,663
- --------------------------------------------------------------
Wal-Mart Stores, Inc. 164,900 9,347,769
- --------------------------------------------------------------
18,137,307
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.72%
Gap, Inc. (The) 75,750 2,812,219
- --------------------------------------------------------------
Intimate Brands, Inc. 79,170 3,245,970
- --------------------------------------------------------------
6,058,189
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.63%
Outdoor Systems, Inc.(a) 125,000 5,296,875
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.74%
Fiserv, Inc.(a) 195,000 6,240,000
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.57%
Nextel Communications, Inc.-Class
A(a) 55,600 4,792,025
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.82%
MCI WorldCom, Inc.(a)(b) 80,400 6,899,325
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $227,333,243) 318,955,532
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-54.81%
AUSTRALIA-2.04%
AMP Ltd. (Insurance-Life/Health) 201,840 2,053,107
- --------------------------------------------------------------
Austar United Communications Ltd.
(Broadcasting-Television, Radio,
& Cable)(a) 514,100 1,672,516
- --------------------------------------------------------------
Brambles Industries Ltd. (Air
Freight) 102,000 2,869,402
- --------------------------------------------------------------
Cable & Wireless Optus Ltd.
(Telephone)(a) 701,800 1,607,165
- --------------------------------------------------------------
Foster's Brewing Group Ltd.
(Beverages- Alcoholic) 950,000 2,525,829
- --------------------------------------------------------------
TABCORP Holdings Ltd. (Leisure Time
Products) 361,000 2,289,002
- --------------------------------------------------------------
Telstra Corp. Ltd. (Telephone)(a) 1,315,900 4,222,245
- --------------------------------------------------------------
17,239,266
- --------------------------------------------------------------
BELGIUM-0.27%
UCB S.A.
(Manufacturing-Diversified) 60,300 2,248,899
- --------------------------------------------------------------
BRAZIL-0.96%
Embratel Participacoes S.A.-ADR
(Telephone) 134,100 1,726,538
- --------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 21,286 3,385,834
- --------------------------------------------------------------
Tele Centro Sul Participacoes
S.A.-ADR (Telephone) 28,900 1,726,775
- --------------------------------------------------------------
Telesp Participacoes S.A.-ADR
(Telephone) 79,200 1,282,050
- --------------------------------------------------------------
8,121,197
- --------------------------------------------------------------
CANADA-3.08%
BCE, Inc. (Telephone) 110,330 6,639,434
- --------------------------------------------------------------
Bombardier Inc. (Aerospace/Defense) 111,360 1,962,774
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Loblaw Co. Ltd. (Retail-Food
Chains) 43,000 $ 1,001,766
- --------------------------------------------------------------
Nortel Networks Corp.
(Communications Equipment) 218,092 13,508,073
- --------------------------------------------------------------
Toronto-Dominion Bank (The)
(Banks-Regional) 126,440 2,898,424
- --------------------------------------------------------------
26,010,471
- --------------------------------------------------------------
FINLAND-1.34%
Nokia Oyj (Communications
Equipment) 99,200 11,355,777
- --------------------------------------------------------------
FRANCE-6.33%
Accor S.A. (Lodging-Hotels) 13,000 2,926,803
- --------------------------------------------------------------
Alstom (Engineering & Construction) 23,650 716,572
- --------------------------------------------------------------
AXA (Insurance-Multi-Line) 63,080 8,899,320
- --------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 69,560 6,110,580
- --------------------------------------------------------------
Carrefour Supermarche S.A.
(Retail-Food Chains) 70,020 12,964,959
- --------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 25,320 4,829,452
- --------------------------------------------------------------
PSA Peugeot Citreon (Automobiles) 10,000 1,919,991
- --------------------------------------------------------------
Renault S.A. (Automobiles) 35,000 1,811,630
- --------------------------------------------------------------
Societe Television Francaise 1
(Broadcasting- Television, Radio
& Cable) 17,170 5,382,982
- --------------------------------------------------------------
Total Fina S.A.-Class B (Oil &
Gas-Refining & Marketing) 58,469 7,904,363
- --------------------------------------------------------------
53,466,652
- --------------------------------------------------------------
GERMANY-1.62%
Deutsche Bank A.G. (Banks-Major
Regional)(a) 22,000 1,578,496
- --------------------------------------------------------------
EM.TV & Merchandising A.G.
(Broadcasting- Television, Radio
& Cable) 50,000 2,472,318
- --------------------------------------------------------------
EM.TV & Merchandising A.G.-Rts.,
expiring 11/12/99
(Broadcasting-Television, Radio &
Cable) 50,000 526
- --------------------------------------------------------------
Mannesmann A.G.
(Machinery-Diversified) 61,060 9,603,607
- --------------------------------------------------------------
13,654,947
- --------------------------------------------------------------
HONG KONG-1.95%
China Telecom Ltd.
(Telecommunications-
Cellular/Wireless)(a) 1,496,000 5,113,065
- --------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 5,219,000 3,695,176
- --------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banks-Regional)(a) 828,000 3,762,619
- --------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail-Food
Chains) 392,000 3,936,098
- --------------------------------------------------------------
16,506,958
- --------------------------------------------------------------
INDONESIA-0.11%
Gulf Indonesia Resources Ltd. (Oil-
International Integrated)(a) 122,200 969,963
- --------------------------------------------------------------
IRELAND-0.58%
Bank of Ireland (Banks-Major
Regional) 180,484 1,410,795
- --------------------------------------------------------------
</TABLE>
FS-32
<PAGE> 223
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
IRELAND-(CONTINUED)
CRH PLC (Construction-Cement &
Aggregates) 186,000 $ 3,512,479
- --------------------------------------------------------------
4,923,274
- --------------------------------------------------------------
ITALY-0.91%
Banca Popolare di Brescia
(Banks-Regional) 143,000 6,055,337
- --------------------------------------------------------------
Credito Italiano S.p.A.
(Banks-Major Regional) 345,200 1,616,096
- --------------------------------------------------------------
7,671,433
- --------------------------------------------------------------
JAPAN-17.16%
Advantest Corp.
(Electronics-Instrumentation) 46,900 7,062,779
- --------------------------------------------------------------
Alps Electric Co., Ltd.
(Electronics-Component
Distributors) 207,000 4,010,743
- --------------------------------------------------------------
DDI Corp. (Telecommunications) 6,300 6,888,878
- --------------------------------------------------------------
Hirose Electric Co. Ltd.
(Electronics- Component
Distributors) 36,800 6,420,718
- --------------------------------------------------------------
Hoya Corp.
(Manufacturing-Specialized) 50,000 3,596,950
- --------------------------------------------------------------
Ibiden Co., Ltd.
(Electronics-Component
Distributors) 153,000 2,568,222
- --------------------------------------------------------------
Kirin Brewery Co., Ltd.
(Beverages-Alcoholic) 361,000 4,134,420
- --------------------------------------------------------------
Kyocera Corp.
(Electronics-Component
Distributors) 57,300 5,496,139
- --------------------------------------------------------------
Matsushita Communication Industrial
Co., Ltd. (Telephone) 63,000 10,587,118
- --------------------------------------------------------------
Murata Manufacturing Co., Ltd.
(Electronics- Component
Distributors) 65,000 8,354,515
- --------------------------------------------------------------
NEC Corp. (Computers-Hardware) 358,000 7,245,504
- --------------------------------------------------------------
Nippon Telegraph & Telephone Corp.
(Telecommunications-Long
Distance) 6,080 9,330,967
- --------------------------------------------------------------
NTT Data Corp. (Computers-Software
& Services) 3,180 5,032,852
- --------------------------------------------------------------
NTT Mobile Communications Network,
Inc.
(Telecommunications-Cellular/Wireless) 4,250 11,292,024
- --------------------------------------------------------------
Okuma Corp. (Hardware & Tools) 582,000 2,372,548
- --------------------------------------------------------------
Omron Corp. (Electronics-Component
Distributors) 13,000 271,833
- --------------------------------------------------------------
Orix Corp. (Financial-Diversified) 12,600 1,692,005
- --------------------------------------------------------------
Ricoh Co., Ltd. (Office Equipment &
Supplies) 328,000 5,351,571
- --------------------------------------------------------------
Rohm Co. Ltd.
(Electronics-Component
Distributors) 15,000 3,366,745
- --------------------------------------------------------------
Sanix Inc. (Services-Commercial &
Consumer) 51,100 4,754,400
- --------------------------------------------------------------
Sharp Corp. (Electrical Equipment) 185,000 2,945,662
- --------------------------------------------------------------
Sony Corp. (Electronics-Component
Distributors) 63,300 9,872,505
- --------------------------------------------------------------
Takeda Chemical Industries Ltd.
(Health Care- Drugs-Generic &
Other) 94,000 5,400,796
- --------------------------------------------------------------
Tokyo Electron Ltd. (Electronics-
Semiconductors) 44,000 3,654,885
- --------------------------------------------------------------
Trend Micro Inc.
(Computers-Software &
Services)(a) 52,650 10,453,743
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Ushio, Inc. (Electronics-Component
Distributors) 235,000 $ 2,891,996
- --------------------------------------------------------------
145,050,518
- --------------------------------------------------------------
MEXICO-2.42%
Cifra S.A. de C.V. (Retail-General
Merchandise)(a) 2,327,000 3,557,660
- --------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR
(Beverages- Non-Alcoholic) 174,900 2,426,738
- --------------------------------------------------------------
Fomento Economico Mexicano, S.A. de
C.V.-ADR
(Beverages-Non-Alcoholic) 111,590 3,661,547
- --------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series C
(Beverages-Alcoholic) 445,440 1,088,699
- --------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 105,200 4,471,000
- --------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de
C.V.-Class A (Paper & Forest
Products) 518,000 1,659,324
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Telephone) 42,500 3,633,750
- --------------------------------------------------------------
20,498,718
- --------------------------------------------------------------
NETHERLANDS-2.47%
Aegon N.V. (Insurance Brokers) 52,200 4,818,968
- --------------------------------------------------------------
Equant N.V.
(Computers-Networking)(a) 8,500 827,174
- --------------------------------------------------------------
Getronics N.V. (Computers-Software
& Services) 47,560 2,371,683
- --------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. (Electrical
Equipment) 46,560 4,775,886
- --------------------------------------------------------------
Koninklijke Ahold N.V. (Retail-Food
Chains) 152,200 4,675,563
- --------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit
(Publishing) 101,830 3,444,238
- --------------------------------------------------------------
20,913,512
- --------------------------------------------------------------
NEW ZEALAND-0.30%
Auckland International Airport Ltd.
(Airlines) 1,800,000 2,502,004
- --------------------------------------------------------------
SINGAPORE-1.44%
Allgreen Properties Ltd.
(Homebuilding)(a) 1,020,000 864,979
- --------------------------------------------------------------
DBS Group Holdings Ltd.
(Banks-Money Center)(a) 280,283 3,169,135
- --------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 782,600 2,127,475
- --------------------------------------------------------------
NatSteel Ltd. (Iron & Steel) 1,553,000 2,596,584
- --------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing- Newspapers) 200,000 3,428,159
- --------------------------------------------------------------
12,186,332
- --------------------------------------------------------------
SOUTH KOREA-1.35%
Korea Electric Power Corp.-ADR
(Electric Companies) 131,000 2,063,250
- --------------------------------------------------------------
Korea Telecom Corp.-ADR
(Telephone)(a) 122,200 4,307,550
- --------------------------------------------------------------
L.G. Chemical Ltd.
(Chemicals-Specialty) 167,000 5,053,856
- --------------------------------------------------------------
11,424,656
- --------------------------------------------------------------
</TABLE>
FS-33
<PAGE> 224
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN-1.04%
Banco Popular Espanol S.A.
(Banks-Major Regional) 26,000 $ 1,750,611
- --------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 430,380 7,081,499
- --------------------------------------------------------------
8,832,110
- --------------------------------------------------------------
SWEDEN-0.66%
Hennes & Mauritz A.B.-Class B
(Retail- Specialty-Apparel) 210,640 5,596,406
- --------------------------------------------------------------
SWITZERLAND-1.78%
ABB Ltd. (Electrical Equipment)(a) 32,420 3,263,901
- --------------------------------------------------------------
Adecco S.A. (Services-Commercial &
Consumer) 6,600 3,999,738
- --------------------------------------------------------------
Compagnie Financiere Richemont A.G.
(Tobacco) 2,000 3,819,768
- --------------------------------------------------------------
Zurich Allied A.G.
(Insurance-Multi-Line) 6,960 3,939,517
- --------------------------------------------------------------
15,022,924
- --------------------------------------------------------------
UNITED KINGDOM-7.00%
Barclays PLC (Banks-Major Regional) 225,500 6,906,971
- --------------------------------------------------------------
BP Amoco PLC (Oil & Gas-Refining &
Marketing) 220,000 2,135,850
- --------------------------------------------------------------
British Sky Broadcasting Group PLC
(Broadcasting-Television, Radio &
Cable) 440,000 4,727,445
- --------------------------------------------------------------
British Telecommunications PLC
(Communications Equipment) 116,000 2,104,547
- --------------------------------------------------------------
Compass Group PLC
(Services-Commercial & Consumer) 288,800 3,095,801
- --------------------------------------------------------------
General Electric Co. PLC
(Manufacturing- Diversified) 367,100 3,992,477
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Granada Group PLC (Leisure
Time-Products) 270,000 $ 2,135,193
- --------------------------------------------------------------
Hays PLC (Services-Commercial &
Consumer) 461,300 5,282,419
- --------------------------------------------------------------
Invensys PLC (Electronics-Component
Distributors) 290,000 1,425,599
- --------------------------------------------------------------
Orange PLC (Telephone)(a) 450,300 11,230,931
- --------------------------------------------------------------
Provident Financial PLC (Consumer
Finance) 202,478 2,262,015
- --------------------------------------------------------------
Shell Transport & Trading Co. (Oil-
International Integrated) 458,000 3,512,735
- --------------------------------------------------------------
Vodafone AirTouch PLC
(Telecommunications-
Cellular/Wireless) 1,361,500 6,334,791
- --------------------------------------------------------------
WPP Group PLC
(Services-Advertising/ Marketing) 366,600 3,981,012
- --------------------------------------------------------------
59,127,786
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$332,274,553) 463,323,803
- --------------------------------------------------------------
MONEY MARKET FUNDS-6.14%
STIC Liquid Assets Portfolio(c) 25,959,462 25,959,462
- --------------------------------------------------------------
STIC Prime Portfolio(c) 25,959,462 25,959,462
- --------------------------------------------------------------
Total Money Market Funds (Cost
$51,918,924) 51,918,924
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.69% 834,198,259
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.31% 11,052,814
- --------------------------------------------------------------
NET ASSETS-100.00% $845,251,073
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Pfd. - Preferred
Rts. - Rights
Notes to Schedule of Investments:
(a) Non-Income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-34
<PAGE> 225
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$611,526,720) $834,198,259
- -------------------------------------------------------
Foreign currencies, at value (cost
$13,236,307) 13,245,860
- -------------------------------------------------------
Receivables for:
Investments sold 8,377,903
- -------------------------------------------------------
Capital stock sold 1,986,057
- -------------------------------------------------------
Dividends and interest 1,081,214
- -------------------------------------------------------
Investment for deferred compensation plan 23,205
- -------------------------------------------------------
Other assets 38,824
- -------------------------------------------------------
Total assets 858,951,322
- -------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 8,594,115
- -------------------------------------------------------
Capital stock reacquired 1,016,512
- -------------------------------------------------------
Deferred compensation 23,205
- -------------------------------------------------------
Options written (premiums received
$1,753,505) 2,674,700
- -------------------------------------------------------
Accrued advisory fees 581,419
- -------------------------------------------------------
Accrued administrative services fees 10,970
- -------------------------------------------------------
Accrued directors' fees 2,400
- -------------------------------------------------------
Accrued distribution fees 612,902
- -------------------------------------------------------
Accrued transfer agent fees 223,736
- -------------------------------------------------------
Accrued operating expenses (39,710)
- -------------------------------------------------------
Total liabilities 13,700,249
- -------------------------------------------------------
Net assets applicable to shares
outstanding $845,251,073
=======================================================
NET ASSETS:
Class A $388,549,182
=======================================================
Class B $425,345,431
=======================================================
Class C $ 31,356,460
=======================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 200,000,000
- -------------------------------------------------------
Outstanding 16,580,603
=======================================================
Class B:
Authorized 200,000,000
- -------------------------------------------------------
Outstanding 18,669,410
=======================================================
Class C:
Authorized 200,000,000
- -------------------------------------------------------
Outstanding 1,375,854
=======================================================
Class A:
Net asset value and redemption price
per share $ 23.43
- -------------------------------------------------------
Offering price per share:
(Net asset value $23.43
divided by 95.25%) $ 24.60
=======================================================
Class B:
Net asset value and offering price per
share $ 22.78
=======================================================
Class C:
Net asset value and offering price per
share $ 22.79
=======================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $677,229 foreign
withholding tax) $ 5,811,440
- --------------------------------------------------------
Interest 1,816,133
- --------------------------------------------------------
Total investment income 7,627,573
- --------------------------------------------------------
EXPENSES:
Advisory fees 5,898,665
- --------------------------------------------------------
Administrative services fees 97,142
- --------------------------------------------------------
Custodian fees 341,569
- --------------------------------------------------------
Directors' fees 12,734
- --------------------------------------------------------
Distribution fees -- Class A 1,585,224
- --------------------------------------------------------
Distribution fees -- Class B 3,564,027
- --------------------------------------------------------
Distribution fees -- Class C 205,127
- --------------------------------------------------------
Transfer agent fees -- Class A 708,552
- --------------------------------------------------------
Transfer agent fees -- Class B 982,114
- --------------------------------------------------------
Transfer agent fees -- Class C 66,129
- --------------------------------------------------------
Other 237,509
- --------------------------------------------------------
Total expenses 13,698,792
- --------------------------------------------------------
Less:
Expenses paid indirectly (12,008)
- --------------------------------------------------------
Net expenses 13,686,784
- --------------------------------------------------------
Net investment income (loss) (6,059,211)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 63,517,124
- --------------------------------------------------------
Foreign currencies 162,721
- --------------------------------------------------------
Forward currency contacts 81,453
- --------------------------------------------------------
Futures contracts 2,042,833
- --------------------------------------------------------
Options contracts written (1,820,509)
- --------------------------------------------------------
63,983,622
- --------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 142,665,744
- --------------------------------------------------------
Foreign currencies (114,912)
- --------------------------------------------------------
Futures contracts (797,175)
- --------------------------------------------------------
Options contracts written (921,195)
- --------------------------------------------------------
140,832,462
- --------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 204,816,084
- --------------------------------------------------------
Net increase in net assets resulting from
operations $198,756,873
========================================================
</TABLE>
See Notes to Financial Statements.
FS-35
<PAGE> 226
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (6,059,211) $ (2,809,816)
- -------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 63,983,622 18,919,692
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 140,832,462 20,734,353
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 198,756,873 36,844,229
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (6,185,053) (4,566,706)
- -------------------------------------------------------------------------------------------
Class B (7,892,012) (5,964,749)
- -------------------------------------------------------------------------------------------
Class C (358,333) (47,034)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 84,229,840 27,194,800
- -------------------------------------------------------------------------------------------
Class B 49,286,118 44,408,521
- -------------------------------------------------------------------------------------------
Class C 14,141,472 11,162,365
- -------------------------------------------------------------------------------------------
Net increase in net assets 331,978,905 109,031,426
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 513,272,168 404,240,742
- -------------------------------------------------------------------------------------------
End of period $845,251,073 $ 513,272,168
===========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $568,723,576 $ 416,466,146
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (806,662) (1,238,947)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 55,673,261 17,216,533
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 221,660,898 80,828,436
- -------------------------------------------------------------------------------------------
$845,251,073 $ 513,272,168
===========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Growth Fund (the "Fund") is a series portfolio of AIM International
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of six separate
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be 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 the 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 its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued
FS-36
<PAGE> 227
based upon quotes furnished by independent sources and are valued at the last
bid price in the case of equity securities and in the case of debt
obligations, the mean between the last bid and asked prices. Securities for
which market quotations are not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
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. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales 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 the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased
by $6,491,496, undistributed net realized gains decreased by $11,091,496 and
paid-in capital increased by $4,600,000 as a result of differing book/tax
treatment of foreign currency transactions, equalization credits and net
operating loss reclassifications 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 reclassification
discussed above.
C. 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.
D. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. 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.
G. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction
FS-37
<PAGE> 228
exceeds the premium received when the option was written) without regard to
any unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. If a written option is exercised, the
Fund realizes a gain or a loss from the sale of the underlying security and
the proceeds of the sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
I. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
J. Expenses -- Distribution expenses 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 investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1
billion of the Fund's average daily net assets, plus 0.80% of the Fund's average
daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $97,142 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $931,153 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund ,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C 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 Class 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 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,
1999, the Class A, Class B and Class C shares paid AIM Distributors $1,585,224,
$3,564,027 and $205,127, respectively, as compensation under the Plans.
AIM Distributors received commissions of $195,571 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. 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, 1999,
AIM Distributors received $24,812 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, 1999, the Fund paid legal fees of $3,064 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$8,262 and $3,746, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $12,008 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
FS-38
<PAGE> 229
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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. 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, 1999 was
$723,201,067 and $601,838,894, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $233,438,852
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (11,796,546)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $221,642,306
=========================================================
</TABLE>
Cost of investments for tax purposes is $612,555,953.
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-----------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Beginning of period -- --
- --------------------------------------------------------- ---------- ----------
Written 2,084 $2,630,916
- --------------------------------------------------------- ---------- ----------
Closed (640) (877,411)
- --------------------------------------------------------- ---------- ----------
End of period 1,444 $1,753,505
========================================================= ========== ==========
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- -------------------------------------------------- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
American Online, Inc. Apr-00 $130 640 $1,214,039 $1,328,000 $(113,961)
- -------------------------------------------------- -------- ------ --------- ---------- ------------ --------------
MCI Worldcom, Inc. Dec-99 70 804 539,466 1,346,700 (807,234)
- -------------------------------------------------- -------- ------ --------- ---------- ------------ --------------
1,444 $1,753,505 $2,674,700 $(921,195)
================================================== ======== ====== ========= ========== ============ ==============
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Sold
Class A 10,512,070 $ 211,966,029 14,601,141 $ 264,657,310
- -------------------------------------------------------------------------------------------------------------------------
Class B 4,204,829 83,820,436 4,603,864 82,487,081
- -------------------------------------------------------------------------------------------------------------------------
Class C 944,252 18,989,474 731,595 13,444,846
- -------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 314,736 5,777,296 265,883 4,315,756
- -------------------------------------------------------------------------------------------------------------------------
Class B 411,104 7,371,231 348,564 5,562,820
- -------------------------------------------------------------------------------------------------------------------------
Class C 37,653 676,846 2,787 44,837
- -------------------------------------------------------------------------------------------------------------------------
Issued in connection with acquisition*:
Class A 3,763,754 73,826,199 -- --
- -------------------------------------------------------------------------------------------------------------------------
Class B 1,833,252 35,102,320 -- --
- -------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (10,242,303) (207,339,684) (13,382,242) (241,778,266)
- -------------------------------------------------------------------------------------------------------------------------
Class B (3,903,318) (77,007,869) (2,513,498) (43,641,380)
- -------------------------------------------------------------------------------------------------------------------------
Class C (277,476) (5,524,848) (130,050) (2,327,318)
- -------------------------------------------------------------------------------------------------------------------------
7,598,553 $ 147,657,430 4,528,044 $ 82,765,686
=========================================================================================================================
</TABLE>
* The Fund acquired AIM Worldwide Growth Fund on February 12, 1999. The acquired
fund's net assets as of the closing date were $109,306,659. The net assets of
the Fund immediately prior to acquisition were $581,902,071.
FS-39
<PAGE> 230
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and Class B
capital stock outstanding during each of the years in the five year period ended
October 31, 1999 and for a share of Class C capital stock outstanding during
each of the years in the two-year period October 31, 1999 and the period August
4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.91 $ 16.65 $ 14.20 $ 12.32 $ 10.23
- ------------------------------------------------------------ -------- -------- -------- -------- -------
Income from investment operations:
Net investment income (loss) (0.10) (0.05) (0.04) (0.01) (0.02)
- ------------------------------------------------------------ -------- -------- -------- -------- -------
Net gains on securities (both realized and unrealized) 6.12 1.74 2.49 2.11 2.11
- ------------------------------------------------------------ -------- -------- -------- -------- -------
Total from investment operations 6.02 1.69 2.45 2.10 2.09
- ------------------------------------------------------------ -------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income - - - - (0.004)
- ------------------------------------------------------------ -------- -------- -------- -------- -------
Distributions from net realized gains (0.50) (0.43) - (0.22) -
- ------------------------------------------------------------ -------- -------- -------- -------- -------
Total distributions (0.50) (0.43) - (0.22) (0.004)
- ------------------------------------------------------------ -------- -------- -------- -------- -------
Net asset value, end of period $ 23.43 $ 17.91 $ 16.65 $ 14.20 $ 12.32
============================================================ ======== ======== ======== ======== =======
Total return(a) 34.43% 10.43% 17.25% 17.26% 20.48%
============================================================ ======== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $388,549 $219,050 $178,917 $114,971 $23,754
============================================================ ======== ======== ======== ======== =======
Ratio of expenses to average net assets(b) 1.67%(c) 1.70% 1.76% 1.93% 2.12%
============================================================ ======== ======== ======== ======== =======
Ratio of net investment income (loss) to average net
assets(d) (0.57)%(c) (0.27)% (0.30)% (0.13)% (0.28)%
============================================================ ======== ======== ======== ======== =======
Portfolio turnover rate 93% 97% 96% 82% 79%
============================================================ ======== ======== ======== ======== =======
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.94% and 2.98% for 1996-1995.
(c) Ratios are based on average net assets of $317,044,851.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.14)% and (1.14)% for 1996-1995.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------- ---------------------------
1999 1998 1997 1996 1995 1999 1998 1997
-------- -------- -------- -------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.52 $ 16.39 $ 14.05 $ 12.26 $ 10.22 $ 17.52 $ 16.39 $17.39
- ----------------------------------------- -------- -------- -------- -------- ------- ------- ------- ------
Income from investment operations:
Net investment income (loss) (0.23)(a) (0.15)(a) (0.11) (0.05) (0.04) (0.23)(a) (0.15)(a)(0.03)
- ----------------------------------------- -------- -------- -------- -------- ------- ------- ------- ------
Net gains (losses) on securities (both
realized and unrealized) 5.99 1.71 2.45 2.06 2.08 6.00 1.71 (0.97)
- ----------------------------------------- -------- -------- -------- -------- ------- ------- ------- ------
Total from investment operations 5.76 1.56 2.34 2.01 2.04 5.77 1.56 (1.00)
- ----------------------------------------- -------- -------- -------- -------- ------- ------- ------- ------
Less distributions:
Distributions from net realized gains (0.50) (0.43) - (0.22) - (0.50) (0.43) -
- ----------------------------------------- -------- -------- -------- -------- ------- ------- ------- ------
Net asset value, end of period $ 22.78 $ 17.52 $ 16.39 $ 14.05 $ 12.26 $ 22.79 $ 17.52 $16.39
========================================= ======== ======== ======== ======== ======= ======= ======= ======
Total return(b) 33.69% 9.78% 16.65% 16.60% 19.96% 33.69% 9.78% (5.75)%
========================================= ======== ======== ======== ======== ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $425,345 $282,456 $224,225 $121,848 $17,157 $31,356 $11,765 $1,100
========================================= ======== ======== ======== ======== ======= ======= ======= ======
Ratio of expenses to average net assets 2.23%(c) 2.26% 2.29% 2.48%(d) 2.64%(d) 2.23%(c) 2.26% 2.29%(e)
========================================= ======== ======== ======== ======== ======= ======= ======= ======
Ratio of net investment income (loss) to
average net assets (1.13)%(c) (0.83)% (0.83)% (0.69)%(f) (0.79)%(f) (1.13)%(c) (0.83)% (0.83)%(e)
========================================= ======== ======== ======== ======== ======= ======= ======= ======
Portfolio turnover rate 93% 97% 96% 82% 79% 93% 97% 96%
========================================= ======== ======== ======== ======== ======= ======= ======= ======
</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) Ratios are based on average net assets of $356,402,709 and $20,512,721 for
Class B and Class C, respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.49% and 3.38% for 1996-1995.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.69)% and (1.54)% for 1996-1995.
FS-40
<PAGE> 231
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Global Income Fund (a portfolio of
AIM International Funds, Inc.), including the schedule of
investments, as of October 31, 1999, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and the financial
highlights for each of the years in the 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, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Global
Income Fund as of October 31, 1999, 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 LLP
December 3, 1999
Houston, Texas
FS-41
<PAGE> 232
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS &
NOTES-62.27%
AIR FREIGHT-0.40%
Atlas Air, Inc., Sr. Unsec. Notes,
10.75%, 08/01/05 $ 350,000 $ 350,000
- --------------------------------------------------------------
AIRLINES-3.80%
Air 2 US, Series C, Equipment Trust,
10.127%, 10/01/20 (Acquired
10/28/99; Cost $450,000)(b) 450,000 457,920
- --------------------------------------------------------------
Airplanes Pass Through Trust, Series
D Gtd. Sub. Bonds, 10.875%,
03/15/19 230,000 204,845
- --------------------------------------------------------------
Delta Air Lines, Inc., Deb.,
9.00%, 05/15/16 550,000 583,297
- --------------------------------------------------------------
10.375%, 12/15/22 1,000,000 1,208,370
- --------------------------------------------------------------
Dunlop Standard Aero Holdings
(United Kingdom), Sr. Notes,
11.875%, 05/15/09(c) 530,000 537,950
- --------------------------------------------------------------
United Air Lines, Inc., Pass Through
Ctfs., 9.56%, 10/19/18 300,000 329,784
- --------------------------------------------------------------
3,322,166
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.75%
Advance Stores Co., Inc., Series B,
Sr. Unsec. Gtd. Sub. Notes,
10.25%, 04/15/08 270,000 249,750
- --------------------------------------------------------------
Exide Corp., Sr. Notes, 10.00%,
04/15/05 430,000 402,050
- --------------------------------------------------------------
651,800
- --------------------------------------------------------------
AUTOMOBILES-0.34%
DaimlerChrysler N.A. Holdings
(Germany), Gtd. Notes, 7.20%,
09/01/09 300,000 301,065
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.55%
Midland Bank PLC (United Kingdom),
Sub. Notes, 7.65%, 05/01/25 280,000 283,480
- --------------------------------------------------------------
Regions Financial Corp., Sub. Notes,
7.75%, 09/15/24 500,000 497,940
- --------------------------------------------------------------
Republic New York Corp.,
Sub. Notes, 9.70%, 02/01/09 400,000 455,340
- --------------------------------------------------------------
Sub. Deb., 9.50%, 04/15/14 370,000 412,546
- --------------------------------------------------------------
Deutsche Bank Finance B.V.
(Netherlands), Conv. Bonds, 4.50%,
02/12/17(e) 1,200,000 579,060
- --------------------------------------------------------------
2,228,366
- --------------------------------------------------------------
BANKS (MONEY CENTER)-1.26%
Capital One Financial Corp., Unsec.
Notes, 7.25%, 05/01/06 600,000 570,000
- --------------------------------------------------------------
Riggs Capital Trust II, Series C
Gtd. Bonds, 8.875%, 03/15/27 570,000 533,722
- --------------------------------------------------------------
1,103,722
- --------------------------------------------------------------
BANKS (REGIONAL)-0.75%
Mercantile Bancorp, Inc., Unsec.
Sub. Notes, 7.30%, 06/15/07 660,000 654,562
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-5.94%
British Sky Broadcasting (United
Kingdom), Unsec. Gtd. Notes,
8.20%, 07/15/09 (Acquired
07/01/99-08/10/99; Cost
$890,547)(b) $ 900,000 $ 877,254
- --------------------------------------------------------------
Comcast Cable Communications, Unsec.
Notes, 8.50%, 05/01/27 500,000 540,710
- --------------------------------------------------------------
Cox Communications, Inc., Unsec.
Notes, 7.75%, 08/15/06 400,000 409,744
- --------------------------------------------------------------
CSC Holdings, Inc., Sr. Unsec. Deb.,
7.875%, 02/15/18 400,000 381,784
- --------------------------------------------------------------
7.625%, 07/15/18 1,600,000 1,489,024
- --------------------------------------------------------------
Fox Family Worldwide, Inc., Sr.
Unsec. Disc. Notes, 10.25%,
11/01/07(f) 940,000 618,050
- --------------------------------------------------------------
Knology Holdings, Inc., Sr. Disc.
Notes, 11.875%, 10/15/07(f) 700,000 393,750
- --------------------------------------------------------------
USA Networks, Inc., Sr. Unsec. Gtd.
Notes, 6.75%, 11/15/05 500,000 477,914
- --------------------------------------------------------------
5,188,230
- --------------------------------------------------------------
CHEMICALS-1.63%
Agrium, Inc. (Canada), Unsec. Notes,
7.00%, 02/01/04 350,000 337,536
- --------------------------------------------------------------
Airgas, Inc., Medium Term Notes,
7.14%, 03/08/04 500,000 474,010
- --------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada),
Yankee Deb., 8.50%, 12/15/12 450,000 482,634
- --------------------------------------------------------------
Sterling Chemicals, Inc., Sr. Unsec.
Sub. Notes, 11.75%, 08/15/06 200,000 127,000
- --------------------------------------------------------------
1,421,180
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.93%
Dialog Corp. PLC (United Kingdom),
Series A, Sr. Sub. Yankee Notes,
11.00%, 11/15/07 750,000 637,500
- --------------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 250,000 171,250
- --------------------------------------------------------------
808,750
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.33%
Exodus Communications, Sr. Unsec.
Notes, 11.25%, 07/01/08 280,000 290,500
- --------------------------------------------------------------
CONSTRUCTION (CEMENT &
AGGREGATES)-0.34%
Schuff Steel Co., Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 06/01/08 350,000 299,250
- --------------------------------------------------------------
CONSUMER FINANCE-1.25%
Countrywide Capital, Gtd. Notes,
8.05%, 06/15/27 350,000 332,052
- --------------------------------------------------------------
MBNA Capital I, Series A Bonds,
8.278%, 12/01/26 835,000 757,161
- --------------------------------------------------------------
1,089,213
- --------------------------------------------------------------
</TABLE>
FS-42
<PAGE> 233
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)-0.26%
Fleming Companies, Inc., Sr. Unsec.
Gtd. Sub. Notes, 10.625%, 07/31/07 $ 255,000 $ 229,500
- --------------------------------------------------------------
ELECTRIC COMPANIES-2.30%
Cleveland Electric Illumination,
Series D, Sr. Sec. Notes, 7.88%,
11/01/17 500,000 482,969
- --------------------------------------------------------------
CMS Energy Corp., Sr. Unsec. Notes,
7.50%, 01/15/09 750,000 690,172
- --------------------------------------------------------------
El Paso Electric Co., Series D, Sec.
First Mortgage Bonds, 8.90%,
02/01/06 250,000 265,052
- --------------------------------------------------------------
Series E, Sec. First Mortgage Bonds,
9.40%, 05/01/11 250,000 273,007
- --------------------------------------------------------------
Niagara Mohawk Power, Series H, Sr.
Unsec. Disc. Notes, 8.50%,
07/01/10 (Acquired 08/11/99; Cost
$291,000)(b) 400,000 302,664
- --------------------------------------------------------------
2,013,864
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.23%
Panda Funding Corp., Series A-1,
Pooled Project Bonds, 11.625%,
08/20/12 198,404 199,396
- --------------------------------------------------------------
ENTERTAINMENT-1.88%
News America Holdings, Inc., Notes,
8.45%, 08/01/34 500,000 512,615
- --------------------------------------------------------------
Time Warner Inc., Deb., 9.125%,
01/15/13 1,000,000 1,127,140
- --------------------------------------------------------------
1,639,755
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.07%
Finova Capital Corp., Unsec. Sr.
Notes, 7.625%, 09/21/09 210,000 210,244
- --------------------------------------------------------------
Sumitomo Bank International Finance
N.V. (Japan), Gtd. Sub. Notes,
8.50%, 06/15/09 700,000 724,511
- --------------------------------------------------------------
934,755
- --------------------------------------------------------------
FOODS-1.02%
ConAgra, Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 900,000 889,443
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.09%
Harborside Healthcare, Sr. Unsec.
Gtd. Disc. Sub. Notes, 11.00%,
08/01/08(e) 300,000 78,000
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.54%
Team Health, Inc., Sr. Sub. Notes,
12.00%, 03/15/09(c) 470,000 472,350
- --------------------------------------------------------------
HOMEBUILDING-0.06%
D.R. Horton, Inc., Unsec. Gtd.
Notes, 10.00%, 04/15/06 55,000 55,275
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.50%
Procter & Gamble Co. (The), Putable
Deb., 8.00%, 09/01/24 400,000 434,548
- --------------------------------------------------------------
HOUSEWARES-0.35%
Decora Industries, Inc., Series B,
Sr. Sec. Gtd. Notes, 11.00%,
05/01/05 350,000 306,250
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.79%
Torchmark Corp., Notes, 7.875%,
05/15/23 750,000 693,143
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-1.09%
Terra Nova Holdings, Co. (United
Kingdom), Sr. Unsec. Gtd. Notes,
7.20%, 08/15/07 $ 500,000 $ 479,330
- --------------------------------------------------------------
7.00%, 05/15/08 500,000 471,800
- --------------------------------------------------------------
951,130
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.61%
HSBC America Capital Trust II, Gtd.
Bonds, 8.38%, 05/15/27 (Acquired
08/12/99; Cost $479,210)(b) 500,000 479,120
- --------------------------------------------------------------
Lehman Brothers, Inc.,
Sr. Sub. Notes, 7.375%, 01/15/07 530,000 523,667
- --------------------------------------------------------------
Notes, 8.50%, 08/01/15 390,000 404,305
- --------------------------------------------------------------
1,407,092
- --------------------------------------------------------------
IRON & STEEL-0.47%
Acme Metal, Inc., Sr. Unsec. Gtd.
Deb., 10.875%, 12/15/07(d)(g) 438,000 94,170
- --------------------------------------------------------------
GS Technologies, Inc., Sr. Gtd.
Notes, 12.00%, 09/01/04 200,000 111,000
- --------------------------------------------------------------
Sheffield Steel Corp., Series B,
First Mortgage Notes, 11.50%,
12/01/05 250,000 208,750
- --------------------------------------------------------------
413,920
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.46%
Marvel Enterprises, Inc., Sr. Unsec.
Gtd. Sub. Notes, 12.00%, 06/15/09 440,000 402,600
- --------------------------------------------------------------
LODGING-HOTELS-0.35%
John Q. Hammons Hotels, Inc., Sec.
First Mortgage Notes, 9.75%,
10/01/05 100,000 90,500
- --------------------------------------------------------------
Stena Line A.B. (Sweden), Sr. Unsec.
Yankee Notes, 10.625%, 06/01/08 310,000 217,775
- --------------------------------------------------------------
308,275
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.24%
Glenoit Corp., Sr. Unsec. Gtd. Sub.
Notes, 11.00%, 04/15/07 380,000 210,900
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.52%
First Wave Marine, Inc., Sr. Unsec.
Gtd. Sub. Notes, 11.00%, 02/01/08 250,000 188,750
- --------------------------------------------------------------
MMI Products, Inc., Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 260,000 265,200
- --------------------------------------------------------------
453,950
- --------------------------------------------------------------
METALS MINING-0.27%
Rio Algom Ltd. (Canada), Yankee
Unsec. Deb., 7.05%, 11/01/05 250,000 238,455
- --------------------------------------------------------------
NATURAL GAS-1.80%
Dynegy, Inc., Sr. Unsec. Deb.,
7.125%, 05/15/18 500,000 459,975
- --------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 8.25%,
09/15/12 500,000 515,220
- --------------------------------------------------------------
</TABLE>
FS-43
<PAGE> 234
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NATURAL GAS-(CONTINUED)
Sonat, Inc., Unsec. Notes, 7.625%,
07/15/11 $ 600,000 $ 600,828
- --------------------------------------------------------------
1,576,023
- --------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-1.43%
Oneok, Inc., Unsec. Notes, 7.75%,
08/15/06 400,000 401,224
- --------------------------------------------------------------
Pogo Producing Co., Series B, Sr.
Unsec. Sub. Notes, 10.375%,
02/15/09 500,000 520,000
- --------------------------------------------------------------
Queen Sand Resources, Inc., Sr.
Unsec. Gtd. Sub. Notes, 12.50%,
07/01/08 160,000 92,000
- --------------------------------------------------------------
Talisman Energy, Inc. (Canada),
Yankee Deb., 7.125%, 06/01/07 250,000 240,210
- --------------------------------------------------------------
1,253,434
- --------------------------------------------------------------
OIL & GAS (REFINING &
MARKETING)-0.70%
Texas Petrochemical Corp., Sr.
Unsec. Sub. Notes, 11.125%,
07/01/06 750,000 611,250
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.54%
Polaroid Corp., Sr. Unsec. Notes,
11.50%, 02/15/06 470,000 472,350
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.30%
AES Corp., Sr. Notes, 8.00%,
12/31/08 750,000 686,250
- --------------------------------------------------------------
Kincaid Generation LLC, Sec. Bonds,
7.33%, 06/15/20 (Acquired
04/30/98; Cost $501,235)(b) 500,000 453,630
- --------------------------------------------------------------
1,139,880
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.65%
News America Holdings, Inc., Sr.
Gtd. Deb., 9.25%, 02/01/13 250,000 274,755
- --------------------------------------------------------------
United News & Media PLC (United
Kingdom), Sr. Unsec. Yankee Notes,
7.75%, 07/01/09 300,000 292,905
- --------------------------------------------------------------
567,660
- --------------------------------------------------------------
RAILROADS-1.48%
CSX Corp., Sr. Unsec. Putable Deb.,
7.25%, 05/01/27 750,000 747,173
- --------------------------------------------------------------
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 550,000 546,816
- --------------------------------------------------------------
1,293,989
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.22%
Glenborough Properties, Series B,
Sr. Unsec. Notes, 7.625%, 03/15/05 500,000 445,514
- --------------------------------------------------------------
Health Care REIT, Inc., Sr. Unsec.
Notes, 7.625%, 03/15/08 200,000 169,320
- --------------------------------------------------------------
Spieker Properties LP, Unsec. Deb.,
7.35%, 12/01/17 500,000 446,705
- --------------------------------------------------------------
1,061,539
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.19%
Plainwell, Inc., Series B, Sr.
Unsec. Sub. Notes, 11.00%,
03/01/08 230,000 166,750
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-2.31%
Amazon.com, Inc., Conv. Deb., 4.75%,
02/01/09 (Acquired 01/29/99; Cost
$501,875)(b) $ 500,000 $ 532,500
- --------------------------------------------------------------
CEX Holdings, Inc., Series B Sr.
Unsec. Gtd. Sub. Notes, 9.625%,
06/01/08 170,000 184,450
- --------------------------------------------------------------
CSK Auto Inc., Series A, Sr. Gtd.
Sub. Deb, 11.00%, 11/01/06 130,000 134,550
- --------------------------------------------------------------
Neff Corp., Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 06/01/08 840,000 814,800
- --------------------------------------------------------------
Rent-A-Center, Inc., Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 08/15/08 350,000 350,000
- --------------------------------------------------------------
2,016,300
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.15%
J Crew Operating Corp., Sr. Sub.
Notes, 10.375%, 10/15/07 150,000 126,750
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-1.02%
Sovereign Bancorp, Inc., Medium Term
Sub. Notes, 8.00%, 03/15/03 600,000 595,242
- --------------------------------------------------------------
Washington Mutual, Inc., Notes,
7.50%, 08/15/06 290,000 293,622
- --------------------------------------------------------------
888,864
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.22%
MDC Communications Corp. (Canada),
Sr. Unsec. Sub. Yankee Notes,
10.50%, 12/01/06 200,000 195,000
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.65%
Hydrochem Industrial Service Co.,
Series B, Sr. Sec. Gtd. Sub.
Notes, 10.375%, 08/01/07 150,000 131,250
- --------------------------------------------------------------
Laidlaw, Inc. (Canada), Unsec.
Yankee Deb., 6.70%, 05/01/08 500,000 436,010
- --------------------------------------------------------------
567,260
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.28%
MSX International, Inc., Sr. Unsec.
Sub. Notes, 11.375%, 01/15/08 260,000 245,700
- --------------------------------------------------------------
SOVEREIGN DEBT-2.38%
Province of Manitoba (Canada),
Yankee Deb., 7.75%, 07/17/16 550,000 585,629
- --------------------------------------------------------------
Province of Quebec (Canada), Series
A, Medium Term Putable Yankee
Notes, 5.735%, 03/02/26 500,000 497,670
- --------------------------------------------------------------
Series A, Medium Term Yankee
Notes, 6.29%, 03/06/26 1,000,000 993,710
- --------------------------------------------------------------
2,077,009
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.64%
PageMart Wireless, Inc., Sr. Sub.
Disc. Notes, 11.25%, 02/01/08(f) 600,000 189,000
- --------------------------------------------------------------
US Unwired Inc., Sr. Disc. Notes,
13.375%, 11/01/09 (Acquired
10/26/99; Cost $366,142)(b)(f) 700,000 369,250
- --------------------------------------------------------------
558,250
- --------------------------------------------------------------
</TABLE>
FS-44
<PAGE> 235
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG
DISTANCE)-4.14%
Call-Net Enterprises, Inc. (Canada),
Sr. Unsec. Disc. Yankee Notes,
8.94%, 08/15/08(e) $ 330,000 $ 196,350
- --------------------------------------------------------------
Centel Capital, Deb., 9.00%,
10/15/19 300,000 342,225
- --------------------------------------------------------------
Econophone, Inc., Sr. Unsec. Notes,
13.50%, 07/15/07 750,000 781,875
- --------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Unsec. Yankee Notes,
11.50%, 12/15/07 250,000 256,250
- --------------------------------------------------------------
MCI Communications Corp., Putable
Sr. Unsec. Deb., 7.125%, 06/15/27 650,000 655,025
- --------------------------------------------------------------
Primus Telecommunications Group,
Inc., Sr. Notes, 11.25%, 01/15/09 750,000 693,750
- --------------------------------------------------------------
Tele1 Europe B.V. (Netherlands), Sr.
Unsec. Notes, 13.00%, 05/15/09(c) 500,000 497,500
- --------------------------------------------------------------
Versatel Telecom B.V. (Netherlands),
Sr. Notes, 13.25%, 05/15/08 190,000 191,900
- --------------------------------------------------------------
3,614,875
- --------------------------------------------------------------
TELEPHONE-4.42%
AT&T Canada Inc., Notes, 7.65%,
09/15/06 (Acquired 09/15/99) Cost
$369,123)(b) 370,000 370,758
- --------------------------------------------------------------
Bell Atlantic Financial Services,
Inc., Conv. Bonds, 4.25%, 09/15/05 500,000 528,806
- --------------------------------------------------------------
Esat Holdings Ltd. (Ireland), Sr.
Yankee Notes, 12.50%, 02/01/07(f) 350,000 255,500
- --------------------------------------------------------------
ICG Services, Inc., Sr. Unsec. Disc.
Notes, 10.00%, 02/15/08(f) 600,000 321,096
- --------------------------------------------------------------
Liberty Media Group, Bonds, 7.875%,
07/15/09 (Acquired 06/30/99; Cost
$397,616)(b) 400,000 398,910
- --------------------------------------------------------------
Logix Communications, Sr. Unsec.
Notes, 12.25%, 06/15/08 350,000 280,875
- --------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.375%, 07/15/43 500,000 466,490
- --------------------------------------------------------------
Williams Communications Group, Inc.,
Sr. Unsec. Notes, 10.70%, 10/01/07 450,000 469,125
- --------------------------------------------------------------
Worldwide Fiber, Inc. (Canada), Sr.
Notes,
12.50%, 12/15/05 230,000 235,750
- --------------------------------------------------------------
12.00%, 08/01/09(c) 530,000 532,650
- --------------------------------------------------------------
3,859,960
- --------------------------------------------------------------
TRUCKERS-0.33%
Travelcenters of America, Inc., Sr.
Unsec. Gtd. Sub. Deb., 10.25%,
04/01/07 290,000 286,375
- --------------------------------------------------------------
WASTE MANAGEMENT-2.05%
Browning-Ferris, Deb., 9.25%,
05/01/21 350,000 302,750
- --------------------------------------------------------------
Waste Management Inc., Sr. Unsec.
Notes,
7.125%, 10/01/09 525,000 447,258
- --------------------------------------------------------------
7.125%, 12/15/17 190,000 145,263
- --------------------------------------------------------------
WMX Technologies, Inc., Unsec.
Putable Notes, 7.10%, 08/01/26 980,000 897,327
- --------------------------------------------------------------
1,792,598
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Bonds & Notes (Cost
$58,071,172) 54,413,221
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED BONDS
& NOTES-33.28%
AUSTRALIA-1.97%
New South Wales Treasury Corp.
(Sovereign Debt), Gtd. Notes,
7.00%, 04/01/04 AUD 1,320,000 $ 856,995
- --------------------------------------------------------------
State Bank New South Wales
(Banks-Major Regional), Series E
Medium Term Sr. Unsec. Gtd.
Notes, 8.625%, 08/20/01 AUD 1,300,000 862,743
- --------------------------------------------------------------
1,719,738
- --------------------------------------------------------------
CANADA-9.47%
B.C. Generic Residual (Sovereign
Debt), Deb.,13.88%,
06/21/04(e) CAD 150,000 76,004
- --------------------------------------------------------------
Bank of Montreal (Banks-Money
Center), Sub. Deb., 7.92%,
07/31/12 CAD 300,000 216,435
- --------------------------------------------------------------
Bell Mobility Cellular
(Telecommunications-
Cellular/Wireless), Deb., 6.55%,
06/02/08 CAD 750,000 492,805
- --------------------------------------------------------------
British Columbia Municipal Finance
Authority (Sovereign Debt),
Bonds, 7.75%, 12/01/05 CAD 500,000 362,997
- --------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas- Exploration & Production),
Deb., 11.00%, 10/31/00 CAD 450,000 317,870
- --------------------------------------------------------------
Canadian Pacific Ltd.,
(Railroads), Unsec. Medium Term
Disc. Notes, 5.85%, 03/30/09
(Acquired 03/24/99; Cost
$661,416)(b)(f) CAD 1,000,000 634,015
- --------------------------------------------------------------
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.75%,
08/13/07(f) CAD 1,100,000 524,859
- --------------------------------------------------------------
10.40%, 05/15/08(f) CAD 1,200,000 507,369
- --------------------------------------------------------------
Sr. Unsec. Disc. Notes, 10.75%,
02/15/09(f) CAD 1,300,000 509,916
- --------------------------------------------------------------
GMAC Canada Ltd. (Financial
Diversified), Sr. Unsec. Gtd.
Unsub. Notes, 6.50%, 03/23/04GBP 450,000 718,447
- --------------------------------------------------------------
Loblaw Co. Ltd. (Retail-Food
Chains), Unsec. Medium Term
Disc. Notes, 6.45%, 03/01/39 CAD 750,000 460,896
- --------------------------------------------------------------
Molson Breweries Co. Ltd.
(Beverages- Alcoholic), Unsec.
Unsub. Notes, 6.00%, 06/02/08CAD 700,000 453,605
- --------------------------------------------------------------
NAV Canada (Services-Commercial &
Consumer), Bonds, 7.40%,
06/01/27 CAD 1,000,000 730,551
- --------------------------------------------------------------
Poco Petroleums Ltd. (Oil &
Gas-Exploration & Production),
Unsec. Deb., 6.60%, 09/11/07 CAD 750,000 484,961
- --------------------------------------------------------------
Province of Ontario (Sovereign
Debt), Sr. Unsec. Unsub. Notes,
6.25%, 12/03/08 NZD 1,500,000 672,945
- --------------------------------------------------------------
Telegobe Canada, Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 CAD 650,000 453,958
- --------------------------------------------------------------
TransCanada Pipelines (Natural
Gas), Series Q, Deb., 10.625%,
10/20/09 CAD 375,000 318,211
- --------------------------------------------------------------
</TABLE>
FS-45
<PAGE> 236
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Westcoast Energy, Inc. (Natural
Gas), Series V, Unsec. Deb.,
6.45%, 12/18/06 CAD $ 500,000 $ 335,635
- --------------------------------------------------------------
8,271,479
- --------------------------------------------------------------
DENMARK-1.08%
Kingdom of Denmark (Sovereign
Debt), Bonds, 7.00%, 12/15/04DKK 6,150,000 940,928
- --------------------------------------------------------------
GERMANY-2.86%
Bundesrepublik Deutschland
(Sovereign Debt), Series 92
Bonds, 7.25%, 10/21/02 EUR 810,000 921,185
- --------------------------------------------------------------
Hypovereins Finance N.V.
(Banks-Major Regional), Gtd.
Series E Medium Term Notes,
6.00%, 03/12/07 DEM 250,000 134,974
- --------------------------------------------------------------
International Bank for
Reconstruction & Development
(Banks-Money Center), Unsec.
Deb., 7.125%, 04/12/05 DEM 1,400,000 826,494
- --------------------------------------------------------------
Treuhandanstalt (Sovereign Debt),
Gtd. Notes, 6.00%, 11/12/03 EUR 560,000 618,697
- --------------------------------------------------------------
2,501,350
- --------------------------------------------------------------
GREECE-1.18%
Hellenic Republic (Sovereign
Debt), Bonds, 6.60%, 01/15/04GRD 333,000,000 1,032,847
- --------------------------------------------------------------
NETHERLANDS-4.70%
Dresdner Finance B.V. (Banks-Major
Regional), Series 11 Floating
Rate Gtd. Notes, 3.532%,
07/30/03 EUR 1,000,000 1,047,839
- --------------------------------------------------------------
KPNQWest B.V.
(Telecommunications-Long
Distance), Sr. Unsec. Notes,
7.125%, 06/01/09 (Acquired
05/25/99; Cost $1,051,124)(b)EUR 1,000,000 1,019,104
- --------------------------------------------------------------
Mannesmann Finance B.V. (Machinery
Diversified), Gtd. Unsec. Unsub.
Notes, 4.75%, 05/27/09 EUR 900,000 843,286
- --------------------------------------------------------------
Prudential Financial B.V.
(Investment Banking/ Brokerage),
Sr. Unsec. Gtd. Bonds, 9.375%,
06/04/07 GBP 400,000 749,353
- --------------------------------------------------------------
SPT Telecom A.S.
(Telecommunications-Long
Distance), Gtd. Unsec. Unsub.
Notes, 5.125%, 05/07/03 DEM 275,000 147,120
- --------------------------------------------------------------
Tecnost International Finance N.V.
(Financial- Diversified), Series
E Medium Term Gtd. Notes,
6.125%, 07/30/09 EUR 290,000 297,125
- --------------------------------------------------------------
4,103,827
- --------------------------------------------------------------
NEW ZEALAND-2.59%
Inter-American Development Bank,
(Banks- Money Center), Unsec.
Bonds, 5.75%, 04/15/04 NZD 2,000,000 951,163
- --------------------------------------------------------------
International Bank for
Reconstruction & Development
(Banks-Money Center),
Unsec. Notes, 5.50%, 04/15/04NZD 800,000 378,406
- --------------------------------------------------------------
Sr. Unsec. Notes, 6.77%,
08/20/07(e) NZD 750,000 209,131
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
NEW ZEALAND-(CONTINUED)
New Zealand Government (Sovereign
Debt), Bonds,
10.00%, 03/15/02 NZD $ 675,000 $ 369,771
- --------------------------------------------------------------
8.00%, 04/15/04 NZD 675,000 357,696
- --------------------------------------------------------------
2,266,167
- --------------------------------------------------------------
SWEDEN-2.23%
AB Spintab (Banks-Regional),
Series 161, Unsec. Deb., 7.50%,
06/15/04 SEK 6,700,000 861,443
- --------------------------------------------------------------
Stadshypotek A.B.
(Banks-Regional), Series 1562,
Notes, 3.50%, 09/15/04 SEK 10,000,000 1,086,187
- --------------------------------------------------------------
1,947,630
- --------------------------------------------------------------
U.S.A.-0.61%
AT&T Canada, Inc. (Telephone), Sr.
Unsec. Notes, 7.15%, 09/23/04CAD 800,000 537,070
- --------------------------------------------------------------
UNITED KINGDOM-6.59%
Airtours PLC (Services-Commercial
& Consumer), Conv. Sub. Notes,
5.75%, 01/05/04 (Acquired
12/09/98; Cost $494,636)(b) GBP 299,000 452,874
- --------------------------------------------------------------
Lloyds Bank PLC (Banks-Major
Regional), Sub. Notes, 5.25%,
07/14/08 DEM 1,500,000 771,334
- --------------------------------------------------------------
Merrill Lynch & Co. (Investment
Banking/ Brokerage), Sr. Unsec.
Unsub. Notes, 7.375%,
12/17/07 GBP 245,000 408,554
- --------------------------------------------------------------
National Power PLC (Electric
Companies), Sr. Unsec. Unsub.
Bonds, 8.00%, 02/21/07 AUD 800,000 512,359
- --------------------------------------------------------------
National Westminster Bank PLC
(Banks-Money Center), Series E,
Medium Term Unsec. Unsub. Notes,
5.125%, 06/30/11 EUR 210,000 200,584
- --------------------------------------------------------------
Scotia Holdings PLC (Health
Care-Drugs- Generic & Other),
Conv. Unsec. Unsub. Notes,
8.50%, 03/26/02 GBP 650,000 917,237
- --------------------------------------------------------------
Sutton Bridge Financial Ltd.
(Financial- Diversified), Gtd.
Eurobonds, 8.625%, 06/30/22 GBP 450,000 845,032
- --------------------------------------------------------------
TeleWest Communications PLC
(Broadcasting- Television, Radio
& Cable), Sr. Unsec. Notes,
5.25%, 02/19/07 GBP 400,000 651,844
- --------------------------------------------------------------
Union Bank Switzerland London,
(Banks-Major Regional), Unsec.
Sub. Notes, 7.375%, 11/26/04 GBP 600,000 1,000,628
- --------------------------------------------------------------
5,760,446
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Bonds & Notes
(Cost $30,661,602) 29,081,482
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-1.71%
BANKS (MAJOR REGIONAL)-0.09%
Societe Generale (France) 350 76,221
- --------------------------------------------------------------
BANKS (REGIONAL)-1.40%
First Republic Capital Corp.,
Series A-Pfd. (Acquired
05/26/99; Cost $750,000)(b) 750 746,250
- --------------------------------------------------------------
</TABLE>
FS-46
<PAGE> 237
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BANKS (REGIONAL)-(CONTINUED)
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 16,000 $ 480,000
- --------------------------------------------------------------
1,226,250
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
Knology Holdings, Inc.-Wts.,
expiring 10/15/07(i) 700 1,575
- --------------------------------------------------------------
Wireless One, Inc.-Wts., expiring
10/19/00(i) 150 0
- --------------------------------------------------------------
1,575
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, Inc.-Wts.,
expiring 02/01/04(i) 290 290
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.09%
Glaxo Wellcome PLC (United
Kingdom) 2,607 76,980
- --------------------------------------------------------------
PERSONAL CARE-0.00%
IHF Capital, Inc., Series I-Wts.,
expiring 11/14/99(i) 70 35
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.01%
Clearnet Communications Inc.-Wts.
(Canada), expiring 09/15/05(i) 330 4,290
- --------------------------------------------------------------
Loral Space & Communications,
Ltd.-Wts., expiring 01/15/07(i) 420 4,095
- --------------------------------------------------------------
8,385
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-0.08%
Tele1 Europe B.V.-Wts.
(Netherlands), expiring
05/15/09(i) 500 $ 40,125
- --------------------------------------------------------------
Versatel Telecom B.V.-Wts.
(Netherlands), expiring
05/15/08(i) 190 27,597
- --------------------------------------------------------------
67,722
- --------------------------------------------------------------
TELEPHONE-0.04%
Esat Holdings Ltd.-Wts. (Ireland),
expiring 02/01/07(i) 350 25,375
- --------------------------------------------------------------
Intermedia Communications,
Inc.-Wts., expiring 06/01/00(i) 150 13,763
- --------------------------------------------------------------
39,138
- --------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$1,339,360) 1,496,596
- --------------------------------------------------------------
MONEY MARKET FUNDS-1.35%
STIC Liquid Assets Portfolio(j) 588,479 588,479
- --------------------------------------------------------------
STIC Prime Portfolio(j) 588,479 588,479
- --------------------------------------------------------------
Total Money Market Funds (Cost
$1,176,958) 1,176,958
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.61% 86,168,257
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.39% 1,214,655
- --------------------------------------------------------------
NET ASSETS-100.00% $87,382,912
==============================================================
</TABLE>
Investment Abbreviations:
AUD - Australian Dollar
CAD - Canadian Dollars
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DEM - German Deutsche Mark
Disc. - Discounted
DKK - Danish Krone
FRF - French Franc
GBP - British Pound Sterling
GRD - Greek Drachma
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sec. - Secured
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
SEK - Swedish Krona
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (h).
(b) Restricted securities. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 10/31/99 was $7,094,249 which
represented 8.14% of the Fund's net assets.
(c) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(d) Non-income producing security.
(e) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(f) Discounted bond at purchase. Interest rate shown represent the coupon rate
at which the bond will accrue at a specified future date.
(g) Defaulted security. Currently, the issue is in default with respect to
interest payments.
(h) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(i) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(j) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-47
<PAGE> 238
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$91,252,953) $ 86,168,257
- -----------------------------------------------------------
Foreign currencies (cost $18,242) 18,464
- -----------------------------------------------------------
Receivables for:
Investments sold 764,818
- -----------------------------------------------------------
Forward currency contracts 4,248
- -----------------------------------------------------------
Capital stock sold 85,861
- -----------------------------------------------------------
Dividends and interest 2,088,500
- -----------------------------------------------------------
Investment for deferred compensation plan 20,023
- -----------------------------------------------------------
Other assets 13,214
- -----------------------------------------------------------
Total assets 89,163,385
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,059,968
- -----------------------------------------------------------
Capital stock reacquired 478,062
- -----------------------------------------------------------
Dividends 101,464
- -----------------------------------------------------------
Deferred compensation plan 20,023
- -----------------------------------------------------------
Accrued administrative services fees 4,247
- -----------------------------------------------------------
Accrued directors' fees 617
- -----------------------------------------------------------
Accrued distribution fees 55,603
- -----------------------------------------------------------
Accrued transfer agent fees 26,401
- -----------------------------------------------------------
Accrued operating expenses 34,088
- -----------------------------------------------------------
Total liabilities 1,780,473
- -----------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 87,382,912
===========================================================
NET ASSETS:
Class A $ 51,076,640
===========================================================
Class B $ 34,422,767
===========================================================
Class C $ 1,883,505
===========================================================
Capital stock, $0.001 par value per share:
Class A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 5,255,715
===========================================================
Class B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 3,543,063
===========================================================
Class C:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 193,937
===========================================================
Class A:
Net asset value and redemption price per
share $ 9.72
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $9.72 divided by
95.25%) $ 10.20
===========================================================
Class B:
Net asset value and offering price per
share $ 9.72
===========================================================
Class C:
Net asset value and offering price per
share $ 9.71
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 7,761,097
- -----------------------------------------------------------
Dividends (net of $476 foreign withholding
tax) 64,902
- -----------------------------------------------------------
Total investment income 7,825,999
- -----------------------------------------------------------
EXPENSES:
Advisory fees 703,524
- -----------------------------------------------------------
Administrative services fees 66,799
- -----------------------------------------------------------
Custodian fees 48,756
- -----------------------------------------------------------
Directors' fees 8,112
- -----------------------------------------------------------
Distribution fees-Class A 300,260
- -----------------------------------------------------------
Distribution fees-Class B 385,265
- -----------------------------------------------------------
Distribution fees-Class C 19,247
- -----------------------------------------------------------
Transfer agent fees-Class A 114,393
- -----------------------------------------------------------
Transfer agent fees-Class B 73,389
- -----------------------------------------------------------
Transfer agent fees-Class C 3,666
- -----------------------------------------------------------
Other 160,098
- -----------------------------------------------------------
Total expenses 1,883,509
- -----------------------------------------------------------
Less:
Fees waived by advisor (423,180)
- -----------------------------------------------------------
Expenses paid indirectly (2,351)
- -----------------------------------------------------------
Net expenses 1,457,978
- -----------------------------------------------------------
Net investment income 6,368,021
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (3,425,545)
- -----------------------------------------------------------
Foreign currencies (699,509)
- -----------------------------------------------------------
Forward currency contracts 117,048
- -----------------------------------------------------------
(4,008,006)
- -----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities (4,733,538)
- -----------------------------------------------------------
Foreign currencies (5,039)
- -----------------------------------------------------------
Forward currency contracts 267,350
- -----------------------------------------------------------
(4,471,227)
- -----------------------------------------------------------
Net gain (loss) from investment securities,
foreign currencies and forward currency
contracts (8,479,233)
- -----------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(2,111,212)
===========================================================
</TABLE>
See Notes to Financial Statements.
FS-48
<PAGE> 239
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,368,021 $ 4,564,973
- ----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and forward currency contracts (4,008,006) (293,145)
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and forward
currency contracts (4,471,227) (2,380,155)
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations (2,111,212) 1,891,673
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (3,538,334) (2,295,926)
- ----------------------------------------------------------------------------------------
Class B (2,065,556) (1,495,827)
- ----------------------------------------------------------------------------------------
Class C (102,985) (42,707)
- ----------------------------------------------------------------------------------------
Return of capital distribution:
Class A (483,962) (354,717)
- ----------------------------------------------------------------------------------------
Class B (310,211) (250,576)
- ----------------------------------------------------------------------------------------
Class C (15,757) (8,211)
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (258,088)
- ----------------------------------------------------------------------------------------
Class B -- (181,448)
- ----------------------------------------------------------------------------------------
Class C -- (5,682)
- ----------------------------------------------------------------------------------------
Share transactions-net:
Class A (1,856,726) 29,014,691
- ----------------------------------------------------------------------------------------
Class B 1,178,036 12,527,487
- ----------------------------------------------------------------------------------------
Class C 263,914 1,597,917
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (9,042,793) 40,138,586
- ----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 96,425,705 56,287,119
- ----------------------------------------------------------------------------------------
End of period $87,382,912 $96,425,705
========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $95,576,239 $96,795,220
- ----------------------------------------------------------------------------------------
Undistributed net investment income (45,192) 222,498
- ----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and forward currency
contracts (3,069,640) 15,255
- ----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward currency
contracts (5,078,495) (607,268)
- ----------------------------------------------------------------------------------------
$87,382,912 $96,425,705
========================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Income 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. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be 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 high current income. Its secondary
objective is protection of principal and 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 the 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 its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at
FS-49
<PAGE> 240
the closing bid price on that day. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the closing bid price. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued based upon quotes furnished by
independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
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. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales 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 the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such distributions are
declared and paid monthly. The Fund may elect to use a portion of the
proceeds of capital stock redemptions as distributions for Federal income
tax purposes. Distributions from net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was decreased by
$118,906, undistributed net realized gains increased by $923,111 and
paid-in-capital decreased by $804,205 as a result of a tax return of capital
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 reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $3,052,967 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2007.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding forward currency contracts at October 31, 1999 were as
follows:
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
SETTLEMENT TO CONTRACT TO APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- ---------- --------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
11/10/99 AUD 650,000 424,775 414,696 10,079
- ------------------------------------------------------------------------------------
11/04/99 CAD 5,000,000 3,344,705 3,396,451 (51,745)
- ------------------------------------------------------------------------------------
11/26/99 GBP 800,000 1,279,104 1,315,326 (36,222)
- ------------------------------------------------------------------------------------
11/26/99 GBP 2,600,000 4,305,600 4,274,808 30,792
- ------------------------------------------------------------------------------------
11/26/99 NZD 2,300,000 1,218,885 1,167,541 51,344
- ------------------------------------------------------------------------------------
$10,573,069 $10,568,822 $ 4,248
====================================================================================
</TABLE>
F. Bond Premiums -- It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
G. Expenses -- Distribution expenses 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 investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.70% of the first $1
billion of the Fund's average daily net assets, plus 0.65% of the Fund's average
daily net assets in excess of $1 billion. During the year ended October 31,
1999, AIM waived fees of $423,180.
FS-50
<PAGE> 241
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $66,799 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $148,724 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C 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 Class 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 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,
1999, the Class A, Class B and Class C shares paid AIM Distributors $300,260,
$385,265 and $19,247, respectively, as compensation under the Plans.
AIM Distributors received commissions of $28,250 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. 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, 1999,
AIM Distributors received $3,743 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, 1999, the Fund paid legal fees of $3,672 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$1,167 and $1,184, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $2,351 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. 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, 1999 was
$90,400,242 and $90,308,631, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 815,437
- ------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (5,913,598)
- ------------------------------------------------------------
Net unrealized depreciation of investment
securities $(5,098,161)
============================================================
</TABLE>
Cost of investments for tax purposes is $91,266,418.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 2,496,536 $ 26,051,117 3,840,125 $ 41,970,650
- ----------------------------------------------------------------------------
Class B 1,275,307 13,306,447 1,818,456 19,865,377
- ----------------------------------------------------------------------------
Class C 101,598 1,053,223 155,501 1,696,174
- ----------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 315,101 3,238,097 221,486 2,412,254
- ----------------------------------------------------------------------------
Class B 188,786 1,938,556 144,487 1,573,639
- ----------------------------------------------------------------------------
Class C 9,111 93,556 4,387 47,595
- ----------------------------------------------------------------------------
Reacquired:
Class A (3,041,035) (31,145,940) (1,406,526) (15,368,213)
- ----------------------------------------------------------------------------
Class B (1,370,398) (14,066,967) (814,522) (8,911,529)
- ----------------------------------------------------------------------------
Class C (85,444) (882,865) (13,394) (145,852)
- ----------------------------------------------------------------------------
(110,438) $ (414,776) 3,950,000 $ 43,140,095
============================================================================
</TABLE>
FS-51
<PAGE> 242
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and Class B
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999 and for a share of Class C capital stock outstanding during
each of the years in the two-year period ended October 31, 1999 and the period
August 4, 1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.60 $ 10.93 $ 10.85 $10.74 $10.02
- ------------------------------------------------------ ------- ------- ------- ------ ------
Income from investment operations:
Net investment income 0.67 0.71 0.72 0.79(a) 0.79
- ------------------------------------------------------ ------- ------- ------- ------ ------
Net gains (losses) on securities (both realized and
unrealized) (0.86) (0.27) 0.21 0.25 0.75
- ------------------------------------------------------ ------- ------- ------- ------ ------
Total from investment operations (0.19) 0.44 0.93 1.04 1.54
- ------------------------------------------------------ ------- ------- ------- ------ ------
Less distributions:
Dividends from investment income (0.61) (0.61) (0.72) (0.81) (0.82)
- ------------------------------------------------------ ------- ------- ------- ------ ------
Distributions from net realized gains -- (0.07) (0.13) (0.12) --
- ------------------------------------------------------ ------- ------- ------- ------ ------
Return of capital (0.08) (0.09) -- -- --
- ------------------------------------------------------ ------- ------- ------- ------ ------
Total distributions (0.69) (0.77) (0.85) (0.93) (0.82)
- ------------------------------------------------------ ------- ------- ------- ------ ------
Net asset value, end of period $ 9.72 $ 10.60 $ 10.93 $10.85 $10.74
====================================================== ======= ======= ======= ====== ======
Total return(b) (1.94)% 3.95% 9.05% 10.22% 16.07%
====================================================== ======= ======= ======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,077 $58,115 $30,924 $21,926 $10,004
====================================================== ======= ======= ======= ====== ======
Ratio of expenses to average net assets(c) 1.25%(d) 1.23% 1.25% 1.25% 1.25%
====================================================== ======= ======= ======= ====== ======
Ratio of net investment income to average net assets(e) 6.54%(d) 6.38% 6.54% 7.27% 7.38%
====================================================== ======= ======= ======= ====== ======
Portfolio turnover rate 93% 47% 61% 83% 128%
====================================================== ======= ======= ======= ====== ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.67%, 1.73%, 1.86%, 2.02% and 3.03% for the periods 1999-1995.
(d) Ratios are based on average net assets of $60,052,093.
(e) After fee waivers and/or expense reimbursements. The ratios of net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 6.12%, 5.89%, 5.93%, 6.51% and 5.59% for the periods
1999-1995.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------- --------------------------
1999 1998 1997 1996 1995 1999 1998 1997
------- ------- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.59 $ 10.92 $ 10.84 $ 10.73 $10.01 $10.59 $10.92 $10.76
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income 0.62 0.65 0.67 0.74(a) 0.74 0.62 0.66 0.15(a)
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Net gains (losses) on securities (both
realized and unrealized) (0.85) (0.27) 0.21 0.24 0.75 (0.86) (0.28) 0.17
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Total from investment operations (0.23) 0.38 0.88 0.98 1.49 (0.24) 0.38 0.32
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Less distributions:
Dividends from investment income (0.56) (0.55) (0.67) (0.75) (0.77) (0.56) (0.55) (0.13)
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Distributions from net realized gains -- (0.07) (0.13) (0.12) -- -- (0.07) (0.03)
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Return of capital (0.08) (0.09) -- -- -- (0.08) (0.09) --
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Total distributions (0.64) (0.71) (0.80) (0.87) (0.77) (0.64) (0.71) (0.16)
- ------------------------------------------ ------- ------- ------- ------- ------ ------ ------ ------
Net asset value, end of period $ 9.72 $ 10.59 $ 10.92 $ 10.84 $10.73 $ 9.71 $10.59 $10.92
========================================== ======= ======= ======= ======= ====== ====== ====== ======
Total return(b) (2.37)% 3.38% 8.48% 9.66% 15.56% (2.47)% 3.39% 2.99%
========================================== ======= ======= ======= ======= ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $34,423 $36,525 $25,121 $16,787 $4,207 $1,884 $1,785 $ 242
========================================== ======= ======= ======= ======= ====== ====== ====== ======
Ratio of expenses to average net assets(c) 1.75%(d) 1.75% 1.76% 1.75% 1.73% 1.75%(d) 1.73% 1.76%(e)
========================================== ======= ======= ======= ======= ====== ====== ====== ======
Ratio of net investment income to average
net assets(f) 6.04%(d) 5.87% 6.03% 6.77% 6.88% 6.04%(d) 5.88% 6.03%(e)
========================================== ======= ======= ======= ======= ====== ====== ====== ======
Portfolio turnover rate 93% 47% 61% 83% 128% 93% 47% 61%
========================================== ======= ======= ======= ======= ====== ====== ====== ======
</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
2.17%, 2.25%, 2.37%, 2.53% and 3.57% for 1999-1995 for Class B and 2.17%,
2.22% and 2.37% (annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $38,526,539 and $1,924,739 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 5.62%, 5.37%, 5.42%, 6.00% and 5.05% for 1999-1995 for
Class B and 5.62%, 5.40% and 5.42% (annualized) for 1999-1997 for Class C.
FS-52
<PAGE> 243
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, 1999, 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, 1999, 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, 1999, 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 LLP
December 3, 1999
Houston, Texas
FS-53
<PAGE> 244
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-94.17%
AUSTRALIA-1.53%
AMP Ltd. (Insurance-Life/Health) 1,352,000 $ 13,752,481
- ---------------------------------------------------------------
Brambles Industries Ltd. (Air
Freight) 383,000 10,774,322
- ---------------------------------------------------------------
Cable & Wireless Optus Ltd.
(Telephone)(a) 3,103,700 7,107,662
- ---------------------------------------------------------------
Telstra Corp. Ltd. (Telephone)(a) 4,774,700 15,320,279
- ---------------------------------------------------------------
46,954,744
- ---------------------------------------------------------------
BELGIUM-0.40%
UCB S.A.
(Manufacturing-Diversified) 328,600 12,255,194
- ---------------------------------------------------------------
BRAZIL-0.97%
Embratel Participacoes S.A.-ADR
(Telephone) 492,800 6,344,800
- ---------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 78,071 12,418,632
- ---------------------------------------------------------------
Tele Centro Sul Participacoes
S.A.-ADR (Telephone) 105,840 6,323,940
- ---------------------------------------------------------------
Telesp Participacoes S.A.-ADR
(Telephone) 286,300 4,634,481
- ---------------------------------------------------------------
29,721,853
- ---------------------------------------------------------------
CANADA-6.33%
BCE, Inc. (Telephone) 672,500 40,469,673
- ---------------------------------------------------------------
Bombardier Inc.
(Aerospace/Defense) 1,403,100 24,730,317
- ---------------------------------------------------------------
Imasco Ltd.
(Manufacturing-Diversified) 351,100 9,419,582
- ---------------------------------------------------------------
Loblaw Co. Ltd. (Retail-Food
Chains) 275,000 6,406,643
- ---------------------------------------------------------------
Nortel Networks Corp.
(Communications Equipment) 1,000,714 61,981,723
- ---------------------------------------------------------------
Research in Motion Ltd.
(Communications Equipment)(a) 460,000 14,262,462
- ---------------------------------------------------------------
Rogers Communications, Inc.
(Telecommunications-Cellular/Wireless)(a) 675,000 13,662,297
- ---------------------------------------------------------------
Shaw Communications, Inc.
(Broadcasting- Television,
Radio & Cable) 376,000 11,428,377
- ---------------------------------------------------------------
Toronto-Dominion Bank (The)
(Banks- Regional) 510,200 11,695,476
- ---------------------------------------------------------------
194,056,550
- ---------------------------------------------------------------
FINLAND-2.98%
Nokia Oyj (Communications
Equipment) 654,342 74,904,859
- ---------------------------------------------------------------
Sonera Oyj
(Telecommunications-Cellular/
Wireless) 546,900 16,426,703
- ---------------------------------------------------------------
91,331,562
- ---------------------------------------------------------------
FRANCE-12.32%
Accor S.A. (Lodging-Hotels) 96,500 21,725,885
- ---------------------------------------------------------------
Altran Technologies, S.A.
(Services- Commercial &
Consumer) 93,200 31,954,840
- ---------------------------------------------------------------
AXA (Insurance-Multi-Line) 288,614 40,717,636
- ---------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 432,900 38,028,609
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-(CONTINUED)
Carrefour Supermarche S.A.
(Retail-Food Chains) 477,200 $ 88,358,734
- ---------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail- General Merchandise) 221,750 42,295,855
- ---------------------------------------------------------------
PSA Peugeot Citroen (Automobiles) 75,000 14,399,934
- ---------------------------------------------------------------
Renault S.A. (Automobiles) 254,000 13,147,258
- ---------------------------------------------------------------
Societe Television Francaise 1
(Broadcasting-Television, Radio
& Cable) 113,075 35,450,245
- ---------------------------------------------------------------
Total Fina S.A.-Class B (Oil &
Gas-Refining & Marketing) 379,262 51,271,770
- ---------------------------------------------------------------
377,350,766
- ---------------------------------------------------------------
GERMANY-4.16%
Deutsche Bank A.G. (Banks-Major
Regional)(a) 415,000 29,776,171
- ---------------------------------------------------------------
EM.TV & Merchandising A.G.
(Broadcasting- Television,
Radio & Cable) 187,500 9,271,191
- ---------------------------------------------------------------
EM.TV & Merchandising A.G.-Rts.,
expiring 11/12/99
(Broadcasting-Television, Radio
& Cable) 187,500 1,973
- ---------------------------------------------------------------
Mannesmann A.G.
(Machinery-Diversified) 380,200 59,798,417
- ---------------------------------------------------------------
Porsche A.G.-Pfd. (Automobiles) 10,500 28,610,500
- ---------------------------------------------------------------
127,458,252
- ---------------------------------------------------------------
HONG KONG-3.19%
China Telecom Ltd.
(Telecommunications-
Cellular/Wireless)(a) 9,104,000 31,115,871
- ---------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 30,166,000 21,358,247
- ---------------------------------------------------------------
Dao Heng Bank Group Ltd. (Banks-
Regional)(a) 3,880,000 17,631,596
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Retail-Food Chains) 2,744,000 27,552,683
- ---------------------------------------------------------------
97,658,397
- ---------------------------------------------------------------
INDONESIA-0.30%
Gulf Indonesia Resources Ltd.
(Oil- International
Integrated)(a) 1,172,000 9,302,750
- ---------------------------------------------------------------
IRELAND-1.44%
Bank of Ireland (Banks-Major
Regional) 2,344,400 18,325,545
- ---------------------------------------------------------------
CRH PLC (Construction-Cement &
Aggregates) 1,360,000 25,682,645
- ---------------------------------------------------------------
44,008,190
- ---------------------------------------------------------------
ITALY-1.63%
Banca Popolare di Brescia (Banks-
Regional) 887,000 37,560,026
- ---------------------------------------------------------------
Credito Italiano S.p.A.
(Banks-Major Regional) 2,620,100 12,266,319
- ---------------------------------------------------------------
49,826,345
- ---------------------------------------------------------------
</TABLE>
FS-54
<PAGE> 245
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-25.23%
Advantest Corp. (Electronics-
Instrumentation) 235,900 $ 35,524,723
- ---------------------------------------------------------------
Alps Electric Co., Ltd.
(Electronics- Component
Distributors) 1,197,000 23,192,557
- ---------------------------------------------------------------
DDI Corp. (Telecommunications) 34,750 37,998,178
- ---------------------------------------------------------------
Hirose Electric Co. Ltd.
(Electronics- Component
Distributors) 206,800 36,081,646
- ---------------------------------------------------------------
Hoya Corp.
(Manufacturing-Specialized) 270,000 19,423,529
- ---------------------------------------------------------------
Ibiden Co., Ltd.
(Electronics-Component
Distributors) 820,000 13,764,328
- ---------------------------------------------------------------
Kirin Brewery Co., Ltd.
(Beverages- Alcoholic) 1,732,000 19,836,059
- ---------------------------------------------------------------
Kyocera Corp.
(Electronics-Component
Distributors) 314,000 30,118,460
- ---------------------------------------------------------------
Matsushita Communication
Industrial Co., Ltd.
(Telephone) 363,000 61,001,966
- ---------------------------------------------------------------
Murata Manufacturing Co., Ltd.
(Electronics- Component
Distributors) 367,000 47,170,879
- ---------------------------------------------------------------
NEC Corp. (Computers-Hardware) 2,088,000 42,258,693
- ---------------------------------------------------------------
Nippon Telegraph & Telephone
Corp. (Telecommunications-Long
Distance) 3,338 51,228,238
- ---------------------------------------------------------------
NTT Data Corp.
(Computers-Software & Services) 1,984 31,399,933
- ---------------------------------------------------------------
NTT Mobile Communications
Network, Inc.
(Telecommunications-Cellular/Wireless) 2,379 63,208,767
- ---------------------------------------------------------------
Okuma Corp. (Hardware & Tools) 3,251,000 13,252,842
- ---------------------------------------------------------------
Orix Corp.
(Financial-Diversified) 46,600 6,257,733
- ---------------------------------------------------------------
Ricoh Co., Ltd. (Office Equipment
& Supplies) 1,735,000 28,307,851
- ---------------------------------------------------------------
Rohm Co. Ltd.
(Electronics-Component
Distributors) 74,000 16,609,275
- ---------------------------------------------------------------
Sanix Inc. (Services-Commercial &
Consumer) 185,600 17,268,428
- ---------------------------------------------------------------
Sharp Corp. (Electrical
Equipment) 918,000 14,616,853
- ---------------------------------------------------------------
Sony Corp. (Electronics-Component
Distributors) 345,900 53,947,859
- ---------------------------------------------------------------
Takeda Chemical Industries Ltd.
(Health Care-Drugs-Generic &
Other) 642,000 36,886,288
- ---------------------------------------------------------------
Tokyo Electron Ltd. (Electronics-
Semiconductors) 229,000 19,022,013
- ---------------------------------------------------------------
Trend Micro Inc.
(Computers-Software &
Services)(a) 197,100 39,134,526
- ---------------------------------------------------------------
Ushio, Inc.
(Electronics-Component
Distributors) 1,261,000 15,518,325
- ---------------------------------------------------------------
773,029,949
- ---------------------------------------------------------------
MEXICO-3.27%
Cifra S.A. de C.V.
(Retail-General Merchandise)(a) 8,782,000 13,426,459
- ---------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR
(Beverages- Non-Alcoholic) 796,800 11,055,600
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-ADR
(Beverages-Non-Alcoholic) 669,970 21,983,391
- ---------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series
C (Beverages-Alcoholic) 4,538,900 11,093,515
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO-(CONTINUED)
Grupo Televisa S.A.-GDR
(Entertainment)(a) 536,200 $ 22,788,500
- ---------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de
C.V.- Class A (Paper & Forest
Products) 1,979,000 6,339,386
- ---------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Telephone) 156,000 13,338,000
- ---------------------------------------------------------------
100,024,851
- ---------------------------------------------------------------
NETHERLANDS-4.68%
Aegon N.V. (Insurance Brokers) 195,000 18,001,891
- ---------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 274,000 10,579,204
- ---------------------------------------------------------------
Equant N.V.
(Computers-Networking)(a) 100,000 9,731,462
- ---------------------------------------------------------------
Getronics N.V.
(Computers-Software & Services) 442,000 22,041,289
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. (Electrical
Equipment) 306,000 31,387,912
- ---------------------------------------------------------------
Koninklijke Ahold N.V.
(Retail-Food Chains) 957,514 29,414,696
- ---------------------------------------------------------------
Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (Publishing) 654,600 22,140,803
- ---------------------------------------------------------------
143,297,257
- ---------------------------------------------------------------
SINGAPORE-1.49%
Datacraft Asia Ltd.
(Communications Equipment) 1,418,400 6,524,640
- ---------------------------------------------------------------
DBS Group Holdings Ltd.
(Banks-Money Center)(a) 1,393,274 15,753,624
- ---------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 3,901,900 10,607,198
- ---------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing- Newspapers) 749,000 12,838,456
- ---------------------------------------------------------------
45,723,918
- ---------------------------------------------------------------
SOUTH KOREA-2.06%
Korea Electric Power Corp.-ADR
(Electric Companies) 659,900 10,393,425
- ---------------------------------------------------------------
Korea Telecom Corp.-ADR
(Telephone)(a) 464,000 16,356,000
- ---------------------------------------------------------------
L.G. Chemical Ltd.
(Chemicals-Specialty) 597,000 18,066,778
- ---------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 548,300 18,299,512
- ---------------------------------------------------------------
63,115,715
- ---------------------------------------------------------------
SPAIN-2.07%
Banco Popular Espanol S.A.
(Banks-Major Regional) 197,000 13,264,246
- ---------------------------------------------------------------
NH Hoteles, S.A. (Investment
Management)(a) 556,500 6,293,758
- ---------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 2,668,827 43,913,045
- ---------------------------------------------------------------
63,471,049
- ---------------------------------------------------------------
SWEDEN-1.51%
Hennes & Mauritz A.B.-Class B
(Retail- Specialty-Apparel) 1,466,768 38,969,943
- ---------------------------------------------------------------
NetCom A.B.
(Telecommunications-Cellular/
Wireless)(a) 176,400 7,324,976
- ---------------------------------------------------------------
46,294,919
- ---------------------------------------------------------------
</TABLE>
FS-55
<PAGE> 246
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWITZERLAND-3.11%
ABB Ltd. (Electrical
Equipment)(a) 151,150 $ 15,217,108
- ---------------------------------------------------------------
Adecco S.A. (Services-Commercial
& Consumer) 29,191 17,690,355
- ---------------------------------------------------------------
Compagnie Financiere Richemont
A.G. (Tobacco) 16,100 30,749,131
- ---------------------------------------------------------------
Zurich Allied A.G.
(Insurance-Multi-Line) 56,106 31,756,725
- ---------------------------------------------------------------
95,413,319
- ---------------------------------------------------------------
TAIWAN-0.92%
Far Eastern Textile Ltd.
(Chemicals- Diversified) 9,331,470 12,767,522
- ---------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co.
(Electronics-Semiconductors)(a) 3,472,000 15,433,544
- ---------------------------------------------------------------
28,201,066
- ---------------------------------------------------------------
THAILAND-0.46%
Siam Commercial Bank PLC Wts.,
expiring 05/10/02
(Banks-Regional)(b) 9,404,000 3,288,538
- ---------------------------------------------------------------
Siam Commercial Bank PLC, 5.25%
Pfd. (Banks-Regional)(a) 9,404,000 10,657,298
- ---------------------------------------------------------------
13,945,836
- ---------------------------------------------------------------
UNITED KINGDOM-14.12%
Barclays PLC (Banks-Major
Regional) 1,392,000 42,636,380
- ---------------------------------------------------------------
BP Amoco PLC (Oil & Gas-Refining
& Marketing) 2,930,000 28,445,643
- ---------------------------------------------------------------
British Sky Broadcasting Group
PLC (Broadcasting-Television,
Radio & Cable) 2,810,000 30,191,184
- ---------------------------------------------------------------
British Telecommunications PLC
(Communications Equipment) 1,598,875 29,007,819
- ---------------------------------------------------------------
Compass Group PLC
(Services-Commercial &
Consumer) 1,996,500 21,401,546
- ---------------------------------------------------------------
General Electric Co. PLC
(Manufacturing- Diversified) 2,139,000 23,263,168
- ---------------------------------------------------------------
Granada Group PLC (Leisure Time-
Products) 1,861,950 14,724,527
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Hays PLC (Services-Commercial &
Consumer) 3,280,700 $ 37,567,809
- ---------------------------------------------------------------
Invensys PLC
(Electronics-Component-
Distributors) 2,500,000 12,289,648
- ---------------------------------------------------------------
Logica PLC (Computer Software &
Services) 1,033,500 15,810,845
- ---------------------------------------------------------------
Orange PLC (Telephone)(a) 2,902,300 72,386,256
- ---------------------------------------------------------------
Provident Financial PLC (Consumer
Finance) 963,933 10,768,731
- ---------------------------------------------------------------
Shell Transport & Trading Co.
(Oil- International Integrated) 2,840,000 21,782,023
- ---------------------------------------------------------------
Vodafone Airtouch PLC
(Telecommunications-Cellular/
Wireless) 9,171,500 42,673,183
- ---------------------------------------------------------------
WPP Group PLC
(Services-Advertising/
Marketing) 2,729,500 29,640,406
- ---------------------------------------------------------------
432,589,168
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$1,993,503,584) 2,885,031,650
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES-0.08%
SHIPPING-0.08%
Cosco Treasury Co. Ltd. (Hong
Kong), Conv. Gtd. Bonds, 1.00%,
03/13/03 (Cost $2,038,832) $ 2,754,000 2,569,534
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-3.68%
STIC Liquid Assets Portfolio(c) 56,392,364 56,392,364
- ---------------------------------------------------------------
STIC Prime Portfolio(c) 56,392,364 56,392,364
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $112,784,728) 112,784,728
- ---------------------------------------------------------------
TOTAL INVESTMENTS-97.93% 3,000,385,912
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-2.07% 63,347,198
- ---------------------------------------------------------------
NET ASSETS-100.00% $3,063,733,110
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Rts. - Rights
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(c) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-56
<PAGE> 247
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,108,327,144) $3,000,385,912
- ------------------------------------------------------------
Foreign currencies, at value (cost
$74,813,071) 74,702,387
- ------------------------------------------------------------
Receivables for:
Investments sold 56,015,112
- ------------------------------------------------------------
Capital stock sold 18,461,482
- ------------------------------------------------------------
Dividends and interest 6,337,504
- ------------------------------------------------------------
Foreign exchange contracts 14,794
- ------------------------------------------------------------
Investment for deferred compensation plan 49,495
- ------------------------------------------------------------
Other assets 64,941
- ------------------------------------------------------------
Total assets 3,156,031,627
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 80,677,634
- ------------------------------------------------------------
Capital stock reacquired 6,310,879
- ------------------------------------------------------------
Deferred compensation 49,495
- ------------------------------------------------------------
Accrued advisory fees 2,182,463
- ------------------------------------------------------------
Accrued administrative services fees 15,624
- ------------------------------------------------------------
Accrued custodian fees 308,014
- ------------------------------------------------------------
Accrued directors' fees 1,989
- ------------------------------------------------------------
Accrued distribution fees 1,957,696
- ------------------------------------------------------------
Accrued transfer agent fees 474,904
- ------------------------------------------------------------
Accrued operating expenses 319,819
- ------------------------------------------------------------
Total liabilities 92,298,517
- ------------------------------------------------------------
Net assets applicable to shares outstanding $3,063,733,110
============================================================
NET ASSETS:
Class A $2,058,418,998
============================================================
Class B $ 887,106,232
============================================================
Class C $ 118,207,880
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 400,000,000
- ------------------------------------------------------------
Outstanding 94,727,616
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 42,019,748
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 5,595,038
============================================================
Class A:
Net asset value and redemption price per
share $ 21.73
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $21.73 / 94.50%) $ 22.99
============================================================
Class B:
Net asset value and offering price per
share $ 21.11
============================================================
Class C:
Net asset value and offering price per
share $ 21.13
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $4,188,410 foreign
withholding tax) $ 30,386,931
- -----------------------------------------------------------
Interest 6,418,977
- -----------------------------------------------------------
Total investment income 36,805,908
- -----------------------------------------------------------
EXPENSES:
Advisory fees 25,205,776
- -----------------------------------------------------------
Administrative services fees 150,312
- -----------------------------------------------------------
Custodian fees 2,096,887
- -----------------------------------------------------------
Directors' fees 30,233
- -----------------------------------------------------------
Distribution fees-Class A 5,566,448
- -----------------------------------------------------------
Distribution fees-Class B 8,024,805
- -----------------------------------------------------------
Distribution fees-Class C 871,229
- -----------------------------------------------------------
Transfer agent fees-Class A 3,503,290
- -----------------------------------------------------------
Transfer agent fees-Class B 2,144,697
- -----------------------------------------------------------
Transfer agent fees-Class C 275,741
- -----------------------------------------------------------
Other 1,047,772
- -----------------------------------------------------------
Total expenses 48,917,190
- -----------------------------------------------------------
Less: Fees waived by advisor (1,122,543)
- -----------------------------------------------------------
Expenses paid indirectly (38,898)
- -----------------------------------------------------------
Net expenses 47,755,749
- -----------------------------------------------------------
Net investment income (loss) (10,949,841)
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 182,981,531
- -----------------------------------------------------------
Foreign currencies (190,675)
- -----------------------------------------------------------
182,790,856
- -----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 476,714,401
- -----------------------------------------------------------
Foreign currencies (900,290)
- -----------------------------------------------------------
475,814,111
- -----------------------------------------------------------
Net gain from investment securities and
foreign
currencies 658,604,967
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $647,655,126
===========================================================
</TABLE>
See Notes to Financial Statements.
FS-57
<PAGE> 248
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (10,949,841) $ 796,378
- -----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 182,790,856 132,726,915
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 475,814,111 28,100,960
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 647,655,126 161,624,253
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (10,410,630) (5,803,939)
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (20,381,375) --
- -----------------------------------------------------------------------------------------------
Class B (9,045,542) --
- -----------------------------------------------------------------------------------------------
Class C (756,877) --
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (81,882,865) 22,585,920
- -----------------------------------------------------------------------------------------------
Class B (28,939,533) 35,370,772
- -----------------------------------------------------------------------------------------------
Class C 39,293,753 45,396,283
- -----------------------------------------------------------------------------------------------
Net increase in net assets 535,532,057 259,173,289
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,528,201,053 2,269,027,764
- -----------------------------------------------------------------------------------------------
End of period $3,063,733,110 $2,528,201,053
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,002,598,882 $2,001,298,592
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (8,098,861) (315,829)
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and foreign currencies 177,562,192 111,361,504
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 891,670,897 415,856,786
- -----------------------------------------------------------------------------------------------
$3,063,733,110 $2,528,201,053
===============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-58
<PAGE> 249
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
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. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be 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 long-term growth of capital
by investing in a diversified portfolio of international equity securities whose
issuers are considered by the Fund's portfolio managers to have strong earnings
momentum.
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 the 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 its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
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. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales 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 the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, $13,577,439 was reclassified from undistributed net
investment income (loss), undistributed net realized gains was decreased by
$86,406,374 and paid in capital was increased by $72,828,935 as a result of
differing book/tax treatment of foreign currency transactions and net
operating loss reclassifications 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 reclassification
discussed above.
C. 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.
D. Foreign Currency Translations -- Portfolio, securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
FS-59
<PAGE> 250
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. 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.
F. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
G. Expenses -- Distribution expenses 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 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 has contractually agreed to waive
a portion of its advisory fees paid to the Fund by AIM to the extent necessary
to reduce the fees paid by the Fund at the net asset levels higher than those
currently incorporated in the present advisory fee schedule. Under the
contractual 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 contractual and may not be
terminated without approval of the Board of Directors of the Company. During the
year ended October 31, 1999, AIM waived fees of $1,122,543.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $150,312 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 1999, AFS
was paid $2,547,913 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.30% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C 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 Class 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 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,
1999, the Class A, Class B and Class C shares paid AIM Distributors $5,566,448,
$8,024,805 and $871,229, respectively, as compensation under the Plans.
AIM Distributors received commissions of $446,482 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. 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, 1999,
AIM Distributors received $157,129 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, 1999, the Fund paid legal fees of $8,665 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$32,748 and $6,150, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $38,898 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
FS-60
<PAGE> 251
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, 1999 was
$2,215,214,374 and $2,387,679,858, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $915,052,506
- --------------------------------------------------------------------------
Aggregate unrealized appreciation (depreciation) of
investment securities (34,222,893)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $880,829,613
==========================================================================
Cost of investments for tax purposes is $2,119,556,299
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 144,897,083 $ 2,695,101,630 255,642,183 $ 4,635,171,469
- -----------------------------------------------------------------------------------------------------------------------------
Class B 11,600,846 212,065,890 12,193,983 217,550,365
- -----------------------------------------------------------------------------------------------------------------------------
Class C 9,254,771 168,733,197 25,679,581 472,331,833
- -----------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,596,985 28,282,611 332,423 5,441,633
- -----------------------------------------------------------------------------------------------------------------------------
Class B 482,230 8,356,948 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Class C 39,786 689,883 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Issued in connection with acquisition*:
Class A 5,974,789 106,921,489 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Class B 2,061,255 35,971,364 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (155,781,747) (2,912,188,595) (252,737,021) (4,618,027,182)
- -----------------------------------------------------------------------------------------------------------------------------
Class B (15,614,562) (285,333,735) (10,435,828) (182,179,593)
- -----------------------------------------------------------------------------------------------------------------------------
Class C (7,117,246) (130,129,327) (23,050,474) (426,935,550)
- -----------------------------------------------------------------------------------------------------------------------------
(2,605,810) $ (71,528,645) 7,624,847 $ 103,352,975
=============================================================================================================================
</TABLE>
* The Fund acquired AIM International Growth Fund on February 12, 1999. The
acquired fund's net assets as of the closing date were $125,802,235. The net
assets of the Fund immediately prior to acquisition were $2,655,808,540.
FS-61
<PAGE> 252
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,
1999, for a share of Class B capital stock outstanding during each of the years
in the five-year period ended October 31, 1999 and for a share of Class C
capital stock outstanding during each of the years in the two-year period ended
October 31, 1999 and the period August 4, 1997 (date sales commenced) through
October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.59 $ 16.64 $ 15.37 $ 13.65 $ 13.50
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income (loss) (0.03) 0.05(a) 0.04(a) 0.04(a) 0.01
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- --------
Net gains on securities (both realized and unrealized) 4.49 0.96 1.68 2.07 0.62
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- --------
Total from investment operations 4.46 1.01 1.72 2.11 0.63
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income (0.11) (0.06) (0.02) (0.01) (0.04)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- --------
Distributions from net realized gains (0.21) -- (0.43) (0.38) (0.44)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- --------
Total distributions (0.32) (0.06) (0.45) (0.39) (0.48)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 21.73 $ 17.59 $ 16.64 $ 15.37 $ 13.65
============================================================ ========== ========== ========== ========== ========
Total return(b) 25.73% 6.11% 11.43% 15.79% 5.24%
============================================================ ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,058,419 $1,724,635 $1,577,390 $1,108,395 $654,764
============================================================ ========== ========== ========== ========== ========
Ratio of expenses to average net assets(c) 1.48%(d) 1.45% 1.47% 1.58% 1.67%
============================================================ ========== ========== ========== ========== ========
Ratio of net investment income (loss) to average net
assets(e) (0.14)%(d) 0.28% 0.24% 0.25% 0.10%
============================================================ ========== ========== ========== ========== ========
Portfolio turnover rate 86% 78% 50% 66% 68%
============================================================ ========== ========== ========== ========== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct 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
1.52%, 1.49%, 1.51%, 1.60% and 1.68% for 1999-1995.
(d) Ratios are based on average net assets of $1,855,482,758.
(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 (0.18)%, 0.24%, 0.20%, 0.22% and 0.09% for 1999-1995.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------- --------
1999 1998 1997 1996 1995 1999
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.13 $ 16.27 $ 15.13 $ 13.54 $ 13.49 $ 17.14
- ------------------------------------------------ ---------- ---------- ---------- ---------- -------- --------
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.09)(a) (0.09)(a) (0.07)(a) (0.09) (0.17)(a)
- ------------------------------------------------ ---------- ---------- ---------- ---------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 4.36 0.95 1.66 2.04 0.61 4.37
- ------------------------------------------------ ---------- ---------- ---------- ---------- -------- ---------
Total from investment operations 4.19 0.86 1.57 1.97 0.52 4.20
- ------------------------------------------------ ---------- ---------- ---------- ---------- -------- ---------
Less distributions:
Dividends from net investment income -- -- -- -- (0.03) --
- ------------------------------------------------ ---------- ---------- ---------- ---------- -------- --------
Distributions from net realized gains (0.21) -- (0.43) (0.38) (0.44) (0.21)
- ------------------------------------------------ ---------- ---------- ---------- ---------- -------- --------
Total distributions (0.21) -- (0.43) (0.38) (0.47) (0.21)
- ------------------------------------------------ ---------- ---------- ---------- ---------- -------- --------
Net asset value, end of period $ 21.11 $ 17.13 $ 16.27 $ 15.13 $ 13.54 $ 21.13
================================================ ========== ========== ========== ========== ======== ========
Total return(b) 24.72% 5.29% 10.61% 14.88% 4.35% 24.76%
================================================ ========== ========== ========== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 887,106 $ 744,987 $ 678,809 $ 368,355 $ 51,964 $118,208
================================================ ========== ========== ========== ========== ======== ========
Ratio of expenses to average net assets(c) 2.27%(d) 2.22% 2.25% 2.35% 2.55% 2.27%(d)
================================================ ========== ========== ========== ========== ======== ========
Ratio of net investment income (loss) to average
net assets(f) (0.93)%(d) (0.49)% (0.53)% (0.53)% (0.78)% (0.93)%(d)
================================================ ========== ========== ========== ========== ======== ========
Portfolio turnover rate 86% 78% 50% 66% 68% 86%
================================================ ========== ========== ========== ========== ======== ========
<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%() 2.27%(e)
================================================ ======== ========
Ratio of net investment income (loss) to average
net assets(f) (0.49)%() (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
2.31%, 2.26%, 2.28%, 2.37% and 2.56% for 1999-1995 for Class B and 2.31%,
2.26% and 2.30% (annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $802,480,523 and $87,122,931 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 (0.97)%, (0.53)%, (0.57)%, (0.55)% and (0.79)%, for
1999-1995 for Class B and (0.97)%, (0.53)% and (0.57)% (annualized) for
1999-1997 for Class C.
FS-62
<PAGE> 253
APPENDIX II
ANNUAL REPORT / DECEMBER 31 1999
AIM NEW PACIFIC GROWTH FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 254
[COVER IMAGE]
-------------------------------------
MOUNTAIN AND PALM TREE LANDSCAPE BY SHERRI SILVERMAN
BEAUTIFUL AT FIRST GLANCE, SILVERMAN'S VIBRANT PAINTINGS OFFER
EVEN GREATER REWARDS TO THE CONTEMPLATIVE VIEWER. DRAWING
THEIR POWER FROM THE SIMPLEST SHAPES AND PUREST PIGMENTS, HER
WORKS DISCARD REALISTIC REPRESENTATION IN FAVOR OF INTENSE
MOOD AND ATMOSPHERE. IN THE COVER PAINTING, SILVERMAN'S TROPI-
CAL COLORS MELT SEAMLESSLY TOGETHER INTO A DREAMLIKE VISION OF
EXOTIC LANDS.
-------------------------------------
AIM New Pacific Growth Fund is for shareholders who seek long-term growth of
capital. The fund invests primarily in equity securities of companies located in
Pacific-region countries other than Japan. Japan was eliminated from the fund's
Primary Investment Area on January 21, 1994.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM New Pacific Growth Fund's performance figures are historical and reflect
changes in net asset value and the reinvestment of all distributions.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class B, Class C and Advisor Class shares will
differ from that of its Class A shares due to different sales-charge
structure and expenses.
o Because Class C shares have been offered for less than a year (since
5/3/99), total return provided is cumulative total return that has not yet
been annualized.
o Effective 3/1/99, Advisor Class shares were closed to new investors.
Effective 2/11/00, after the close of the fiscal year, Advisor Class shares
converted to Class A shares.
o During the fiscal year ended 12/31/99, the fund paid distributions of
$0.0068 per share.
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 dollar relative to other currencies, the custodial
arrangements made for the fund's foreign holdings, accounting differences,
political risks and the lesser degree of public information required to be
provided by non-U.S. companies.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged MSCI All Country (AC) Pacific Free ex-Japan Index is a group
of securities from all developed and emerging markets in the Pacific Rim
(except Japan) tracked by Morgan Stanley Capital International. MSCI's
"free" indexes account for the actual buyable securities available to
foreign investors by taking into account local market restrictions on share
ownership by foreigners.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends, and they do not
reflect sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NEITHER INSURED NOR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF
YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus for the fund.
AIM NEW PACIFIC GROWTH FUND
<PAGE> 255
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report has reconfirmed our
[PHOTO OF faith in two long-established principles of investing:
Charles T. portfolio diversification and long-term thinking. We could
Bauer, title this report "What a Difference a Year Makes."
Chairman of An investor surveying conditions when the fiscal year
the Board of opened on January 1, 1999, would have seen a market
THE FUND dominated by large-capitalization stocks and high-quality
APPEARS HERE] bonds, especially U.S. Treasuries. During 1998, two
well-known indexes of large-capitalization U.S. companies,
the S&P 500 and the Dow Jones Industrial Average, were up
28.60% and 18.15%, respectively. By contrast,
smaller-company stocks in the Russell 2000 had lost 2.55%.
Overseas, many markets were languishing, especially in Asia,
where so many financial difficulties had originated in 1997.
In bond markets as well, name-brand quality was the
place to be. The Lehman Government/Corporate Bond Index,
which follows sovereign issues and investment-grade debt, was up 9.47%, while
the Lehman High Yield Index, which tracks riskier "junk bonds," had risen only
1.60%.
It would be easy for an investor to conclude that blue-chip issues, whether
equity or fixed-income, were the place to be, that it was time to divest himself
of everything else and put all his eggs in the blue-chip basket. The investor,
of course, would be wrong.
MARKETS TURN
While large-capitalization stocks continued to do very well, during 1999 markets
broadened dramatically with many investment sectors performing a complete
turnaround. For example, the small-cap stocks in the Russell 2000 were up 21.26%
for calendar year 1999, and many Asian markets, particularly Japan, had staged a
comeback.
The same holds true of bonds. The higher-quality Lehman index was down 2.15%
during 1999 while the Lehman High Yield index was up 2.39%.
The point, at the risk of sounding repetitive to those of you who have
invested with us for a long time, is that this is why diversification is a
fundamental investing principle. Market sectors and asset classes go in and out
of favor, but over the long run--and the long run is several years--the markets'
overall trend has been upward. Selecting an asset class or a market sector on
the basis of a short-term snapshot of conditions is usually unwise, as is
concentrating your portfolio in one asset class. Staying fully invested in a
diversified portfolio remains a compelling strategy and one of your best
prospects for long-term gain. We also continue to remind you that the past few
years have seen extraordinary gains in some markets, and there is no assurance
that this trend will continue.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by multiple
signs of economic health in Europe and Asia, not to mention the prolonged U.S.
economic expansion. However, we are aware of how easily an investor could have
been misled by conditions just 12 months ago. For our shareholders, we therefore
reiterate our commitment to investing through a financial advisor. In addition
to helping you select investments appropriate to your time horizon and risk
tolerance, a financial advisor can keep you informed about how changing market
conditions affect you and your portfolio--and help ensure that when you do alter
your investments, there's a logical reason for doing so. AIM believes every
investor should be guided by a financial professional.
FUND MANAGERS COMMENT
In the pages that follow, your fund's portfolio managers discuss how they
managed your fund during the year ended December 31, how the markets behaved and
what they foresee for the near future. We trust you will find their discussion
informative. If you have any questions or comments, we invite you to contact us,
either at our Web site, aimfunds.com, or through our Client Services department
at 800-959-4246. Information about your account is also available through our
automated AIM Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
A I M Advisors, Inc.
-------------------------------------
STAYING FULLY
INVESTED IN A DIVERSIFIED
PORTFOLIO REMAINS
A COMPELLING STRATEGY
AND ONE OF YOUR
BEST PROSPECTS FOR
LONG-TERM GAIN.
-------------------------------------
AIM NEW PACIFIC GROWTH FUND
<PAGE> 256
ANNUAL REPORT / MANAGERS' OVERVIEW
HONG KONG COMEBACK BOOSTS
FUND PERFORMANCE
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?
AIM New Pacific Growth Fund produced a 45.42% total return for Class A shares,
44.59% for Class B shares and 45.90% for Advisor Class shares. These returns are
at net asset value, without a sales charge. The fund's benchmark, the MSCI All
Country (AC) Pacific Free ex-Japan Index, returned 46.89% for the same period.
Class C shares produced a cumulative total return of 22.51% from their inception
(5/3/99) through the close of the fiscal year. Net assets closed the period at
$139 million, up from $114 million at the close of the last fiscal year.
WHAT WERE MARKETS LIKE DURING THE FISCAL YEAR?
Asian markets enjoyed a record year in 1999 on the back of recovering economic
conditions, strong earnings growth, lower interest rates and the increased
valuations of Internet-related stocks. We saw a great performance divide among
markets and sectors. Korea and Indonesia gained more than 90% during the year,
while the Philippines was almost flat. The returns of the MSCI Malaysia Index
(which is measured in U.S. dollars) were distorted by currency valuation changes
resulting from capital controls imposed by the Malaysian government during the
Asian financial crisis.
Internet stocks were the clear winners in 1999. Technology and
Internet-related sectors such as telecommunications, software and telecom and
communications products massively outperformed the broad markets. The optimism
about technology stocks led to the heightened valuations of these sectors.
On the economic front, the statistics continue to confirm our view that the
Asian recovery is sustained. Reported gross domestic product growth throughout
the year was higher than expected. Rising economic activity in Asian countries
and Organization for Economic Cooperation and Development nations have
translated into greater demand for Asian products, which has led to rising
industrial production and export growth in Asia.
DID YOU FAVOR ANY COUNTRIES?
Over the year, we significantly increased our weightings in Korea and Taiwan.
Korea has led the region's economic recovery. The market valuation is also very
undemanding, as corporate earnings benefit from restructuring, deleveraging and
falling interest rates, as well as increased demand translating into improving
capacity utilization. Taiwan is also benefiting from stronger external demand,
since its economy is highly correlated to GDP statistics of other nations.
Consequently, stocks such as Taiwan Semiconductor Manufacturing and the
Korean-based Samsung Electronics have performed strongly for the fund.
Our weighting in Hong Kong has also been raised. Hong Kong's economic
recovery has lagged those of other countries because its economy is
service-based; it is set to benefit from the region's economic lift.
The liquidity environment has remained benign. The improving outlook for
the Chinese economy has prompted us to buy China-related stocks such as China
Everbright Holdings and Cosco Pacific.
WERE THERE COUNTRIES IN WHICH YOU REDUCED YOUR HOLDINGS?
We continued to decrease our Australian weightings as the rest of the Asian
economies sustained their comeback. The fund's Australian exposure has been
GROWTH OF NET ASSETS
In millions
================================================================================
12/31/98 $114
12/31/99 $139
================================================================================
-------------------------------------
WHEN YOU MARRY A STRONG, RELA-
TIVELY LONG EARNINGS CYCLE WITH
IMPROVING ECONOMIC GROWTH AND
MARKETS THAT ARE STILL REASONABLY
VALUED, YOU HAVE A GOOD RECIPE
FOR EQUITY PERFORMANCE.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM NEW PACIFIC GROWTH FUND
2
<PAGE> 257
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
<TABLE>
<CAPTION>
=============================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Hutchison Whampoa Ltd. (Hong Kong) 8.67% 1. Banks (Major Regional) 15.30%
2. Cheung Kong (Holdings) Ltd. (Hong Kong) 8.18 2. Land Development 11.30
3. Samsung Electronics Co. (South Korea) 4.46 3. Retail (Food Chains) 8.67
4. LG Information and Communication (South Korea) 3.42 4. Telephone 6.88
5. Broken Hill Proprietary Company Ltd. (Australia) 3.40 5. Computer Hardware 6.78
6. Taiwan Semiconductor Manufacturing Co. (Taiwan) 3.33 6. Electronics (Component Distributors) 6.71
7. Cable & Wireless HKT (Hong Kong) 3.32 7. Investment Banking/Brokerage 5.45
8. HSBC Holdings PLC (United Kingdom) 3.13 8. Metals Mining 4.93
9. DBS Group Holdings Ltd. (Singapore) 2.77 9. Communications Equipment 4.21
10. Kookmin Bank (South Korea) 2.59 10. Banks (Regional) 3.56
<CAPTION>
TOP 10 COUNTRIES
<S> <C>
1. Hong Kong 27.03%
2. South Korea 19.69
3. Taiwan 14.67
4. Singapore 9.98
5. Australia 7.32
6. Thailand 4.64
7. Philippines 3.88
8. United Kingdom 3.13
9. Indonesia 2.66
10. Malaysia 2.53
The fund's portfolio is subject to change, and there is no assurance that the fund will continue to hold any
particular security.
=============================================================================================================
</TABLE>
to stocks of basic industries and commodities, such as iron and steel, which
underperformed last year. One Australian holding that did perform well for us is
Broken Hill Proprietary, Australia's largest company; its mineral assets include
copper, iron ore, manganese, gold and coal. We saw better investment
opportunities elsewhere in the region, given the much faster gross domestic
product (GDP) growth and the lesser threat of inflation. Moreover, corporate
earnings growth has accelerated in other regions in which the fund invests.
WHICH HOLDINGS CONTRIBUTED MOST TO THE FUND'S STELLAR PERFORMANCE?
The fund's largest holding, Hutchison Whampoa (a Hong Kong-based company), was
our best performer over the year. The company is truly diversified; it has
extensive interests in ports and shipping, telecommunications, food processing
and distribution, retailing, manufacturing and real estate, and its business
reaches through Hong Kong to China, the United Kingdom, and around the globe.
A South Korean company that is a household name in the United States,
Samsung Electronics, also contributed significantly to the fund's performance
during the year. Samsung is one of the world's largest makers of computer-memory
chips. Strong demand for DRAM semiconductors, the company's move into the
manufacturing of mobile phones and an undemanding valuation all make Samsung a
star performer for the portfolio.
WHAT IS YOUR OUTLOOK FOR 2000?
Overall we're fairly positive on Asia right now. When you marry a strong,
relatively long earnings cycle with improving economic growth and markets that
are still reasonably valued, you have a good recipe for equity performance.
For the moment, attractive investment fundamentals are being overshadowed by
several issues: investor concerns about demand in the United States (a major
export destination for Asian-produced goods), U.S. interest rates and a nascent
Japanese recovery. These issues are worthy of consideration since Asia's
recovery is geared to global economic growth. However, it's important to
remember that a major element of Asia's economic potential is in its large
population, and domestic personal consumption bears heavily on continued
recovery. Asian consumers have enormous savings; once they begin to feel secure
about their jobs, they will exert their buying power.
-------------------------------------
. . . A MAJOR ELEMENT OF ASIA'S
ECONOMIC POTENTIAL IS IN ITS LARGE
POPULATION, AND DOMESTIC PERSON-
AL CONSUMPTION BEARS HEAVILY ON
CONTINUED RECOVERY.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM NEW PACIFIC GROWTH FUND
3
<PAGE> 258
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM NEW PACIFIC GROWTH FUND VS. BENCHMARK INDEX
12/31/89-12/31/99
In thousands
================================================================================
AIM New Pacific MSCI AC
Growth Fund, Pacific Free
Class A shares ex-Japan Index
- --------------------------------------------------------------------------------
12/31/89 9453 10000
12/31/90 8417 8813.76
12/31/91 9517 11669.2
12/31/92 8759 12822.6
12/31/93 14068 23714.7
12/31/94 11292 20727.9
12/31/95 12133 22801.1
12/31/96 14565 24643.3
12/31/97 8121 16214.1
12/31/98 6571 15498
12/31/99 9555 23273
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. THE RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
================================================================================
CLASS A SHARES
Inception (1/19/77) 9.55%
10 Years -0.45%
5 Years -4.37%
1 Year 37.48%*
*45.42% excluding sales charges
CLASS B SHARES
Inception (4/1/93) -0.70%
5 Years -4.22%
1 Year 39.59%*
*44.59% excluding CDSC
ADVISOR CLASS SHARES*
Inception (6/1/95) -4.90%
3 Years -12.82%
1 Year 45.90%
*Sales charges do not apply.
CLASS C SHARES
Inception (5/3/99) 21.51%*
*22.51% excluding CDSC
Source: Lipper, Inc.
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B, Class C and Advisor Class shares will
differ from that of its Class A shares due to different sales-charge structure
and expenses. For fund performance calculations and descriptions of the index
cited on this page, please see the inside front cover.
ABOUT THIS CHART
This chart compares your fund's Class A shares to its benchmark index. It is
intended to give you an idea of how your fund performed compared to this index
over the period 12/31/89-12/31/99. It is important to understand the difference
between your fund and an index. An index measures the performance of a
hypothetical portfolio. A market index like the MSCI All Country (AC) Pacific
Free ex-Japan Index is unmanaged, incurring 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.
AIM NEW PACIFIC GROWTH FUND
4
<PAGE> 259
ANNUAL REPORT / FOR CONSIDERATION
[COVER IMAGE]
CHOOSE YOUR INVESTMENT PALETTE
No two pieces of art are exactly alike. Just as an artist may use different
paints to create a piece, so does an investor use different kinds of investments
to create a portfolio. And as with art, tastes can change over time--most
investors have different goals at different stages in their lives, as well as
varying tolerance for risk. The biggest advantage mutual funds offer is the
potential for diversification. Providing funds with assorted objectives and
goals allows investors to shape their portfolios to their specific needs and
spread their risk over several different funds, rather than painting their
portfolios all one color.
GROWTH VS. INCOME
If you look at the list of AIM's retail mutual funds on the back of your fund
report, you'll notice that they are divided into different types. Two that
frequently appear are growth and income. Common stock is normally the growth
component of a mutual fund with growth as a primary or secondary objective.
Bonds are typically the income components of a mutual fund with income as a
primary or secondary objective.
Let's take a closer look at the categories into which AIM's retail mutual
funds are divided. Keep in mind that funds listed under the same category don't
necessarily have the same kind of investment strategy or portfolio, even if they
have the same objective.
DOMESTIC MUTUAL FUNDS
GROWTH FUNDS
Growth funds typically invest in common stocks of companies whose businesses are
growing. Growth companies tend to reinvest their profits toward expansion of
their potential to produce greater returns instead of paying dividends. So
growth mutual funds focus on generating capital gains--increasing the value of
the stocks they hold--rather than current income, which means they
generally don't pay regular income dividends. Growth funds usually do, however,
make one capital-gains distribution per year, when there are gains.
An increase over time in the value of a growth fund's portfolio means the
fund's value, or share price, increases over time also. Shareholders in a growth
fund, then, make money by selling their shares for more than they paid for them.
Of course, the opposite is also true--shareholders can lose money by selling
their shares for less than they paid for them. Growth funds usually range from
moderate to very aggressive, depending on the size and types of companies in
which they invest.
GROWTH AND INCOME FUNDS
A growth and income fund generally invests in common and preferred stocks and
bonds of older, more established companies that have a longer track record of
growth and paying dividends.
A typical growth and income mutual fund will pay quarterly or annual income
dividends to its shareholders. (Monthly dividends are not common.) In this way,
growth and income funds can potentially provide long-term growth of investments
and also current income. These funds tend to be more conservative than growth
funds.
INCOME FUNDS
Income funds are generally designed to provide high current income rather than
long-term growth. To that end, income funds usually invest chiefly in
interest-paying corporate and government bonds. They may also own stocks of
companies that pay regular dividends. Some income funds are more aggressive than
others. The aggressiveness of a particular fund depends not only on the kinds of
securities in which it invests, but also on the fund's sector allocation and
maturity structure.
AIM NEW PACIFIC GROWTH FUND
5
<PAGE> 260
ANNUAL REPORT / FOR CONSIDERATION
For example, Treasury securities are considered a relatively safe investment
because they are guaranteed by the U.S. government. However, lower risk also
means lower return potential. On the other hand, lower-rated corporate bonds,
often called junk bonds, involve more risk because they are not guaranteed--they
are only as good as the companies that issue them. But the added risk also means
higher return potential.
Income funds are considered more conservative and are suited for investors
seeking income rather than growth.
TAX-FREE INCOME OR MUNICIPAL FUNDS
These funds provide shareholders with current income that is tax-exempt at some
level, depending on the securities in which they invest. So municipal mutual
funds appeal to investors who are looking to reduce income that would otherwise
be subject to tax. Municipal bonds or notes, which are issued by state or local
governments, are generally exempt from federal taxes. Federal securities, like
Treasury bonds, are usually exempt from state taxes. And then there are some
securities that are exempt from both federal and state taxes.(1)
MONEY MARKET FUNDS
A money market fund is one of the safest types of mutual funds available because
its main goal is preserving your investment while paying current income in the
form of interest. As a result, these funds tend to appeal to investors looking
for safety, liquidity and some income from their investment. Money market funds
invest in high-quality, short-term securities such as commercial paper and U.S.
government agency securities. Although money market funds are not guaranteed or
insured by the U.S. government, the securities they hold are less risky than
other types of fixed-income securities. The trade-off for safety of principal
investment is a lower rate of return.(2)
INTERNATIONAL AND GLOBAL MUTUAL FUNDS
INTERNATIONAL GROWTH FUNDS
An international growth fund has the same objective as a domestic growth fund,
except it invests in stocks of companies located outside the United States. Like
their domestic counterparts, international growth funds tend to pay
distributions in the form of capital gains rather than dividends. An
international growth mutual fund might invest in a particular country, region or
continent depending on the investment strategy shown in its prospectus.
International funds carry different risks than domestic funds because most
foreign markets are not as established as the markets in the United States.
Other risks include changes in the value of the U.S. dollar compared to foreign
currencies, accounting differences, political risks and foreign regulatory
differences.
GLOBAL GROWTH, GLOBAL GROWTH AND INCOME, AND GLOBAL INCOME FUNDS
These funds are similar to their domestic equivalents in terms of their goals
and the income distributions they pay. Global funds are comparable to
international funds in that they can invest in stocks of companies outside the
United States. But global funds can also invest substantially in U.S. stocks;
international funds generally do not. The amount of a global fund's portfolio
that can be invested in the United States varies greatly from fund to fund,
according to a fund's prospectus. Global funds carry the same risks as
international funds.
SPECIALIZED FUNDS
THEME FUNDS
Theme or sector funds invest primarily in a particular industry or sector of the
economy, either domestically or globally. Theme funds are required by prospectus
to invest a certain percentage of their assets in their industry or sector of
choice under normal market conditions. As a result, theme funds present greater
risk and potential reward than more diversified funds. The types of securities
held by a theme fund determine its goal of growth and/or income.
TYPES OF FUND DISTRIBUTIONS
INCOME DIVIDENDS are paid from dividends and/or interest from securities in a
fund's portfolio. For example, if a company in which a mutual fund owns stock
distributes some of its earnings to its shareholders as a dividend, the fund
passes on those earnings to its own shareholders. Income dividends are usually
taxed as ordinary income.
CAPITAL GAINS represent the net profit realized from the growth in value of the
holdings in a fund's portfolio. These distributions are usually made once per
year. There are two types of capital gains:
o Short-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for less than a year. Short-term capital gains
are taxed as ordinary income.
o Long-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for more than a year. Long-term capital gains
are usually taxed at the capital-gains rate, which is typically lower than
ordinary income-tax rates.
(1) Investors in tax-free income funds still have a risk of incurring taxes on
capital-gains distributions, for example, so it's wise to see your tax advisor
before investing in such funds.
(2) There is no guarantee that a money market fund will be able to maintain a
stable net asset value of $1.00 per share.
See the back cover for a complete list of AIM's retail mutual funds. For more
information about your fund's objective, read your fund prospectus. For more
complete information about any AIM fund(s), including sales charges and
expenses, ask your financial advisor or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money.
AIM NEW PACIFIC GROWTH FUND
6
<PAGE> 261
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-96.49%
AUSTRALIA-7.32%
Broken Hill Proprietary Co. Ltd.
(Iron & Steel) 360,350 $ 4,735,236
- --------------------------------------------------------------
North Ltd. (Metals Mining) 893,050 2,106,374
- --------------------------------------------------------------
WMC Ltd. (Metals Mining) 607,000 3,349,912
- --------------------------------------------------------------
10,191,522
- --------------------------------------------------------------
CHINA-0.96%
Angang New Steel Co. Ltd. (Metal
Fabricators)(a) 6,000,000 478,549
- --------------------------------------------------------------
Beijing Yanhua Petrochemical Co.
Ltd. (Chemicals-Diversified) 7,364,000 852,589
- --------------------------------------------------------------
1,331,138
- --------------------------------------------------------------
HONG KONG-27.03%
Bank of East Asia, Ltd.
(Banks-Major Regional) 1,000,000 2,778,671
- --------------------------------------------------------------
Cable & Wireless HKT Ltd.
(Telephone) 1,600,200 4,621,405
- --------------------------------------------------------------
Celestial Asia Securities Holdings
Ltd. (Investment
Banking/Brokerage)(a) 8,000,000 1,018,846
- --------------------------------------------------------------
Cheung Kong Holdings Ltd. (Land
Development) 900,000 11,375,185
- --------------------------------------------------------------
Cosco Pacific Ltd.
(Financial-Diversified) 2,700,000 2,240,304
- --------------------------------------------------------------
Great Wall Technology Co.
(Electronics- Component
Distributors)(a) 1,300,000 1,262,623
- --------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail-Food
Chains) 830,000 12,065,350
- --------------------------------------------------------------
Pacific Century CyberWorks Ltd.
(Communications-Equipment)(a) 472,000 1,099,016
- --------------------------------------------------------------
Yizheng Chemical Fibre Co., Ltd.
(Chemicals- Specialty)(a) 4,088,000 1,143,809
- --------------------------------------------------------------
37,605,209
- --------------------------------------------------------------
INDONESIA-2.66%
PT Indah Kiat Pulp & Paper Corp.
Tbk (Paper & Forest Products)(a) 2,700,000 1,062,612
- --------------------------------------------------------------
PT Lippo Bank Tbk (Banks-Major
Regional)(a) 73,600,000 2,633,274
- --------------------------------------------------------------
3,695,886
- --------------------------------------------------------------
MALAYSIA-2.53%
Berjaya Sports Toto Berhad (Leisure
Time- Products) 600,000 1,294,839
- --------------------------------------------------------------
Malayan Banking Berhad (Banks-Major
Regional) 210,000 746,111
- --------------------------------------------------------------
Telekom Malaysia Berhad (Telephone) 381,750 1,476,886
- --------------------------------------------------------------
3,517,836
- --------------------------------------------------------------
PHILIPPINES-3.88%
Equitable PCI Bank (Banks-Major
Regional) 520,000 1,154,839
- --------------------------------------------------------------
Philippine Long Distance Telephone
Co. (Telephone) 100,290 2,550,800
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PHILIPPINES-(CONTINUED)
San Miguel Corp.-Class B
(Beverages- Alcoholic) 1,200,000 $ 1,697,270
- --------------------------------------------------------------
5,402,909
- --------------------------------------------------------------
SINGAPORE-9.98%
DBS Group Holdings Ltd.
(Banks-Money Center) 235,010 3,852,160
- --------------------------------------------------------------
DBS Land Ltd. (Land Development) 1,000,000 1,969,379
- --------------------------------------------------------------
Keppel Land Ltd. (Land Development) 1,450,000 2,376,764
- --------------------------------------------------------------
Neptune Orient Lines Ltd.
(Shipping)(a) 1,850,000 2,477,034
- --------------------------------------------------------------
Oversea-Chinese Banking Corp. Ltd.
(Banks- Major Regional) 350,000 3,215,251
- --------------------------------------------------------------
13,890,588
- --------------------------------------------------------------
SOUTH KOREA-19.69%
Kookmin Bank (Banks-Major Regional) 230,044 3,606,150
- --------------------------------------------------------------
Korea Electric Power Corp.
(Electric Companies) 50,000 1,549,978
- --------------------------------------------------------------
Korea Telecom Corp.-ADR (Telephone) 12,380 925,405
- --------------------------------------------------------------
L.G. Chemical Ltd.
(Chemicals-Diversified) 90,000 2,845,442
- --------------------------------------------------------------
L.G. Information & Communication
(Communications Equipment) 28,747 4,759,521
- --------------------------------------------------------------
Merrill Lynch International & Co.
KOSPI 200- Wts., expiring
12/14/00 573,354 6,565,477
- --------------------------------------------------------------
Samsung Electronics
(Electronics-Component
Distributors) 26,514 6,211,118
- --------------------------------------------------------------
Shinhan Bank-GDR (Banks-Major
Regional)(a) 49,300 934,235
- --------------------------------------------------------------
27,397,326
- --------------------------------------------------------------
TAIWAN-14.67%
Acer Peripherals Inc.
(Computers--Hardware) 730,000 3,023,737
- --------------------------------------------------------------
Asustek Computer, Inc.
(Computers-Hardware) 168,176 1,773,658
- --------------------------------------------------------------
Cathay Life Insurance Co., Ltd.
(Insurance Brokers) 805,000 1,936,514
- --------------------------------------------------------------
China Steel Corp. (Metals Mining) 1,893,000 1,399,318
- --------------------------------------------------------------
Chinatrust Commercial Bank (Banks-
Regional)(a) 2,476,320 2,879,901
- --------------------------------------------------------------
Formosa Plastics Corp.
(Chemicals-Specialty) 749,000 1,491,556
- --------------------------------------------------------------
Hon Hai Precision Industry Co.,
Ltd. (Electronics-Component
Distributors)(a) 250,000 1,863,948
- --------------------------------------------------------------
Shinkong Synthetic Fibers Corp.
(Chemicals- Specialty)(a) 5,000,000 1,401,944
- --------------------------------------------------------------
Taiwan Semiconductor Manufacturing
Co. Ltd. (Computers-Hardware)(a) 871,500 4,637,263
- --------------------------------------------------------------
20,407,839
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 262
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
THAILAND-4.64%
Industrial Finance Corp. of
Thailand (Banks- Regional)(a) 1,934,400 $ 950,123
- --------------------------------------------------------------
Shin Corporations Public Co. Ltd.
(Computers- Software &
Services)(a) 266,800 2,521,726
- --------------------------------------------------------------
Siam Commercial Bank Public Co.
Ltd.-$1.365 Conv. Pfd.
(Banks-Regional) (Acquired
10/22/99-11/03/99; Cost
$998,418)(b) 914,300 1,116,628
- --------------------------------------------------------------
Thai Farmers Bank Public Co. Ltd.
(Banks- Major Regional)(a) 1,114,300 1,863,823
- --------------------------------------------------------------
6,452,300
- --------------------------------------------------------------
UNITED KINGDOM-3.13%
HSBC Holdings PLC (Banks-Major
Regional) 310,263 4,350,507
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$92,650,873) 134,243,060
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-2.83%
STIC Liquid Assets Portfolio(c) 1,969,173 $ 1,969,173
- --------------------------------------------------------------
STIC Prime Portfolio(c) 1,969,173 1,969,173
- --------------------------------------------------------------
Total Money Market Funds (Cost
$3,938,346) 3,938,346
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.32% (Cost
$96,589,219) 138,181,406
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.68% 940,001
- --------------------------------------------------------------
NET ASSETS-100.00% $139,121,407
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
GDR - Global Depositary Receipt
KOSPI - Korea Stock Price Index
Pfd. - Preferred
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of this security has been determined in
accordance with procedures established by the Board of Trustees. The market
value of this security at 12/31/99 was $1,116,628 which represented 0.80% of
the Fund's net assets.
(c) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
8
<PAGE> 263
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$96,589,219) $138,181,406
- ---------------------------------------------------------
Foreign currencies, at value (cost $55,304) 55,527
- ---------------------------------------------------------
Receivables for:
Fund shares sold 1,448,414
- ---------------------------------------------------------
Dividends and interest 47,700
- ---------------------------------------------------------
Due from Advisor 45,000
- ---------------------------------------------------------
Other assets 46,280
- ---------------------------------------------------------
Total assets 139,824,327
- ---------------------------------------------------------
LIABILITIES:
Payable for fund shares reacquired 390,853
- ---------------------------------------------------------
Accrued distribution fees 178,398
- ---------------------------------------------------------
Accrued transfer agent fees 37,755
- ---------------------------------------------------------
Accrued operating expenses 95,914
- ---------------------------------------------------------
Total liabilities 702,920
- ---------------------------------------------------------
Net assets applicable to shares outstanding $139,121,407
- ---------------------------------------------------------
NET ASSETS:
Class A $ 99,154,776
=========================================================
Class B $ 38,583,585
=========================================================
Class C $ 496,168
=========================================================
Advisor Class $ 886,878
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 13,151,088
=========================================================
Class B 5,302,769
=========================================================
Class C 68,211
=========================================================
Advisor Class 117,537
=========================================================
Class A:
Net asset value price per share $ 7.54
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $7.54 divided
by 94.50%) $ 7.98
=========================================================
Class B:
Net asset value and offering price per
share $ 7.28
=========================================================
Class C:
Net asset value and offering price per
share $ 7.27
=========================================================
Advisor Class:
Net asset value and offering price per
share $ 7.55
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend (net of $229,220 foreign
withholding tax) $ 2,128,846
- ---------------------------------------------------------
Interest 195,186
- ---------------------------------------------------------
Security lending income 57,724
- ---------------------------------------------------------
Total investment income 2,381,756
- ---------------------------------------------------------
EXPENSES:
Advisory and administrative fees 1,208,295
- ---------------------------------------------------------
Accounting service fees 42,925
- ---------------------------------------------------------
Custodian fees 107,038
- ---------------------------------------------------------
Distribution fees -- Class A 308,929
- ---------------------------------------------------------
Distribution fees -- Class B 343,884
- ---------------------------------------------------------
Distribution fees -- Class C 1,868
- ---------------------------------------------------------
Trustees' fees 9,739
- ---------------------------------------------------------
Transfer agent fees 704,578
- ---------------------------------------------------------
Interest 70,042
- ---------------------------------------------------------
Other 247,448
- ---------------------------------------------------------
Total expenses 3,044,746
- ---------------------------------------------------------
Less: Expenses waived by advisors (278,210)
- ---------------------------------------------------------
Expenses paid indirectly and expense
reductions (57,023)
- ---------------------------------------------------------
Net expenses 2,709,513
- ---------------------------------------------------------
Net investment income (loss) (327,757)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 18,882,190
- ---------------------------------------------------------
Foreign currencies (466,840)
- ---------------------------------------------------------
18,415,350
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 36,762,028
- ---------------------------------------------------------
Foreign currencies (8,070)
- ---------------------------------------------------------
36,753,958
- ---------------------------------------------------------
Net gain from investment securities and
foreign currencies 55,169,308
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 54,841,551
=========================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 264
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (327,757) $ 1,671,771
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 18,415,350 (40,073,782)
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 36,753,958 22,911,376
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 54,841,551 (15,490,635)
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS IN EXCESS OF NET INVESTMENT INCOME:
Class A (87,958) (876,799)
- --------------------------------------------------------------------------------------------
Class B (36,209) (89,061)
- --------------------------------------------------------------------------------------------
Class C (254) --
- --------------------------------------------------------------------------------------------
Advisor Class (786) (19,770)
- --------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (22,320,127) (46,870,786)
- --------------------------------------------------------------------------------------------
Class B (6,726,132) (15,289,487)
- --------------------------------------------------------------------------------------------
Class C 356,060 --
- --------------------------------------------------------------------------------------------
Advisor Class (968,323) (415,164)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 25,057,822 (79,051,702)
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 114,063,585 193,115,287
- --------------------------------------------------------------------------------------------
End of period $139,121,407 $114,063,585
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $166,689,561 $196,845,058
- --------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (287,071) (22,386)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (68,874,157) (87,598,203)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 41,593,074 4,839,116
- --------------------------------------------------------------------------------------------
$139,121,407 $114,063,585
============================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 265
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM New Pacific Growth Fund (the "Fund") is a separate series of AIM Growth
Series (the "Trust"). The Trust is organized as a Delaware business trust and is
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 series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares are sold
without a sales charge. Effective March 1, 1999, the Fund discontinued sales of
the Advisor Class to new investors. Matters affecting each portfolio or class
will be 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 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 the 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 its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and option contracts
generally will be valued 15 minutes after the close of trading of the New
York Stock Exchange ("NYSE"). Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the
NYSE. Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the NYSE 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 Trustees.
B. Securities Transactions and Investment Income -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
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 the accrual basis. Dividend income is recorded on the
ex-dividend date. On December 31, 1999, undistributed net investment income
was increased by $188,279, undistributed net realized gains increased by
$308,696 and paid-in capital decreased by $496,975 as a result of differing
book/tax treatment of foreign currency transactions and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds of fund share redemptions
as distributions for federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $67,710,923 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2006.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that
11
<PAGE> 266
portion of the results of operations resulting from changes in foreign
exchange rates on investments and the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the
net realized and unrealized gain or loss from investments.
F. 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.
G. Expenses -- Distribution 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
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO Asset Management Limited is the Fund's sub-advisor and
sub-administrator. The Fund pays AIM investment management and administration
fees at an annual rate of 0.975% on the first $500 million of the Fund's average
daily net assets, plus 0.95% on the next $500 million of the Fund's average
daily net assets, plus 0.925% on the next $500 million of the Fund's average
daily net assets, plus 0.90% on the Fund's average daily net assets exceeding
$1.5 billion. AIM has contractually agreed to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the maximum annual rate of 2.00%, 2.65%, 2.65% and 1.65% of the average daily
net assets of the Fund's Class A, Class B, Class C and Advisor Class shares,
respectively. During the year ended December 31, 1999, AIM waived fees of
$278,210.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
December 31, 1999, AIM was paid $42,925 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended December 31, 1999, AFS was
paid $558,462 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the
1940 Act with respect to the Fund's Class A shares, Class B shares and Class C
shares (collectively, the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.35% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C 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 Class 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 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. For the year ended December 31, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $308,929, $343,884 and $1,868,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $41,906 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. 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 December 31, 1999,
AIM Distributors received $1,977 in contingent deferred sales charges imposed on
redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
NOTE 3-EXPENSE REDUCTIONS
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $4,301 under an expense offset arrangement and AIM directed
certain portfolio trades to brokers who then paid $52,722 of the Fund's
expenses. The effect of the above arrangements resulted in a reduction of the
Fund's total expenses of $57,023 during the year ended December 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $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. The funds which
are party to the line of credit are charged a commitment fee of 0.09% 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. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line
12
<PAGE> 267
of credit with BankBoston and State Street Bank & Trust Company. The
arrangements with the banks allowed the Fund and certain other funds to borrow,
on a first come, first served basis, an aggregate maximum amount of
$250,000,000.
During the year ended December 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $1,268,718 with a weighted average interest rate
of 5.52%. Interest expense for the Fund for the year ended December 31, 1999 was
$70,042.
NOTE 5-PORTFOLIO SECURITIES LOANED
At December 31, 1999, there were no securities on loans to brokers. For the year
ended December 31, 1999, the Fund received fees of $57,724 for securities
lending.
For international securities, cash collateral is received by the fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. The collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
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 December 31, 1999 was
$115,517,581 and $155,632,699, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $43,173,298
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,031,416)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $40,141,882
=========================================================
</TABLE>
Cost of investments for tax purposes is $98,039,524.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 113,808,832 $ 643,233,897 220,054,764 $ 1,179,166,766
- ---------------------------------------------------------------------------------------------------------------------------
Class B 17,687,564 97,412,284 29,096,684 151,336,461
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 768,672 4,718,277 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Advisor Class 314,081 1,824,518 5,119,563 27,073,240
- ---------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 13,533 90,093 151,132 760,569
- ---------------------------------------------------------------------------------------------------------------------------
Class B 4,886 32,636 15,481 77,283
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 21 140 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Advisor Class 109 757 3,439 17,402
- ---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (116,247,910) (665,644,117) (225,597,779) (1,226,798,121)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (18,708,171) (104,171,052) (31,689,112) (166,703,231)
- ---------------------------------------------------------------------------------------------------------------------------
Class C* (700,482) (4,362,357) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Advisor Class (467,522) (2,793,598) (5,082,992) (27,505,806)
- ---------------------------------------------------------------------------------------------------------------------------
(3,526,387) $ (29,658,522) (7,928,820) $ (62,575,437)
===========================================================================================================================
</TABLE>
* Class C Shares commenced sales on May 3, 1999.
13
<PAGE> 268
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and Class B
outstanding during each of the years in the five-year period ended December 31,
1999, for a share of Class C outstanding during May 3, 1999 (date sales
commenced) through December 31, 1999 and for a share of Advisor Class
outstanding during each of the years in four-year period ended December 31, 1999
and the period June 1, 1995 (date operations commenced) through December 31,
1995.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.19 $ 6.48 $ 13.12 $ 12.47 $ 12.10
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.01) 0.06 0.05 0.02 0.11
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net realized and unrealized gain (loss) on investments 2.37 (1.30) (5.84) 2.44 0.79
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net increase (decrease) from investment operations 2.36 (1.24) (5.79) 2.46 0.90
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Distributions to shareholders:
In excess of net investment income (0.01) (0.05) (0.03) -- (0.10)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
From net realized gains -- -- (0.82) (1.81) (0.43)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Total distributions (0.01) (0.05) (0.85) (1.81) (0.53)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net asset value, end of period $ 7.54 $ 5.19 $ 6.48 $ 13.12 $ 12.47
============================================================ ======= ======== ======== ======== ========
Total return(b) 45.42% (19.09)% (44.24)% 20.04% 7.45%
============================================================ ======= ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000s) $99,155 $80,824 $135,807 $361,244 $383,722
============================================================ ======= ======== ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.08)%(c) 1.30% 0.41% 0.17% 0.91%
============================================================ ======= ======== ======== ======== ========
Ratio of expense to average net assets including interest:
With fee waivers 2.06%(c) 2.00% 1.66% 1.86% 1.89%
============================================================ ======= ======== ======== ======== ========
Without fee waivers 2.29%(c) 2.40% 1.93% 1.99% 1.94%
============================================================ ======= ======== ======== ======== ========
Ratio of expenses to average net assets, excluding interest
expense:
With fee waivers 2.00%(c) 2.00% 1.66% 1.86% 1.89%
============================================================ ======= ======== ======== ======== ========
Without fee waivers 2.23%(c) 2.40% 1.93% 1.99% 1.94%
============================================================ ======= ======== ======== ======== ========
Ratio of interest expense to average net assets 0.06%(c) -- -- -- --
============================================================ ======= ======== ======== ======== ========
Portfolio turnover rate 98% 96% 80% 93% 63%
============================================================ ======= ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $88,265,497.
<TABLE>
<CAPTION>
CLASS C
-----------
MAY 3, 1999
CLASS B THROUGH ADVISOR CLASS
-------------------------------------------------- DEC. 31, ------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995(a) 1999(a) 1999(a) 1998(a)
------- ------- ------- -------- -------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.04 $ 6.28 $ 12.80 $ 12.29 $ 11.96 $ 5.94 $ 5.18 $ 6.45
- ------------------------------------------- ------- ------- ------- -------- -------- ------ ------- -------
Income from investment operations:
Net investment income (loss) (0.04) 0.03 (0.03) (0.06) 0.03 (0.03) 0.02 0.08(b)
- ------------------------------------------- ------- ------- ------- -------- -------- ------ ------- -------
Net realized and unrealized gain (loss) on
investments 2.29 (1.26) (5.67) 2.38 0.75 1.37 2.36 (1.28)
- ------------------------------------------- ------- ------- ------- -------- -------- ------ ------- -------
Net increase (decrease) from investment
operations 2.25 (1.23) (5.70) 2.32 0.78 1.34 2.38 (1.20)
- ------------------------------------------- ------- ------- ------- -------- -------- ------ ------- -------
Distributions to shareholders:
In excess of net investment income (0.01) (0.01) -- -- (0.02) (0.01) (0.01) (0.07)
- ------------------------------------------- ------- ------- ------- -------- -------- ------ ------- -------
From net realized gains -- -- (0.82) (1.81) (0.43) -- -- --
- ------------------------------------------- ------- ------- ------- -------- -------- ------ ------- -------
Total distributions (0.01) (0.01) (0.82) (1.81) (0.45) (0.01) (0.01) (0.07)
- ------------------------------------------- ------- ------- ------- -------- -------- ------ ------- -------
Net asset value, end of period $ 7.28 $ 5.04 $ 6.28 $ 12.80 $ 12.29 $ 7.27 $ 7.55 $ 5.18
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Total return(b) 44.59% (19.55)% (44.65)% 19.28% 6.54% 22.51% 45.90% (18.51)%
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Ratios and supplemental data:
Net assets, end of period (in 000s) $38,584 $31,837 $55,820 $151,805 $130,887 $ 496 $ 887 $ 1,402
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Ratio of net investment income (loss) to
average net assets: (0.73)%(c) 0.65% (0.24)% (0.48)% 0.26% (0.73)%(d) 0.27%(c) 1.65%
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Ratio of expense to average net assets
including interest:
With fee waivers 2.71%(c) 2.65% 2.31% 2.51% 2.54% 2.71%(d) 1.71%(c) 1.65%
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Without fee waivers 2.94%(c) 3.05% 2.58% 2.64% 2.59% 2.94%(d) 1.94%(c) 2.05%
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Ratio of expenses to average net assets,
excluding interest expense:
With fee waivers 2.65%(c) 2.65% 2.31% 2.51% 2.54% 2.65%(d) 1.65%(c) 1.65%
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Without fee waivers 2.88%(c) 3.05% 2.58% 2.64% 2.59% 2.88%(d) 1.88%(c) 2.05%
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Ratio of interest expense to average net
assets 0.06%(c) -- -- -- -- 0.06%(d) 0.06%(c) --
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
Portfolio turnover rate 98% 96% 80% 93% 63% 98% 98% 96%
=========================================== ======= ======= ======= ======== ======== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------------------
1997(a) 1996(a) 1995(a)
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.16 $12.45 $12.89
- ------------------------------------------- ------- ------ ------
Income from investment operations:
Net investment income (loss) 0.08 0.07 0.09
- ------------------------------------------- ------- ------ ------
Net realized and unrealized gain (loss) on
investments (5.89) 2.45 0.05
- ------------------------------------------- ------- ------ ------
Net increase (decrease) from investment
operations (5.81) 2.52 0.14
- ------------------------------------------- ------- ------ ------
Distributions to shareholders:
In excess of net investment income (0.08) -- (0.15)
- ------------------------------------------- ------- ------ ------
From net realized gains (0.82) (1.81) (0.43)
- ------------------------------------------- ------- ------ ------
Total distributions (0.90) (1.81) (0.58)
- ------------------------------------------- ------- ------ ------
Net asset value, end of period $ 6.45 $13.16 $12.45
=========================================== ======= ====== ======
Total return(b) (44.26)% 20.56% 1.07%
=========================================== ======= ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000s) $ 1,488 $1,575 $ 935
=========================================== ======= ====== ======
Ratio of net investment income (loss) to
average net assets: 0.76% 0.52% 1.26%(e)
=========================================== ======= ====== ======
Ratio of expense to average net assets
including interest:
With fee waivers 1.31% 1.51% 1.54%(e)
=========================================== ======= ====== ======
Without fee waivers 1.58% 1.64% 1.59%(e)
=========================================== ======= ====== ======
Ratio of expenses to average net assets,
excluding interest expense:
With fee waivers 1.31% 1.51% 1.54%(e)
=========================================== ======= ====== ======
Without fee waivers 1.58% 1.64% 1.59%(e)
=========================================== ======= ====== ======
Ratio of interest expense to average net
assets -- -- --
=========================================== ======= ====== ======
Portfolio turnover rate 80% 93% 63%()
=========================================== ======= ====== ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average net assets of $34,388,350 and $1,087,061, for
Class B and Advisor Class, respectively.
(d) Ratios are annualized and based on average net assets of $280,562.
(e) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The effective date of this conversion was
February 11, 2000.
14
<PAGE> 269
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of AIM Growth Series
and Shareholders of AIM New Pacific Growth Fund:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of AIM
New Pacific Growth Fund (hereafter referred to as the
"Fund") at December 31, 1999, the results of its
operations, the changes in its net assets and the
financial highlights for each of the periods indicated
therein, in conformity with accounting principles
generally accepted in the United States. These financial
statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express
an opinion on these financial statements based on our
audits. We conducted our audits of these financial
statements in accordance with auditing standards
generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made
by management, and evaluating the overall financial
statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 1999
by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 16, 2000
15
<PAGE> 270
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
C. Derek Anderson Robert H. Graham 11 Greenway Plaza
Senior Managing Partner, Plantagenet Capital Chairman and President Suite 100
Management, LLC (an investment Houston, TX 77046
partnership); Chief Executive Officer, Dana R. Sutton
Plantagenet Holdings, Ltd. Vice President and Treasurer INVESTMENT MANAGER
(an investment banking firm)
Samuel D. Sirko A I M Advisors, Inc.
Frank S. Bayley Vice President and Secretary 11 Greenway Plaza
Partner, law firm of Suite 100
Baker & McKenzie Melville B. Cox Houston, TX 77046
Vice President
Robert H. Graham SUB-ADVISOR
President and Chief Executive Officer, Gary T. Crum
A I M Management Group Inc. Vice President INVESCO Asia Limited
12/F, Three Exchange Square,
Ruth H. Quigley Carol F. Relihan 8 Connaught Place, Hong Kong
Private Investor Vice President
TRANSFER AGENT
Mary J. Benson
Assistant Vice President and A I M Fund Services, Inc.
Assistant Treasurer P.O. Box 4739
Houston, TX 77210-4739
Sheri Morris
Assistant Vice President and CUSTODIAN
Assistant Treasurer
State Street Bank and Trust Company
Nancy L. Martin 225 Franklin Street
Assistant Secretary Boston, MA 02110
Ofelia M. Mayo COUNSEL TO THE FUND
Assistant Secretary
Kirkpatrick & Lockhart LLP
Kathleen J. Pflueger 1800 Massachusetts Avenue, N.W.
Assistant Secretary Washington, D.C. 20036-1800
COUNSEL TO THE TRUSTEES
Paul, Hastings, Janofsky & Walker LLP
Twenty Third Floor
555 South Flower Street
Los Angeles, CA 90071
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM New Pacific Growth Fund paid ordinary dividends in the amount of $0.0068 per
share to shareholders during its tax year ended December 31, 1999. Of these
amounts 0.00% is eligible for the dividends received deduction for corporations.
16
<PAGE> 271
-------------------------------------
OUR AUTOMATED
AIM INVESTOR LINE,
800-246-5463,
PROVIDES CURRENT ACCOUNT
INFORMATION AND THE PRICE,
YIELD AND TOTAL RETURN
ON ALL AIM FUNDS
24 HOURS A DAY.
-------------------------------------
AIM FUNDS(SM) MAKES INVESTING EASY
o AIM BANK CONNECTION(SM). You can make investments in your AIM account in
amounts from $50 to $100,000 without writing a check. Once you set up this
convenient feature, AIM will draw the funds from your pre-authorized
checking account at your request.
o AIM INTERNET CONNECT(SM). With this service, you can purchase, redeem or
exchange shares of AIM funds in your current AIM account simply by accessing
our Web site at www.aimfunds.com. For a retirement account, such as an IRA
or 403(b), only exchanges are allowed over the Internet because of the
tax-reporting and record-keeping requirements these accounts involve.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. You can receive
distributions in cash, or you can reinvest them in your account without
paying a sales charge. Over time, the power of compounding can significantly
increase the value of your account.
o AUTOMATIC INVESTMENT PLAN. You can add to your account by authorizing your
AIM fund to withdraw a specified amount, minimum $50, from your bank account
on a regular schedule.
o EASY ACCESS TO YOUR MONEY. You can redeem shares of your AIM fund any day
the New York Stock Exchange is open. The value of the shares may be more or
less than their original cost depending on market conditions.
o EXCHANGE PRIVILEGE. As your investment goals change, you may exchange part
or all of your shares of one fund for shares of a different AIM fund within
the same share class. You may make up to 10 such exchanges per calendar
year.
o TAX-ADVANTAGED RETIREMENT PLANS. You can enjoy the tax advantages offered by
a variety of investment plans, including Traditional IRAs, Roth IRAs and
education IRAs, among others.
o E-MAIL ACCESS. You can contact us at [email protected] for general
information. For account information, contact us at
[email protected].
o www.aimfunds.com. Our award-winning Web site provides account information,
shareholder education and fund performance information.
<PAGE> 272
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund AIM Money Market Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately
AIM Capital Development Fund $160 billion in assets for more than 6.6
AIM Constellation Fund(1) INTERNATIONAL GROWTH FUNDS million shareholders, including individual
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund investors, corporate clients and financial
AIM Large Cap Growth Fund AIM Asian Growth Fund institutions, as of December 31, 1999.
AIM Mid Cap Equity Fund AIM Developing Markets Fund The AIM Family of Funds--Registered
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(4) Trademark-- is distributed nationwide, and
AIM Mid Cap Opportunities Fund AIM European Development Fund AIM today is the eighth-largest mutual fund
AIM Select Growth Fund AIM International Equity Fund complex in the United States in assets under
AIM Small Cap Growth Fund(2) AIM Japan Growth Fund management, according to Strategic Insight,
AIM Small Cap Opportunities Fund(3) AIM Latin American Growth Fund an independent mutual fund monitor.
AIM Value Fund AIM New Pacific Growth Fund
AIM Weingarten Fund
GLOBAL GROWTH FUNDS
GROWTH & INCOME FUNDS AIM Global Aggressive Growth Fund
AIM Advisor Flex Fund AIM Global Growth Fund
AIM Advisor Large Cap Value Fund
AIM Advisor Real Estate Fund GLOBAL GROWTH & INCOME FUNDS
AIM Balanced Fund AIM Global Growth & Income Fund
AIM Basic Value Fund AIM Global Utilities Fund
AIM Charter Fund
GLOBAL INCOME FUNDS
INCOME FUNDS AIM Emerging Markets Debt Fund
AIM Floating Rate Fund AIM Global Government Income Fund
AIM High Yield Fund AIM Global Income Fund
AIM High Yield Fund II AIM Strategic Income Fund
AIM Income Fund
AIM Intermediate Government Fund THEME FUNDS
AIM Limited Maturity Treasury Fund AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
TAX-FREE INCOME FUNDS AIM Global Health Care Fund
AIM High Income Municipal Fund AIM Global Infrastructure Fund
AIM Municipal Bond Fund AIM Global Resources Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Telecommunications and Technology Fund(5)
AIM Tax-Free Intermediate Fund AIM Global Trends Fund(6)
</TABLE>
(1) Effective December 1, 1999, AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations. (2) AIM Small
Cap Growth Fund closed to new investors on November 8, 1999. (3) AIM Small Cap
Opportunities Fund closed to new investors on November 4, 1999. (4) On September
1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth Fund. Previously
the fund invested in all size companies in most areas of Europe. The fund now
seeks to invest at least 65% of its assets in large-cap companies within
countries using the euro as their currency (EMU-member countries). (5) On June
1, 1999, AIM Global Telecommunications Fund was renamed AIM Global
Telecommunications and Technology Fund. (6) Effective August 27, 1999, AIM
Global Trends Fund was restructured to operate as a traditional mutual fund.
Before that date, the fund operated as a fund of funds. For more complete
information about any AIM fund(s), including sales charges and expenses, ask
your financial advisor or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money. If used as
sales material after April 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
[DALBAR LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
AIM Distributors, Inc. NPG-AR-1
<PAGE> 273
APPENDIX III
AIM ASIAN GROWTH FUND
AIM NEW PACIFIC GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
10/31/99
(Unaudited)
<TABLE>
<CAPTION>
SHARES
- ---------------------------------------------
AIM NEW PACIFIC AIM ASIAN PRO FORMA
GROWTH FUND GROWTH FUND COMBINING
<S> <C> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-
-90.65%
AUSTRALIA--11.23%
Austar United Communications Ltd. (Broadcasting-
-- 51,700 51,700 Television, Radio & Cable)
-- 25,800 25,800 Brambles Industries Ltd. (Air Freight)
-- 167,000 167,000 BRL Hardy Ltd. (Beverages-Alcoholic)
360,350 -- 360,350 Broken Hill Proprietary Co. Ltd. (Iron & Steel)
-- 196,800 196,800 Computershare Ltd. (Computers-Software & Services)
-- 325,000 325,000 ERG Ltd. (Electrical Equipment)
-- 255,000 255,000 Foster's Brewing Group Ltd. (Beverages-Alcoholic)
-- 212,000 212,000 James Hardie Industries Ltd. (Building Materials)
153,607 -- 153,607 National Australia Bank Ltd. (Banks-Major Regional)
893,050 -- 893,050 North Ltd. (Metals Mining)
-- 87,058 87,058 TABCORP Holdings Ltd. (Leisure Time Products)
450,700 162,700 613,400 Telstra Corp. Ltd. (Telephone)
607,000 -- 607,000 WMC Ltd. (Metals-Mining)
---------- --------- ----------
========== ========= ==========
CHINA--1.23%
6,000,000 -- 6,000,000 Angang New Steel Co. Ltd. (Metal Fabricators) (a)
Beijing Yanhua Petrochemical Co. Ltd. (Chemical
7,364,000 -- 7,364,000 Diversified)
---------- --------- ----------
========== ========= ==========
HONG KONG--24.37%
-- 600,000 600,000 ASM Pacific Technology Ltd. (Machinery-Diversified)
1,000,000 -- 1,000,000 Bank of East Asia, Ltd. (Banks-Major Regional)
1,600,200 -- 1,600,200 Cable & Wireless HKT Ltd. (Telephone)
900,000 -- 900,000 Cheung Kong Holdings Ltd. (Land Development)
840,000 -- 840,000 China Everbright Ltd. (Land Development)
China Telecom Ltd. (Telecommunications -
-- 204,000 204,000 Cellular/Wireless) (a)
3,000,000 630,000 3,630,000 Cosco Pacific Ltd. (Financial-Diversified)
-- 182,800 182,800 Dah Sing Financial Group (Banks-Regional)
-- 148,500 148,500 Dao Heng Bank Group Ltd. (Banks - Regional)
-- 820,000 820,000 Esprit Asia Holdings Ltd. (Retail-Stores)
-- 839,500 839,500 Giordano International Ltd. (Retail-Specialty-Apparel)
Great Wall Technology Co. (Electronics-Component
1,800,000 -- 1,800,000 Distributors) (a)
Guangdong Kelon Electrical Holdings Co. Ltd.
-- 446,000 446,000 (Household Furniture & Appliances)
-- 516,600 516,600 HKR International Ltd. (Land Development)
830,000 74,000 904,000 Hutchison Whampoa Ltd. (Retail-Food Chains)
-- 137,000 137,000 Johnson Electric Holdings Ltd. (Electrical Equipment)
-- 441,000 441,000 Kerry Properties Ltd. (Land Development)
-- 482,000 482,000 Li & Fung Ltd. (Distributors-Food & Health)
Pacific Century CyberWorks Ltd. (Communications
472,000 -- 472,000 Equipment) (a)
Shanghai Industrial Holdings Ltd. (Manufacturing-
835,000 -- 835,000 Diversified)
Shenzhen Expressway Co. Ltd. (Services - Commercial
-- 2,402,000 2,402,000 & Consumer)
Shui On Construction and Materials Ltd. (Construction-
-- 486,000 486,000 Cement & Aggregates)
Television Broadcasts Ltd. (Broadcasting-Television,
-- 133,000 133,000 Radio & Cable)
-- 190,500 190,500 Wing Hang Bank Ltd. (Banks-Major Regional)
Yizheng Chemical Fibre Co., Ltd. (Chemicals-
4,088,000 -- 4,088,000 Specialty) (a)
Zhejiang Expressway Co. Ltd. (Services-Commercial &
-- 2,356,000 2,356,000 Consumer)
---------- --------- ----------
========== ========= ==========
INDIA--0.96%
-- 19,600 19,600 ITC Ltd. (Tobacco)
Satyam Infoway Ltd.-ADR (Computers-Software &
-- 12,000 12,000 Services) (a)
Videsh Sanchar Nigam Ltd.-GDR
-- 47,600 47,600 (Telecommunications-Cellular/Wireless)
---------- --------- ----------
========== ========= ==========
INDONESIA--2.78%
Gulf Indonesia Resources Ltd. (Oil-International
-- 49,700 49,700 Integrated) (a)
-- 536,000 536,000 PT Indofood Sukses Makmur Tbk (Foods) (a)
PT Indah Kiat Pulp & Paper Corp. Tbk (Paper & Forest
2,700,000 -- 2,700,000 Products) (a)
73,600,000 -- 73,600,000 PT Lippo Bank Tbk (Banks-Major Regional) (a)
---------- --------- ----------
========== ========= ==========
<CAPTION>
MARKET VALUE
------------------------------------------------------------
AIM NEW PACIFIC AIM ASIAN PRO FORMA
GROWTH FUND GROWTH FUND COMBINING
<S> <C> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-
- -90.65%
AUSTRALIA--11.23%
Austar United Communications Ltd. (Broadcasting-
Television, Radio & Cable) $ -- $ 168,195 $ 168,195
Brambles Industries Ltd. (Air Freight) -- 725,790 725,790
BRL Hardy Ltd. (Beverages-Alcoholic) -- 729,726 729,726
Broken Hill Proprietary Co. Ltd. (Iron & Steel) 3,725,459 -- 3,725,459
Computershare Ltd. (Computers-Software & Services) -- 715,571 715,571
ERG Ltd. (Electrical Equipment) -- 1,281,222 1,281,222
Foster's Brewing Group Ltd. (Beverages-Alcoholic) -- 677,986 677,986
James Hardie Industries Ltd. (Building Materials) -- 513,892 513,892
National Australia Bank Ltd. (Banks-Major Regional) 2,371,259 -- 2,371,259
North Ltd. (Metals Mining) 1,726,120 -- 1,726,120
TABCORP Holdings Ltd. (Leisure Time Products) -- 552,011 552,011
Telstra Corp. Ltd. (Telephone) 2,293,400 522,045 2,815,445
WMC Ltd. (Metals-Mining) 2,605,891 -- 2,605,891
---------- ----------- ------------
18,608,567
========== =========== ============
CHINA--1.23%
Angang New Steel Co. Ltd. (Metal Fabricators) (a) 702,875 -- 702,875
Beijing Yanhua Petrochemical Co. Ltd. (Chemical
Diversified) 1,327,171 -- 1,327,171
---------- ----------- ------------
2,030,046
========== =========== ============
HONG KONG--24.37%
ASM Pacific Technology Ltd. (Machinery-Diversified) -- 706,737 706,737
Bank of East Asia, Ltd. (Banks-Major Regional) 2,188,437 -- 2,188,437
Cable & Wireless HKT Ltd. (Telephone) 3,656,435 -- 3,656,435
Cheung Kong Holdings Ltd. (Land Development) 8,168,020 -- 8,168,020
China Everbright Ltd. (Land Development) 600,147 -- 600,147
China Telecom Ltd. (Telecommunications -
Cellular/Wireless) (a) -- 697,236 697,236
Cosco Pacific Ltd. (Financial-Diversified) 2,124,072 446,055 2,570,127
Dah Sing Financial Group (Banks-Regional) -- 729,496 729,496
Dao Heng Bank Group Ltd. (Banks - Regional) -- 674,817 674,817
Esprit Asia Holdings Ltd. (Retail-Stores) -- 770,587 770,587
Giordano International Ltd. (Retail-Specialty-Apparel) -- 891,579 891,579
Great Wall Technology Co. (Electronics-Component
Distributors) (a) 1,100,655 -- 1,100,655
Guangdong Kelon Electrical Holdings Co. Ltd.
(Household Furniture & Appliances) -- 396,159 396,159
HKR International Ltd. (Land Development) -- 392,366 392,366
Hutchison Whampoa Ltd. (Retail-Food Chains) 8,334,084 743,039 9,077,123
Johnson Electric Holdings Ltd. (Electrical Equipment) -- 740,722 740,722
Kerry Properties Ltd. (Land Development) -- 437,134 437,134
Li & Fung Ltd. (Distributors-Food & Health) -- 837,657 837,657
Pacific Century CyberWorks Ltd. (Communications
Equipment) (a) 355,454 -- 355,454
Shanghai Industrial Holdings Ltd. (Manufacturing-
Diversified) 1,558,618 -- 1,558,618
Shenzhen Expressway Co. Ltd. (Services - Commercial
& Consumer) -- 358,687 358,687
Shui On Construction and Materials Ltd. (Construction-
Cement & Aggregates) -- 675,686 675,686
Television Broadcasts Ltd. (Broadcasting-Television,
Radio & Cable) -- 710,534 710,534
Wing Hang Bank Ltd. (Banks-Major Regional) -- 621,667 621,667
Yizheng Chemical Fibre Co., Ltd. (Chemicals-
Specialty) (a) 1,118,291 -- 1,118,291
Zhejiang Expressway Co. Ltd. (Services-Commercial &
Consumer) -- 357,884 357,884
---------- ----------- ------------
40,392,255
========== =========== ============
INDIA--0.96%
ITC Ltd. (Tobacco) -- 371,420 371,420
Satyam Infoway Ltd.-ADR (Computers-Software &
Services) (a) -- 465,000 465,000
Videsh Sanchar Nigam Ltd.-GDR
(Telecommunications-Cellular/Wireless) -- 760,410 760,410
---------- ----------- ------------
1,596,830
========== =========== ============
INDONESIA--2.78%
Gulf Indonesia Resources Ltd. (Oil-International
Integrated) (a) -- 394,494 394,494
PT Indofood Sukses Makmur Tbk (Foods) (a) -- 633,348 633,348
PT Indah Kiat Pulp & Paper Corp. Tbk (Paper & Forest
Products) (a) 1,161,926 -- 1,161,926
PT Lippo Bank Tbk (Banks-Major Regional) (a) 2,415,755 -- 2,415,755
---------- ----------- ------------
4,605,523
========== =========== ============
</TABLE>
<PAGE> 274
<TABLE>
<CAPTION>
SHARES
- -------------------------------------------------
AIM NEW PACIFIC AIM ASIAN PRO FORMA
GROWTH FUND GROWTH FUND COMBINING
<S> <C> <C> <C>
MALAYSIA--1.93%
600,000 -- 600,000 Berjaya Sports Toto Berhad (Leisure Time-Products)
210,000 -- 210,000 Malayan Banking Berhad (Banks-Major Regional)
381,750 -- 381,750 Telekom Malaysia Berhad (Telephone)
- ----------- --------- ---------
=========== ========= =========
NEW ZEALAND--0.31%
Sky Network Television Ltd. (Broadcasting-Television,
-- 283,000 283,000 Radio, Cable) (a)
Sky Network Television Ltd.-ADR (Broadcasting-
-- 5,400 5,400 Television, Radio & Cable) (a)
- ----------- --------- ---------
=========== ========= =========
PHILIPPINES--2.98%
-- 209,110 209,110 Bank of the Philippine Islands (Banks-Major Regional)
520,000 131,350 651,350 Equitable PCI Bank (Banks-Major Regional)
International Container Terminal Services, Inc. (Air
-- 2,873,000 2,873,000 Freight) (a)
Jollibee Foods Corp. (Restaurants), Wts., expiring
-- 1,605,000 1,605,000 03/24/03 (b)
-- 181,300 181,300 Manila Electric Co. (Electric Power)
60,290 -- 60,290 Philippine Long Distance Telephone Co. (Telephone)
-- 3,304,900 3,304,900 SM Prime Holdings, Inc. (Land Development)
- ----------- --------- ---------
=========== ========= =========
SINGAPORE--13.87%
-- 690,000 690,000 Allgreen Properties Ltd. (Homebuilding) (a)
410,000 -- 410,000 City Developments Ltd. (Land Development)
-- 155,600 155,600 Datacraft Asia Ltd. (Communications Equipment)
280,010 63,127 343,137 DBS Group Holdings Ltd. (Banks-Money Center)
1,250,000 -- 1,250,000 DBS Land Ltd. (Land Development)
-- 231,000 231,000 Keppel Corp. Ltd. (Engineering & Construction)
1,800,000 419,000 2,219,000 Keppel Land Ltd. (Land Development)
-- 105,500 105,500 Natsteel Electronics Ltd. (Computers - Hardware)
-- 396,000 396,000 NatSteel Ltd. (Iron & Steel)
2,050,000 -- 2,050,000 Neptune Orient Lines Ltd. (Shipping) (a)
OMNI Industries Ltd. (Electronics-Component
-- 625,000 625,000 Distributors)
Oversea-Chinese Banking Corp. Ltd. (Banks-Major
441,000 -- 441,000 Regional)
-- 57,000 57,000 Singapore Airlines Ltd. (Airlines)
Singapore Press Holdings Ltd. (Publishing-
-- 38,000 38,000 Newspapers)
Venture Manufacturing Ltd. (Electronics-Component
-- 45,000 45,000 Distributors)
- ----------- --------- ---------
=========== ========= =========
SOUTH KOREA--13.84%
100,000 52,000 152,000 Kookmin Bank (Banks-Major Regional)
Kookmin Bank (Banks-Major Regional), Rts.,
-- 5,223 5,223 expiring 12/08/99
10,044 -- 10,044 expiring 11/04/99
50,000 37,400 87,400 Korea Electric Power Corp.-ADR (Electric Companies)
12,380 21,904 34,284 Korea Telecom Corp.-ADR (Telephone) (a)
90,000 23,800 113,800 L.G. Chemical Ltd. (Chemicals-Specialty)
L.G. Information & Communication (Communications
28,747 -- 28,747 Equipment)
Merrill Lynch International & Co. KOSPI 200-Wts.,
572,101 -- 572,101 expiring 12/14/00 (Investment Banking/Brokerage)
-- 19,800 19,800 Pohang Iron & Steel Co. Ltd. -ADR (Iron & Steel)
Samsung Electronics (Electronics-Component
26,514 4,500 31,014 Distributors)
49,300 -- 49,300 Shinhan Bank-GDR (Banks-Major Regional) (a)
- ----------- --------- ---------
=========== ========= =========
TAIWAN--11.59%
Advanced Semiconductor Engineering Inc. (Electronics-
520,000 -- 520,000 Semiconductors)
168,176 -- 168,176 Asustek Computer, Inc. (Computers-Hardware)
805,000 -- 805,000 Cathay Life Insurance Co., Ltd. (Insurance Brokers)
China Development Industrial Bank (Investment
224,300 -- 224,300 Management)
1,893,000 -- 1,893,000 China Steel Corp. (Metals Mining)
1,976,320 -- 1,976,320 Chinatrust Commercial Bank (Banks-Regional) (a)
-- 193,550 193,550 Compal Electronics, Inc. (Computers-Hardware)
-- 581,010 581,010 Far Eastern Textile Ltd. (Chemicals-Diversified)
749,000 -- 749,000 Formosa Plastics Corp. (Chemicals-Specialty)
Hon Hai Precision Industry Co. Ltd. (Electronics-
-- 112,000 112,000 Component Distributors) (a)
-- 62,000 62,000 Ritek Inc. (Consumer-Jewelry, Novelties & Gifts) (a)
Shinkong Synthetic Fibers Corp. (Chemicals-Specialty)
5,000,000 -- 5,000,000 (a)
Taiwan Semiconductor Manufacturing Co. Ltd.
871,500 -- 871,500 (Computers-Hardware) (a)
323,000 -- 323,000 Taiwan Styrene Monomer Corp. (Chemicals-Specialty)
- ----------- --------- ---------
=========== ========= =========
<CAPTION>
MARKET VALUE
--------------------------------------------------------------
AIM NEW PACIFIC AIM ASIAN PRO FORMA
GROWTH FUND GROWTH FUND COMBINING
<S> <C> <C> <C>
MALAYSIA--1.93%
Berjaya Sports Toto Berhad (Leisure Time-Products) $ 1,302,632 $ -- $ 1,302,632
Malayan Banking Berhad (Banks-Major Regional) 712,895 -- 712,895
Telekom Malaysia Berhad (Telephone) 1,175,388 -- 1,175,388
--------------- ----------- ---------------
3,190,915
=============== =========== ===============
NEW ZEALAND--0.31%
Sky Network Television Ltd. (Broadcasting-Television,
Radio, Cable) (a) -- 430,698 430,698
Sky Network Television Ltd.-ADR (Broadcasting-
Television, Radio & Cable) (a) -- 81,675 81,675
--------------- ----------- ---------------
512,373
=============== =========== ===============
PHILIPPINES--2.98%
Bank of the Philippine Islands (Banks-Major Regional) -- 552,760 552,760
Equitable PCI Bank (Banks-Major Regional) 920,698 232,565 1,153,263
International Container Terminal Services, Inc. (Air
Freight) (a) -- 275,837 275,837
Jollibee Foods Corp. (Restaurants), Wts., expiring
03/24/03 (b) -- 610,380 610,380
Manila Electric Co. (Electric Power) -- 497,332 497,332
Philippine Long Distance Telephone Co. (Telephone) 1,255,415 -- 1,255,415
SM Prime Holdings, Inc. (Land Development) -- 585,157 585,157
--------------- ----------- ---------------
4,930,144
=============== =========== ===============
SINGAPORE--13.87%
Allgreen Properties Ltd. (Homebuilding) (a) -- 585,133 585,133
City Developments Ltd. (Land Development) 2,120,647 -- 2,120,647
Datacraft Asia Ltd. (Communications Equipment) -- 715,760 715,760
DBS Group Holdings Ltd. (Banks-Money Center) 3,166,048 713,771 3,879,819
DBS Land Ltd. (Land Development) 2,315,511 -- 2,315,511
Keppel Corp. Ltd. (Engineering & Construction) -- 627,967 627,967
Keppel Land Ltd. (Land Development) 2,544,055 592,199 3,136,254
Natsteel Electronics Ltd. (Computers - Hardware) -- 412,432 412,432
NatSteel Ltd. (Iron & Steel) -- 662,104 662,104
Neptune Orient Lines Ltd. (Shipping) (a) 2,971,372 -- 2,971,372
OMNI Industries Ltd. (Electronics-Component
Distributors) -- 593,913 593,913
Oversea-Chinese Banking Corp. Ltd. (Banks-Major
Regional) 3,315,391 -- 3,315,391
Singapore Airlines Ltd. (Airlines) -- 603,356 603,356
Singapore Press Holdings Ltd. (Publishing-
Newspapers) -- 651,350 651,350
Venture Manufacturing Ltd. (Electronics-Component
Distributors) -- 400,553 400,553
--------------- ----------- ---------------
22,991,562
=============== =========== ===============
SOUTH KOREA--13.84%
Kookmin Bank (Banks-Major Regional) 1,558,983 810,671 2,369,654
Kookmin Bank (Banks-Major Regional), Rts.,
expiring 12/08/99 -- 31,787 31,787
expiring 11/04/99 61,129 -- 61,129
Korea Electric Power Corp.-ADR (Electric Companies) 1,463,110 589,050 2,052,160
Korea Telecom Corp.-ADR (Telephone) (a) 436,395 772,116 1,208,511
L.G. Chemical Ltd. (Chemicals-Specialty) 2,723,635 720,250 3,443,885
L.G. Information & Communication (Communications
Equipment) 2,108,992 -- 2,108,992
Merrill Lynch International & Co. KOSPI 200-Wts.,
expiring 12/14/00 (Investment Banking/Brokerage) 4,771,723 -- 4,771,723
Pohang Iron & Steel Co. Ltd. -ADR (Iron & Steel) -- 660,825 660,825
Samsung Electronics (Electronics-Component
Distributors) 4,420,842 750,313 5,171,155
Shinhan Bank-GDR (Banks-Major Regional) (a) 1,053,788 -- 1,053,788
--------------- ----------- ---------------
22,933,609
=============== =========== ===============
TAIWAN--11.59%
Advanced Semiconductor Engineering Inc. (Electronics-
Semiconductors) 1,598,360 -- 1,598,360
Asustek Computer, Inc. (Computers-Hardware) 1,765,530 -- 1,765,530
Cathay Life Insurance Co., Ltd. (Insurance Brokers) 2,081,021 -- 2,081,021
China Development Industrial Bank (Investment
Management) 333,056 -- 333,056
China Steel Corp. (Metals Mining) 1,456,154 -- 1,456,154
Chinatrust Commercial Bank (Banks-Regional) (a) 1,813,080 -- 1,813,080
Compal Electronics, Inc. (Computers-Hardware) -- 649,845 649,845
Far Eastern Textile Ltd. (Chemicals-Diversified) -- 794,951 794,951
Formosa Plastics Corp. (Chemicals-Specialty) 1,499,417 -- 1,499,417
Hon Hai Precision Industry Co. Ltd. (Electronics-
Component Distributors) (a) -- 766,204 766,204
Ritek Inc. (Consumer-Jewelry, Novelties & Gifts) (a) -- 406,557 406,557
Shinkong Synthetic Fibers Corp. (Chemicals-Specialty)
(a) 1,749,685 -- 1,749,685
Taiwan Semiconductor Manufacturing Co. Ltd.
(Computers-Hardware) (a) 3,873,944 -- 3,873,944
Taiwan Styrene Monomer Corp. (Chemicals-Specialty) 425,643 -- 425,643
--------------- ----------- ---------------
19,213,447
=============== =========== ===============
</TABLE>
<PAGE> 275
<TABLE>
<CAPTION>
SHARES
- ------------------------------------------
AIM NEW PACIFIC AIM ASIAN PRO FORMA
GROWTH FUND GROWTH FUND COMBINING
<S> <C> <C>
THAILAND--3.31%
Advanced Info Service Public Co. Ltd. (Telephone)
-- 56,000 56,000 (a)
Industrial Finance Corp. of Thailand (Banks-Regional)
1,934,400 -- 1,934,400 (a)
PTT Exploration and Production Public Co. Ltd. (Oil &
-- 77,000 77,000 Gas-Exploration & Production)
Shin Corporations Public Co. Ltd. (Computers-
266,800 -- 266,800 Software & Services) (a)
Siam Commercial Bank Public Co. Ltd.-$1.365 Conv.
Pfd. (Banks-Regional) (Acquired 10/22/99-11/03/99;
344,300 605,000 949,300 Cost $998,418) (b)
Thai Farmers Bank Public Co. Ltd., (Banks-Major
887,100 -- 887,100 Regional) (a)
- ----------- ----------- ---------
=========== =========== =========
UNITED KINGDOM--2.25%
310,263 -- 310,263 HSBC Holdings PLC (Banks-Major Regional)
=========== =========== =========
Total Foreign Stocks & Other Equity Interests (cost $121,882,358)
MONEY MARKET FUNDS--2.90%
847,462 1,557,615 2,405,077 STIC Liquid Assets Portfolio (c)
847,462 1,557,615 2,405,077 STIC Prime Portfolio (c)
- ----------- ----------- ---------
Total Money Market Funds (cost $4,810,154 )
=========== =========== =========
TOTAL INVESTMENTS-93.55% (cost $126,692,512)
- ----------- ----------- ---------
OTHER ASSETS LESS LIABILITIES-6.45%
- ----------- ----------- ---------
NET ASSETS--100.00%
=========== =========== =========
<CAPTION>
MARKET VALUE
-------------------------------------------------------
AIM NEW PACIFIC AIM ASIAN PRO FORMA
GROWTH FUND GROWTH FUND COMBINING
<S> <C> <C> <C>
THAILAND--3.31%
Advanced Info Service Public Co. Ltd. (Telephone)
(a) $ -- $ 652,765 $ 652,765
Industrial Finance Corp. of Thailand (Banks-Regional)
(a) 839,301 -- 839,301
PTT Exploration and Production Public Co. Ltd. (Oil &
Gas-Exploration & Production) -- 562,466 562,466
Shin Corporations Public Co. Ltd. (Computers-
Software & Services) (a) 1,098,852 -- 1,098,852
Siam Commercial Bank Public Co. Ltd.-$1.365 Conv.
Pfd. (Banks-Regional) (Acquired 10/22/99-11/03/99;
Cost $998,418) (b) 390,186 685,630 1,075,816
Thai Farmers Bank Public Co. Ltd., (Banks-Major
Regional) (a) 1,252,349 -- 1,252,349
------------- ------------- --------------
5,481,549
============= ============= ==============
UNITED KINGDOM--2.25%
HSBC Holdings PLC (Banks-Major Regional) 3,734,451 -- 3,734,451
============= ============= ==============
Total Foreign Stocks & Other Equity Interests (cost $121,882,358) 150,221,271
MONEY MARKET FUNDS--2.90%
STIC Liquid Assets Portfolio (c) 847,462 1,557,615 2,405,077
STIC Prime Portfolio (c) 847,462 1,557,615 2,405,077
------------- ------------- --------------
Total Money Market Funds (cost $4,810,154 ) 4,810,154
============= ============= ==============
TOTAL INVESTMENTS-93.55% (cost $126,692,512) 113,538,671 41,492,754 155,031,425
------------- ------------- --------------
OTHER ASSETS LESS LIABILITIES-6.45% 9,679,064 1,004,345 10,683,409
------------- ------------- --------------
NET ASSETS--100.00% $ 123,217,735 $ 42,497,099 $ 165,714,834
============= ============= ==============
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
KOSPI - Korea Stock Price Index
Rts. - Rights
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(c) The money market fund has the same investment advisor as the Fund.
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
<PAGE> 276
AIM ASIAN GROWTH FUND
AIM NEW PACIFIC GROWTH FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
AIM NEW PACIFIC AIM ASIAN PRO FORMA
GROWTH FUND GROWTH FUND COMBINING
<S> <C> <C> <C>
ASSETS:
Investments, at market value $113,538,671 $ 41,492,754 $155,031,425
(cost $34,308,857 - Asian Growth)
(cost $92,383,655 - New Pacific Growth)
(cost $126,692,512 - Pro forma combining)
------------ ------------ ------------
Foreign currencies, at value 6,872,879 1,062,360 7,935,239
(cost $1,066,940 - Asian Growth)
(cost $6,841,977 - New Pacific Growth)
------------ ------------ ------------
Cash 5,636,575 -- 5,636,575
------------ ------------ ------------
Receivables for:
Investments sold -- 451,237 2,630,648
------------ ------------ ------------
Capital stock/fund shares sold 2,179,411 434,594 2,614,005
------------ ------------ ------------
Dividends and interest 1,793 10,643 12,436
------------ ------------ ------------
Investment for deferred compensation plan -- 7,658 7,658
------------ ------------ ------------
Other assets 49,565 26,195 75,760
============ ============ ============
Total assets 128,278,894 43,485,441 171,764,335
============ ============ ============
LIABILITIES:
Payables for:
Investments purchased 4,696,972 754,485 5,451,457
------------ ------------ ------------
Capital stock/fund shares reacquired 165,886 101,659 267,545
------------ ------------ ------------
Deferred compensation -- 7,658 7,658
------------ ------------ ------------
Accrued advisory fees -- 48,172 48,172
------------ ------------ ------------
Accrued administrative services fees 4,247 4,247 8,494
------------ ------------ ------------
Accrued trustees'/directors' fees 750 716 1,466
------------ ------------ ------------
Accrued distribution fees 113,367 22,071 135,438
------------ ------------ ------------
Accrued transfer agent fees 23,998 15,101 39,099
------------ ------------ ------------
Accrued operating expenses 55,939 34,233 90,172
------------ ------------ ------------
Total liabilities 5,061,159 988,342 6,049,501
============ ============ ============
Net assets applicable to shares outstanding $123,217,735 $ 42,497,099 $165,714,834
============ ============ ============
NET ASSETS:
Class A $ 86,707,102 $ 25,419,567 $113,145,296
============ ============ ============
Advisor Class 1,018,627 -- --
============ ============ ============
Class B 34,091,431 12,069,543 46,160,974
============ ============ ============
Class C 1,400,575 5,007,989 6,408,564
============ ============ ============
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE (ASIAN GROWTH);
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE (NEW PACIFIC
GROWTH):
Class A:
Authorized -- 200,000,000 200,000,000
------------ ------------ ------------
Outstanding 14,024,150 2,361,340 10,510,835
============ ============ ============
Advisor Class:
Authorized -- -- --
Outstanding 164,672 -- --
============ ============ ============
Class B:
Authorized -- 200,000,000 200,000,000
------------ ------------ ------------
Outstanding 5,707,119 1,133,253 4,332,455
============ ============ ============
Class C:
Authorized -- 200,000,000 200,000,000
------------ ------------ ------------
Outstanding 234,674 471,104 602,901
============ ============ ============
Class A:
Net asset value and redemption price per share $ 6.18 $ 10.76 $ 10.76
------------ ------------ ------------
Offering price per share:
(Net asset value of $10.76 / 94.50% - Asian Growth)
(Net asset value of $ 6.18 / 94.50% - New Pacific Growth) $ 6.54 $ 11.39 $ 11.39
============ ============ ============
Advisor Class:
Net asset value, and offering price per share $ 6.19 $ -- $ --
============ ============ ============
Class B:
Net asset value and offering price per share $ 5.97 $ 10.65 $ 10.65
============ ============ ============
Class C:
Net asset value and offering price per share $ 5.97 $ 10.63 $ 10.63
============ ============ ============
</TABLE>
See Accompanying Notes to Pro Forma Financial Statements.
<PAGE> 277
AIM NEW PACIFIC GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
FOR THE 10 FOR THE YEAR
NOVEMBER AND MONTHS ENDED ENDED
INVESTMENT INCOME: 12/31/98 10/31/98 DECEMBER, 1998 10/31/99 10/31/99
------------ ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Dividend $ 3,912,604 $ 3,684,119 $ 228,485 $ 2,175,942 $ 2,404,427
Interest 696,245 586,927 109,318 181,428 290,746
Security lending income 308,990 284,909 24,081 54,287 78,368
Total investment income (loss) 4,917,839 4,555,955 361,884 2,411,657 $ 2,773,541
EXPENSES:
Advisory and administrative fees 1,447,661 1,178,116 269,545 987,799 1,257,344
Accounting service fees 40,387 34,360 6,027 35,101 41,128
Custodian fees 126,500 104,510 21,990 87,627 109,617
Distribution fees -- Class A 370,817 315,798 55,019 252,675 307,694
Distribution fees -- Class B 410,888 351,198 59,690 281,055 340,745
Distribution fees -- Class C -- -- -- 1,494 1,494
Trustees' fees 13,140 10,944 2,196 7,966 10,162
Transfer agent fees 884,800 687,037 197,763 576,050 773,813
Interest -- -- -- 70,045 70,045
Other 538,157 309,671 228,486 259,646 488,132
Total Expenses 3,832,350 2,991,634 840,716 2,559,458 3,400,174
Less: Expenses waived by advisors -- (271,371) (271,371) (227,532) (498,903)
Expenses reimbursed by AIM Advisors, Inc. (497,914) -- (497,914) -- (497,914)
Expenses paid indirectly and
expense reductions (88,368) (55,521) (143,889) (46,552) (190,441)
Net expenses 3,246,068 2,664,742 (72,458) 2,285,374 2,212,916
Net investment income (loss) 1,671,771 1,891,213 434,342 126,283 560,625
REALIZED AND UNREALIZED GAIN (LOSS) FROM
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (42,030,213) --
Foreign currencies 1,956,431 --
Change in net unrealized appreciation (depreciation) of:
Investment securities 24,192,659 --
Foreign currencies (1,281,283) --
Net gain from investment securities (17,837,554)
foreign currencies 675,148
Net increase in net assets resulting from operations (15,490,635)
</TABLE>
<PAGE> 278
AIM ASIAN GROWTH FUND
AIM NEW PACIFIC GROWTH FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
AIM New Pacific AIM Asian Pro Forma
Growth Fund Growth Fund Adjustments Combining
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,419,183 $ 302,917 $ -- $ 2,722,100
(net of $ 99,541 foreign withholding tax)
(net of $107,458 foreign withholding tax)
------------ ------------ ------------ -----------
Interest 290,746 65,008 355,754
------------ ------------ ------------ -----------
Security lending income 78,368 -- 78,368
============ ============ ============ ===========
Total investment income 2,788,297 367,925 -- 3,156,222
============ ============ ============ ===========
EXPENSES:
Advisory fees 1,213,464 246,413 (31,470) 1,428,407
------------ ------------ ------------ -----------
Accounting/Administrative services fees 43,109 74,007 (43,109) 74,007
------------ ------------ ------------ -----------
Custodian fees 107,496 62,478 169,974
------------ ------------ ------------ -----------
Distribution fees -- ClassA 311,063 61,006 4,026 376,095
------------ ------------ ------------ -----------
Distribution fees -- Class B 343,491 64,087 407,578
------------ ------------ ------------ -----------
Distribution fees -- Class C 834 20,619 21,453
------------ ------------ ------------ -----------
Interest 70,342 -- (70,342) --
------------ ------------ ------------ -----------
Transfer agent fees -- Class A 505,290 61,457 6,540 573,287
------------ ------------ ------------ -----------
Transfer agent fees -- Advisor Class 6,540 -- (6,540) --
------------ ------------ ------------ -----------
Transfer agent fees -- Class B 195,288 36,637 231,925
------------ ------------ ------------ -----------
Transfer agent fees -- Class C 474 11,787 12,261
------------ ------------ ------------ -----------
Trustees'/directors' fees 9,781 7,780 17,561
------------ ------------ ------------ -----------
Registration and filing fees 60,606 61,091 121,697
------------ ------------ ------------ -----------
Other 187,899 71,023 258,922
============ ============ ============ ===========
Total expenses 3,055,677 778,385 (140,895) 3,693,167
============ ============ ============ ===========
Less: Fees waived and reimbursed by advisor (276,394) (207,130) (20,226) (503,750)
------------ ------------ ------------ -----------
Expenses paid indirectly (57,267) (853) -- (58,120)
============ ============ ============ ===========
Net expenses 2,722,016 570,402 (161,121) 3,131,297
------------ ------------ ------------ -----------
Net investment income (loss) 66,281 (202,477) 161,121 24,925
------------ ------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 13,590,516 935,968 14,526,484
------------ ------------ ------------ -----------
Foreign currencies (403,390) (9,786) (413,176)
============ ============ ============ ===========
13,187,126 926,182 14,113,308
============ ============ ============ ===========
Change in net unrealized appreciation of:
Investment securities 30,489,059 6,895,666 37,384,725
------------ ------------ ------------ -----------
Foreign currencies 71,615 1,173 72,788
============ ============ ============ ===========
30,560,674 6,896,839 37,457,513
============ ============ ============ ===========
Net gain from investment securities and foreign
currencies 43,747,800 7,823,021 51,570,821
------------ ------------ ------------ -----------
Net increase in net assets resulting from operations $ 43,814,081 $ 7,620,544 $ 161,121 $51,595,746
============ ============ ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
<PAGE> 279
AIM ASIAN GROWTH FUND
AIM NEW PACIFIC GROWTH FUND
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
OCTOBER 31, 1999
(UNAUDITED)
Note 1 - Basis of Pro Forma Presentation
The pro forma financial statements and the accompanying pro forma schedule of
investments give effect to the proposed Agreement and Plan of Reorganization
between AIM New Pacific Growth Fund and AIM International Funds, Inc. and the
consummation of the transactions contemplated therein to be accounted for as a
tax-free reorganization of investment companies. The Agreement and Plan of
Reorganization would be accomplished by an exchange of shares of AIM Asian
Growth Fund for the net assets of AIM New Pacific Growth Fund and the
distribution of AIM Asian Growth Fund shares to AIM New Pacific Growth Fund
shareholders. If the Agreement and Plan of Reorganization were to have taken
place at October 31, 1999, AIM New Pacific Growth Fund Class A shareholders
would have received 8,054,763 shares of AIM Asian Growth Fund - Class A shares,
AIM New Pacific Growth Fund Advisor Class shareholders would have received
94,732 shares of AIM Asian Growth Fund - Class A shares, AIM New Pacific Growth
Fund Class B shareholders would have received 3,199,202 shares of AIM Asian
Growth Fund - Class B shares and AIM New Pacific Growth Fund Class C
shareholders would have received 131,797 shares of AIM Asian Growth Fund - Class
C shares.
Note 2 - Pro Forma Adjustments
Pro forma adjustments have been made to reflect the contractual expenses of the
combined entities.
<PAGE> 280
PART C. OTHER INFORMATION
Item 15. Indemnification
Pursuant to the Maryland General Corporation Law and the Registrant's
Charter and By-Laws, the Registrant may indemnify any person who was or
is a director, officer, employee or agent of the Registrant to the
maximum extent permitted by the Maryland General Corporation Law. The
specific terms of such indemnification are reflected in the
Registrant's Charter and By-Laws, which are incorporated herein as part
of this Registration Statement. No indemnification will be provided by
the Registrant to any director or officer of the Registrant for any
liability to Registrant or shareholders to which such director or
officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered hereby, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy and will be
governed by the final adjudication of such issue. Insurance coverage is
provided under a joint Mutual Fund and Investment Advisory Professional
Directors and Officers Liability Policy, issued by ICI Mutual Insurance
Company, with a $35,000,000 limit of liability.
Item 16. Exhibits.
1 (a) Articles of Incorporation of Registrant were filed as an
Exhibit to Registrant's Registration Statement on December 19,
1991.
(b) Articles of Amendment, dated May 21, 1992, were filed as an
Exhibit to Registrant's Post-Effective Amendment No. 1 on
February 23, 1993.
(c) Articles of Amendment, dated May 21, 1992, were filed as an
Exhibit to Registrant's Post-Effective Amendment No. 1 on
February 23, 1993.
(d) Articles Supplementary, dated June 29, 1994, to Articles of
Incorporation of Registrant were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 5 on August 17,
1994.
(e) Articles Supplementary, dated August 4, 1994, to Articles of
Incorporation of Registrant were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 5 on August 17,
1994.
(f) Articles of Amendment, dated November 14, 1994, were filed
electronically as an Exhibit to Post-Effective Amendment No. 9
on February 28, 1996.
1
<PAGE> 281
Item 16. Exhibits.
(g) Articles of Restatement, dated November 14, 1994, were filed
electronically as an Exhibit to Post-Effective Amendment No. 9
on February 28, 1996, and are hereby incorporated by
reference.
(h) Articles Supplementary to Articles of Incorporation of
Registrant, dated June 12, 1997, were filed electronically as
an Exhibit to Post-Effective Amendment No. 12 on August 4,
1997, and are hereby incorporated by reference.
(i) Articles of Amendment to Articles of Incorporation of
Registrant, dated October 14, 1997, were filed electronically
as an Exhibit to Post-Effective Amendment No. 13 on October
17, 1997, and are hereby incorporated by reference.
(j) Articles Supplementary to Articles of Incorporation of
Registrant, dated June 9, 1999, were filed electronically as
an Exhibit to Post-Effective Amendment No. 17 on February 23,
2000, and are hereby incorporated by reference.
(k) Articles Supplementary to Articles of Incorporation of
Registrant, dated December 23, 1999, were filed electronically
as an Exhibit to Post-Effective Amendment No. 17 on February
23, 2000, and are hereby incorporated by reference.
2 (a) By-Laws of the Registrant were filed as an Exhibit to
Registrant's Registration Statement on December 19, 1991, and
were filed electronically as an Exhibit to Post-Effective
Amendment No. 9 on February 28, 1996.
(b) First Amendment, dated March 14, 1995, to By-Laws of
Registrant was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996.
(c) Amended and Restated By-Laws, dated effective December 11,
1996, were filed electronically as an Exhibit to
Post-Effective Amendment No. 10 on February 24, 1997, and are
hereby incorporated by reference.
(d) First Amendment, dated June 9, 1999, to Amended and Restated
By-Laws of Registrant were filed electronically as an Exhibit
to Post-Effective Amendment No. 17 on February 23, 2000, and
are hereby incorporated by reference.
3 Voting Trust Agreements - None.
4 A copy of the form of Agreement and Plan of Reorganization
between the Registrant and AIM Growth Series is attached as
Appendix I to the Prospectus contained in this Registration
Statement.
5 None
6 (a) (1) Investment Advisory Agreement, dated as of November
8, 1991, between Registrant and A I M Advisors, Inc.
was filed as an Exhibit to Registrant's Registration
Statement on December 19, 1991.
(2) Investment Advisory Agreement, dated as of October
18, 1993, between Registrant on behalf of its AIM
International Equity Fund and A I M Advisors, Inc.
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on February 24, 1994,
and was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996.
2
<PAGE> 282
Item 16. Exhibits.
(3) Master Investment Advisory Agreement, dated as of
July 1, 1994, between A I M Advisors, Inc. and
Registrant on behalf of its AIM Global Aggressive
Growth Fund, AIM Global Growth Fund and AIM Global
Income Fund was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6 on September 2, 1994,
and was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996.
(4) Master Investment Advisory Agreement, dated February
28, 1997, between A I M Advisors, Inc. and Registrant
was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 16, 1997, and
is hereby incorporated by reference.
(5) Amendment No. 1, dated as of November 1, 1997, to
Master Investment Advisory Agreement, dated February
28, 1997, between A I M Advisors, Inc. and Registrant
was filed electronically as an Exhibit to
Post-Effective Amendment No. 13 on October 17, 1997,
and is hereby incorporated by reference.
(b) (1) Master Sub-Advisory Agreement, dated as of November
1, 1997, between A I M Advisors, Inc. and INVESCO
Global Asset Management Limited was filed
electronically as an Exhibit to Post-Effective
Amendment No. 13 on October 17, 1997, and is hereby
incorporated by reference.
(2) Sub-Sub-Advisory Agreement, dated as of November 1,
1997, between INVESCO Global Asset Management Limited
and INVESCO Asset Management Limited was filed
electronically as an Exhibit to Post-Effective
Amendment No. 13 on October 17, 1997, and is hereby
incorporated by reference.
(3) Sub-Sub-Advisory Agreement, dated as of November 1,
1997, between INVESCO Global Asset Management Limited
and INVESCO Asia Limited was filed electronically as
an Exhibit to Post-Effective Amendment No. 13 on
October 17, 1997, and is hereby incorporated by
reference.
7 (a) (1) Distribution Agreement, dated December 11, 1991,
between Registrant and A I M Distributors, Inc. was
filed as an Exhibit to Registrant's Registration
Statement on December 19, 1991.
(2) Distribution Agreement, dated October 18, 1993,
between Registrant and A I M Distributors, Inc. was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 3 on February 24, 1994.
(3) Master Distribution Agreement, dated September 10,
1994, between Registrant (on behalf of the
portfolios' Class A shares) and A I M Distributors,
Inc. was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 7 on February 23, 1995,
and was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996.
(4) Master Distribution Agreement, dated September 10,
1994, between the Registrant (on behalf of the
portfolios' Class B shares) and A I M Distributors,
Inc. was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 7 on February 23, 1995.
3
<PAGE> 283
Item 16. Exhibits.
(5) Amended and Restated Master Distribution Agreement,
dated May 2, 1995, between the Registrant (on behalf
of the portfolios' Class B shares) and A I M
Distributors, Inc. was electronically filed as an
Exhibit to Post-Effective Amendment No. 8 on December
1, 1995.
(6) Master Distribution Agreement, dated February 28,
1997, between Registrant (on behalf of the
portfolios' Class A shares) and A I M Distributors,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 16, 1997.
(7)(i) Master Distribution Agreement, dated February 28,
1997, between Registrant (on behalf of the
portfolios' Class B shares) and A I M Distributors,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 11 on May 16, 1997.
(7)(ii) Amendment No. 1, dated November 1, 1997, to Master
Distribution Agreement between Registrant (on behalf
of the portfolios' Class B shares) and A I M
Distributors, Inc. was filed electronically as an
Exhibit to Post-Effective Amendment No. 13 on October
17, 1997, and is hereby incorporated by reference.
(8)(i) Amended and Restated Master Distribution Agreement,
dated as of August 4, 1997, between Registrant (on
behalf of the portfolios' Class A and Class C shares)
and A I M Distributors, Inc. was filed electronically
as an Exhibit to Post-Effective Amendment No. 13 on
October 17, 1997, and is hereby incorporated by
reference.
(8)(ii) Amendment No. 1, dated November 1, 1997, to Amended
and Restated Master Distribution Agreement, dated as
of August 4, 1997, (on behalf of the portfolios'
Class A and Class C shares) was filed electronically
as an Exhibit to Post-Effective Amendment No. 13 on
October 17, 1997, and is hereby incorporated by
reference.
(b) Form of Selected Dealer Agreement between A I M Distributors,
Inc. and selected dealers was filed electronically as an
Exhibit to Post-Effective Amendment No. 15 on December 23,
1998, and is hereby incorporated by reference.
(c) Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed electronically as an
Exhibit to Post-Effective Amendment No. 15 on December 23,
1998, and is hereby incorporated by reference.
8 (a) Retirement Plan for Registrant's Non-Affiliated Directors was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 4 on June 29, 1994.
(b) Retirement Plan for Registrant's Non-Affiliated Directors
effective as of March 8, 1994, as restated September 18, 1995,
was filed electronically as an Exhibit to Post-Effective
Amendment No. 9 on February 28, 1996 and is hereby
incorporated by reference.
(c) Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 4 on June 29, 1994.
(d) Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors as approved December 5, 1995, was
filed electronically as an Exhibit to Post-Effective Amendment
No. 9 on February 28, 1996, and is hereby incorporated by
reference.
(e) Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Director's as approved March 12, 1997, was
filed as an Exhibit to Post-Effective Amendment No. 14 on
February 20, 1998, and is hereby incorporated by reference.
4
<PAGE> 284
Item 16. Exhibits.
9 (a) Custodian Agreement between Registrant and State Street Bank
and Trust Company, dated as of November 8, 1991, was filed as
an Exhibit to Registrant's Registration Statement on December
19, 1991, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996, and is
hereby incorporated by reference.
(b) Amendment, dated July 1, 1994, to Custodian Agreement between
Registrant and State Street Bank and Trust Company dated
November 8, 1991, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6 on September 2, 1994, and was
filed electronically as an Exhibit to Post-Effective Amendment
No. 9 on February 28, 1996, and is hereby incorporated by
reference.
(c) Amendment No. 2, dated September 19, 1995, to the Custodian
Contract, dated November 8, 1991, was filed electronically as
an Exhibit to Post-Effective Amendment No. 9 on February 28,
1996, and is hereby incorporated by reference.
(d) Amendment No. 3, dated November 1, 1997, to the Custodian
Contract, dated November 8, 1991, between Registrant and State
Street Bank and Trust Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 13 on October 17,
1997, and is hereby incorporated by reference.
(e) Amendment, dated September 9, 1998, to the Custodian Contract,
dated November 8, 1991, between Registrant and State Street
Bank and Trust Company was filed electronically as an Exhibit
to Post-Effective Amendment No. 15 on December 23, 1998 and is
hereby incorporated by reference.
(f) Subcustodian Agreement, dated September 9, 1994, among Texas
Commerce Bank National Association, State Street Bank and
Trust Company, A I M Fund Services, Inc. and Registrant was
filed electronically as an Exhibit to Post-Effective Amendment
No. 9, on February 28, 1996, and is hereby incorporated by
reference.
10 (a) (1) Registrant's Distribution Plan was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
1 on February 23, 1993.
(2) Distribution Plan, and related forms of agreements,
on behalf of the Registrant's AIM International
Equity Fund, dated September 27, 1993, were filed as
an Exhibit to Registrant's Post-Effective Amendment
No. 3 on February 24, 1994.
(3) Master Distribution Plan, and related forms of
agreements, for Registrant's Class A shares were
filed as Exhibits to Registrant's Post-Effective
Amendment No. 7 on February 23, 1995.
(4) Master Distribution Plan, and related forms of
agreements, for Registrant's Class B shares were
filed as Exhibits to Registrant's Post-Effective
Amendment No. 7 on February 23, 1995.
(5) Amended Master Distribution Plan, dated September 10,
1994, for Registrant's Class A shares was
electronically filed as an Exhibit to Post-Effective
Amendment No. 8 on December 1, 1995.
(6) Amended Master Distribution Plan, dated September 10,
1994, for Registrant's Class B shares was
electronically filed as an Exhibit to Post-Effective
Amendment No. 8 on December 1, 1995.
5
<PAGE> 285
Item 16. Exhibits.
(7) Amended and Restated Master Distribution Plan, dated
as of September 10, 1994, as amended as of September
10, 1994, and as amended and restated as of May 2,
1995, for Registrant's Class B shares was
electronically filed as an Exhibit to Post-Effective
Amendment No. 8 on December 1, 1995.
(8) Amended and Restated Master Distribution Plan, dated
as of September 10, 1994, as amended as of September
10, 1994, and amended and restated as of June 30,
1997, for Registrant's Class A shares was filed
electronically as an Exhibit to Post-Effective
Amendment No. 12 on August 4, 1997.
(9)(i) Second Amended and Restated Master Distribution
Plan, dated as of September 10, 1994, as amended
September 10, 1994, and as amended and restated as
of May 2, 1995, and amended and restated as of June
30, 1997, for Registrant's Class B shares was filed
electronically as an Exhibit to Post-Effective
Amendment No. 12 on August 4, 1997, and is hereby
incorporated by reference.
(9)(ii) Amendment No. 1, dated November 1, 1997, to Second
Amended and Restated Master Distribution Plan for
Registrant's Class B shares was filed electronically
as an Exhibit to Post-Effective Amendment No. 13 on
October 17, 1997, and is hereby incorporated by
reference.
(10)(i) Second Amended and Restated Master Distribution
Plan, dated as of September 10, 1994, as amended as
of September 10, 1994, as amended and restated as of
June 30, 1997, and as amended and restated as of
August 4, 1997, for Registrant's Class A and Class C
shares was filed electronically as an Exhibit to
Post-Effective Amendment No. 13 on October 17, 1997.
(10)(ii) Amendment No. 1, dated November 1, 1997, to Second
Amended and Restated Master Distribution Plan for
Registrants Class A and Class C shares was filed
electronically as an Exhibit to Post-Effective
Amendment No. 13 on October 17, 1997.
(10)(iii) Third Amended and Restated Master Distribution Plan
for Registrant's Class A and Class C shares was
filed electronically as an Exhibit to Post-Effective
Amendment No. 15 on December 23, 1998 and is hereby
incorporated by reference.
(b) Form of Shareholder Service Agreement to be used in connection
with Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Post-Effective Amendment No.
16 on February 19, 1999, and is hereby incorporated by
reference.
(c) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective Amendment
No. 16 on February 19, 1999, and is hereby incorporated by
reference.
(d) (1) Form of Agency Pricing Agreement (for Class A Shares)
to be used in connection with Registrant's Master
Distribution Plan was filed electronically as an
Exhibit to Post-Effective Amendment No. 16 on
February 19, 1999, and is hereby incorporated by
reference.
6
<PAGE> 286
Item 16. Exhibits.
(2) Form of Service Agreement for Certain Retirement
Plans (for the Institutional Classes) to by used in
connection with Registrant's Master Distribution Plan
was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996.
(e) Forms of Service Agreement for Brokers for Bank Trust
Departments and for Bank Trust Departments to be used in
connection with Registrant's Master Distribution Plan were
filed electronically as an Exhibit to Post-Effective Amendment
No. 16 on February 19, 1999, and are hereby incorporated by
reference.
(f) Form of Variable Group Annuity Contractholder Service
Agreement to be used in connection with Registrant's Master
Distribution Plan was filed electronically as an Exhibit to
Post-Effective Amendment No. 16 on February 19, 1999, and is
hereby incorporated by reference.
(g) Rule 18f-3 Amended and Restated Multiple Class Plan (effective
July 1, 1997) was filed electronically as an Exhibit to
Post-Effective Amendment No. 12 on August 12, 1997.
(h) Rule 18f-3 Second Amended and Restated Multiple Class Plan
(effective September 1, 1997) was filed electronically as an
Exhibit to Post-Effective Amendment No. 13 on October 17,
1997.
(i) Third Amended and Restated Multiple Class Plan (Rule 18f-3
Plan) was filed electronically as an Exhibit to Post-Effective
Amendment No. 17 on February 23, 2000, and is hereby
incorporated by reference.
11 Opinion and consent of Ballard Spahr Andrews & Ingersoll, LLP,
as to the legality of the securities being registered is filed
herewith electronically.
12 Opinion and consent of Ballard Spahr Andrews & Ingersoll, LLP,
supporting the tax matters and consequences to shareholders
discussed in the prospectus will be filed as an amendment to
this Registration Statement.
13 (a) (1) Transfer Agency Agreement between Registrant and The
Shareholder Services Group, Inc., dated May 15, 1992,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 1 on February 23, 1993.
(2) Amendment, dated May 15, 1992, to Transfer Agency
Agreement between Registrant and The Shareholder
Services Group, Inc., dated May 15, 1992, was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 1 on February 23, 1993.
(3) Form of Amendment No. 2 to Transfer Agency Agreement
between Registrant and The Shareholder Services
Group, Inc., dated May 15, 1992, was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
6 on September 2, 1994.
(4) Amendment No. 3, dated July 1, 1994, to Transfer
Agency Agreement between Registrant and The
Shareholder Services Group, Inc., dated May 15, 1992,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6 on September 2, 1994.
7
<PAGE> 287
Item 16. Exhibits.
(5)(i) Transfer Agency and Service Agreement, dated as of
November 1, 1994, between the Registrant and A I M
Fund Services, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on
February 23, 1995, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 9 on February
28, 1996, and is hereby incorporated by reference.
(5)(ii) Amendment No. 1, dated August 4, 1997, to the
Transfer Agency and Service Agreement, dated as of
November 1, 1994, between the Registrant and A I M
Fund Services, Inc., was filed electronically as an
Exhibit to Post-Effective Amendment No. 13 on October
17, 1997, and is hereby incorporated by reference.
(5)(iii) Amendment No. 2, dated January 1, 1999, to the
Transfer Agency and Service Agreement, dated as of
November 1, 1999, between Registrant and A I M Fund
Services, Inc., was filed electronically as an
Exhibit to Post-Effective Amendment No. 17 on
February 23, 2000, and is hereby incorporated by
reference.
(6)(i) Remote Access and Related Services Agreement, dated
as December 23, 1994, between the Registrant and The
Shareholder Services Group, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 7 on February
23, 1995, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 9 on February 28,
1996, and is hereby incorporated by reference.
(6)(ii) Amendment No. 1, dated October 4, 1995, to the Remote
Access and Related Services Agreement, dated December
23, 1994, between the Registrant and First Data
Investor Services Group, Inc. (formerly The
Shareholder Services Group, Inc.) was filed
electronically as an Exhibit to Post-Effective
Amendment No. 9 on February 28, 1996, and is hereby
incorporated by reference.
(6)(iii) Addendum No. 2, dated October 12, 1995, to the Remote
Access and Related Services Agreement, dated December
23, 1994, between Registrant and First Data Investor
Services Group, Inc. (formerly The Shareholder
Services Group, Inc.) was filed electronically as an
Exhibit to Post-Effective Amendment No. 9 on February
28, 1996, and is hereby incorporated by reference.
(6)(iv) Amendment No. 3, dated February 1, 1997, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly The
Shareholder Services Group, Inc.) was filed
electronically as an Exhibit to Post-Effective
Amendment No. 12 on August 4, 1997, and is hereby
incorporated by reference.
(6)(v) Amendment No. 4, dated as of June 30, 1998, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between the Registrant and First
Data Investor Services Group, Inc. was filed
electronically as an Exhibit to Post-Effective
Amendment No. 15 on December 23, 1998, and is hereby
incorporated by reference.
(6)(vi) Amendment No. 5, dated July 1, 1998, to the Remote
Access and Related Services Agreement, dated December
23, 1994, between the Registrant and First Data
Investor Services Group, Inc., was filed
electronically as an Exhibit to Post-Effective
Amendment No. 15 on December 23, 1998, and is hereby
incorporated by reference.
8
<PAGE> 288
Item 16. Exhibits.
(6)(vii) Amendment No. 6, dated August 30, 1999, to the Remote
Access and Related Services Agreement, dated December
23, 1994, between the Registrant and First Data
Investor Services Group, Inc., was filed
electronically as an Exhibit to Post-Effective
Amendment No. 17 on February 23, 2000, and is hereby
incorporated by reference.
(6)(viii)Exhibit 1, effective as of August 4, 1997, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between the Registrant and First
Data Investor Services Group, Inc. was filed
electronically as an Exhibit to Post-Effective
Amendment No. 14 on February 20, 1998, and is hereby
incorporated by reference.
(6)(ix) Preferred Registration Technology Escrow Agreement,
dated September 10, 1997, between Registrant and
First Data Investor Services Group, Inc., was filed
electronically as an Exhibit to Post-Effective
Amendment No. 14 on February 20, 1998, and is hereby
incorporated by reference.
(b) (1) Administrative Services Agreement, dated December 10,
1991, between the Registrant and A I M Advisors, Inc.
was filed as an Exhibit to Registrant's Registration
Statement on December 19, 1991.
(2) Administrative Services Agreement, dated as of
October 18, 1993, between A I M Advisors, Inc. and
Registrant, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on February 24, 1994,
and was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996.
(3) Master Administrative Services Agreement, dated as of
July 1, 1994, between A I M Advisors, Inc. and
Registrant on behalf of its AIM Global Aggressive
Growth Fund, AIM Global Growth Fund and AIM Global
Income Fund was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6 on September 2, 1994,
and was filed electronically as an Exhibit to
Post-Effective Amendment No. 9, on February 28, 1996.
(4)(i) Administrative services Agreement, dated as of
October 18, 1993, between A I M Advisors, Inc. on
behalf of Registrant's portfolios, and A I M Fund
Services, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 3 on
February 24, 1994.
(4)(ii) Amendment No. 1, dated May 11, 1994, to
Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc., on behalf of
Registrant's portfolios, and A I M Fund Services,
Inc. was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 4 on June 29, 1994.
(4)(iii) Amendment No. 2, dated July 1, 1994, to
Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc., on behalf of
Registrant's portfolios and classes, and A I M Fund
Services, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 6 on
September 2, 1994.
(4)(iv) Amendment No. 3, dated September 16, 1994, to the
Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc., on behalf of
Registrant's portfolios and classes, and A I M Fund
Services, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on
February 23, 1995.
9
<PAGE> 289
Item 16. Exhibits.
(5)(i) Administrative Services Agreement, dated as of
February 28, 1997, between A I M Advisors, Inc. and
Registrant was filed as an Exhibit to Post-Effective
Amendment No. 11 on May 16, 1997, and is hereby
incorporated by reference.
(5)(ii) Amendment No. 1, dated November 1, 1997, to Master
Administrative Services Agreement, dated February 28,
1997, between A I M Advisors, Inc. and Registrant was
filed electronically as an Exhibit to Post-Effective
Amendment No. 13 on October 17, 1997, and is hereby
incorporated by reference.
(c) (1) Accounting Services Agreement, dated as of November
5, 1991, between the Registrant and State Street Bank
and Trust Company was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 2 on April
2, 1992, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 9 on February 28,
1996.
(2) Amendment No. 1, dated July 1, 1994, to Accounting
Services Agreement, dated as of November 5, 1991,
between the Registrant and State Street Bank and
Trust Company was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6 on September 2, 1994,
and was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 28, 1996.
(d) (1) Shareholder Sub-Accounting Services Agreement among
the Registrant, First Data Investor Services Group
(formerly The Shareholder Services Group, Inc.),
Financial Data Services, Inc. and Merrill Lynch,
Pierce, Fenner & Smith, Inc., was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 1 on
February 23, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 9 on February
28, 1996, and is hereby incorporated by reference.
(2) Notice of Addition of Funds to Shareholder
Sub-Accounting Services Agreement, dated February 1,
1993, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 1 on February 23, 1993,
and was filed electronically as an Exhibit to
Post-Effective Amendment No. 10 on February 24, 1997,
and is hereby incorporated by reference.
(3) Notice of Addition of Funds to Shareholder
Sub-Accounting Services Agreement, dated as of
November 1, 1997, among the Registrant, First Data
Investor Services Group, Inc., Financial Data
Services, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated was filed electronically as an
Exhibit to Post-Effective Amendment No. 13 on October
17, and is hereby incorporated by reference.
(4) Notice of Addition of Funds to Shareholder
Sub-Accounting Services Agreement, dated as of
September 28, 1998, among the Registrant, First Data
Investor Services Group, Inc., Financial Data
Services, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated was filed electronically as an
Exhibit to Post-Effective Amendment No. 16 on
February 19, 1999, and is hereby incorporated by
reference.
10
<PAGE> 290
Item 16. Exhibits.
(5) Notice of Addition of Funds to Shareholder
Sub-Accounting Services Agreement, dated as of March
1, 1999, among the Registrant, First Data Investor
Services Group, Inc., and Merrill Lynch, Pierce,
Fenner & Smith Incorporated was filed electronically
as an Exhibit to Post-Effective Amendment No. 17 on
February 23, 2000, and is hereby incorporated by
reference.
(6) Notice of Addition of Funds to Shareholder
Sub-Accounting Services Agreement, dated as of May
12, 1999, among the Registrant, First Data Investor
Services Group, Inc., and Merrill Lynch, Pierce,
Fenner & Smith Incorporated was filed electronically
as an Exhibit to Post-Effective Amendment No. 17 on
February 23, 2000, and is hereby incorporated by
reference
(7) Notice of Addition of Funds to Shareholder
Sub-Accounting Services Agreement, dated as of
November 1, 1999, among the Registrant, First Data
Investor Services Group, Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated was filed
electronically as an Exhibit to Post-Effective
Amendment No. 17 on February 23, 2000, and is hereby
incorporated by reference
(8) Notice of Addition of Funds to Shareholder
Sub-Accounting Services Agreement, dated as of
December 31, 1999, among the Registrant, First Data
Investor Services Group, Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated was filed
electronically as an Exhibit to Post-Effective
Amendment No. 17 on February 23, 2000, and is hereby
incorporated by reference
14 (a) Consent of KPMG LLP is filed herewith electronically.
(b) Consent of PriceWaterhouseCoopers LLP is filed herewith
electronically.
15 Financial Statements - None.
16 None.
17 (a) Form of Proxy.
(b) Prospectus of AIM New Pacific Growth Fund.
Item 17. Undertakings
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CRF
203.145c], the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
11
<PAGE> 291
SIGNATURES
Pursuant to the Securities Act of 1933, as amended, this Registration
Statement on Form N-14 to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Houston, State of Texas, on the 22nd day of
March, 2000.
AIM INTERNATIONAL FUNDS, INC.
Registrant
By: *
------------------------------
Robert H. Graham
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-14 has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Charles T. Bauer Chairman & Director March 22, 2000
- -----------------------------
Charles T. Bauer
* Director & President March 22, 2000
- -----------------------------
Robert H. Graham
/s/ Bruce L. Crockett Director March 22, 2000
- -----------------------------
Bruce L. Crockett
/s/ Owen Daly II Director March 22, 2000
- -----------------------------
Owen Daly II
/s/ Prema Mathai-Davis Director March 22, 2000
- -----------------------------
Prema Mathai-Davis
/s/ Edward K. Dunn, Jr. Director March 22, 2000
- -----------------------------
Edward K. Dunn, Jr.
/s/ Jack Fields Director March 22, 2000
- -----------------------------
Jack Fields
/s/ Carl Frishling Director March 22, 2000
- -----------------------------
Carl Frishling
/s/ Lewis F. Pennock Director March 22, 2000
- -----------------------------
Lewis F. Pennock
/s/ Louis Sklar Director March 22, 2000
- -----------------------------
Louis Sklar
* Vice President & Treasurer March 22, 2000
- ----------------------------- (Principal Financial Officer)
Dana R. Sutton
</TABLE>
*By: /s/ Carol F. Relihan
---------------------
Carol F. Relihan
Attorney-In-Fact
<PAGE> 292
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Carol F. Relihan, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all his capacities as a director or officer of AIM
International Funds, Inc., a Maryland corporation, to sign on his or its behalf
any and all Registration Statements (including any pre-effective amendments to
Registration Statements) under the Securities Act of 1933, the Investment
Company Act of 1940 and any amendments and supplements thereto and applications
thereunder, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and any other applicable regulatory authority, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, and fully as to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, may lawfully do or cause to be done by virtue hereof.
DATED this 22nd day of March, 2000.
/s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham
<PAGE> 293
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Robert H. Graham or Carol F. Relihan, and each of them, her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for her and in her name, place and stead, in any and all his
capacities as a director or officer of AIM International Funds, Inc. a Maryland
corporation, to sign on her or its behalf any and all Registration Statements
(including any pre-effective amendments to Registration Statements) under the
Securities Act of 1933, the Investment Company Act of 1940 and any amendments
and supplements thereto and applications thereunder, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and any other applicable regulatory
authority, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, and fully as to
all intents and purposes as she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, and each of them,
may lawfully do or cause to be done by virtue hereof.
DATED this 22nd day of March, 2000.
/s/ DANA R. SUTTON
-----------------------------------
Dana R. Sutton
<PAGE> 294
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
11 Opinion of Counsel and Consent of Ballard Spahr Andrews &
Ingersoll, LLP as to securities registered
14(a) Consent of KPMG LLP
14(b) Consent of PriceWaterhouseCoopers LLP
17(a) Form of Proxy
17(b) Prospectus of AIM New Pacific Growth Fund
</TABLE>
<PAGE> 1
EXHIBIT 11
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
1735 MARKET STREET, 51ST FLOOR
PHILADELPHIA, PENNSYLVANIA 19103-7599
(215) 665-8500
March 22, 2000
AIM International Funds, Inc.
11 Greenway Plaza
Suite 100
Houston, Texas 77046
Re: Shares of Stock of AIM Asian Growth Fund, a Portfolio of
AIM International Funds, Inc.
Ladies and Gentlemen:
We have acted as counsel to AIM International Funds, Inc.,
a Maryland corporation (the "Company"), in connection with that certain
Agreement and Plan of Reorganization between the Company, acting on behalf of
AIM Asian Growth Fund (the "Acquiring Fund"), an investment portfolio of the
Company, and AIM Growth Series, a Delaware business trust ("AGS"), acting on
behalf of AIM New Pacific Growth Fund (the "Acquired Fund"), an investment
portfolio of AGS (the "Agreement"), and the consummation of the transactions
contemplated therein.
The Agreement provides for the combination of AIM New
Pacific Growth Fund with AIM Asian Growth Fund (the "Reorganization"). Pursuant
to the Agreement, all of the assets of the Acquired Fund will be transferred
to the Acquiring Fund, the Acquiring Fund will assume all of the liabilities
of the Acquired Fund and the Company will issue Class A shares of the
Acquiring Fund to the Acquired Fund's Class A shareholders, Class B shares of
the Acquiring Fund to the Acquired Fund's Class B shareholders and Class C
shares of the Acquiring Fund to the Acquired Fund's Class C shareholders. The
value of each Acquired Fund shareholder's account with the Acquiring Fund
immediately after the Reorganization will be the same as the value of such
shareholder's account with the Acquired Fund immediately prior to the
Reorganization.
The opinion expressed below is based on the assumption
that a Registration Statement on Form N-14 with respect to the Class A, Class B
and Class C shares of the Acquiring Fund to be issued pursuant to the Agreement
(the "Acquiring Fund Shares") will have been filed
<PAGE> 2
AIM International Funds, Inc.
March 22, 2000
Page 2
by the Company with the Securities and Exchange Commission and will have become
effective before the Reorganization occurs.
Based on the foregoing, we are of the opinion that the
Acquiring Fund Shares, when issued by the Company directly to the shareholders
of the Acquired Fund in accordance with the terms and conditions of the
Agreement, will be legally issued, fully paid and nonassessable.
We express no opinion concerning the laws of any
jurisdiction other than the federal laws of the United States of America and
the laws of the State of Maryland.
We consent to the filing of this opinion as Exhibit 11 to
the Company's Registration Statement on Form N-14 and to the references to this
firm in such Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
<PAGE> 1
EXHIBIT 14(a)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
AIM International Funds, Inc.:
We consent to the use of our report on the AIM Asian Growth Fund (a portfolio
of AIM International Funds, Inc.) dated December 3, 1999 included herein and
the references to our firm under the heading "Financial Information" in the
Statement of Additional Information and "Accountants" in the Agreement and Plan
of Reorganization.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
March 22, 2000
<PAGE> 1
EXHIBIT 14(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use and incorporation by reference in this Registration
Statement on Form N-14 of our report dated February 16, 2000, relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Report to Shareholders of AIM New Pacific Fund, which is also
incorporated by reference and included in the Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 21, 2000
<PAGE> 1
EXHIBIT 17(a)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY!
PROXY CARD PROXY CARD
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF
AIM NEW PACIFIC GROWTH FUND
(A PORTFOLIO OF AIM GROWTH SERIES)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 31, 2000
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders on May 31, 2000, at 3:00 p.m., Central time, and at any
adjournment thereof, all of the shares of the fund which the undersigned would
be entitled to vote if personally present. IF THIS PROXY IS SIGNED AND RETURNED
WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR" THE APPROVAL OF THE
PROPOSAL.
CONTROL NUMBER:
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint
owners should sign. When signing as
executor, administrator, attorney,
trustee or guardian or as custodian for a
minor, please give full title as such. If
a corporation, please sign in full
corporate name and indicate the signer's
office. If a partner, sign in the
partnership name.
-----------------------------------------
Signature
-----------------------------------------
Signature (if held jointly)
-----------------------------------------
Dated 10527_02
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE TRUSTEES
RECOMMEND VOTING "FOR" THE PROPOSAL. TO VOTE, FILL IN BOX COMPLETELY.
EXAMPLE: [X]
<TABLE>
<S> <C> <C> <C>
1. To approve an Agreement and Plan of Reorganization among AIM Growth Series, FOR AGAINST ABSTAIN
acting on behalf of AIM New Pacific Growth Fund, AIM International Funds,
Inc., acting on behalf of AIM Asian Growth Fund and A I M Advisors, Inc.. [ ] [ ] [ ]
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
<PAGE> 1
EXHIBIT 17(b)
CLASS A, CLASS B AND CLASS C SHARES OF
AIM NEW PACIFIC GROWTH FUND
Supplement dated March 22, 2000
to the Prospectus dated May 3, 1999,
as supplemented February 11, 2000
The Board of Trustees of AIM Growth Series unanimously approved, on March
22, 2000, a Plan of Reorganization ("Plan") pursuant to which AIM New
Pacific Growth Fund ("New Pacific Growth Fund"), a series of AIM Growth
Series, would transfer substantially all of its assets to AIM Asian Growth
Fund ("Asian Growth Fund"), a series of AIM International Funds, Inc. As a
result of the transaction, shareholders of New Pacific Growth Fund would
receive shares of Asian Growth Fund in exchange for their shares of New
Pacific Growth Fund, and New Pacific Growth Fund would cease operations.
New Pacific Growth Fund and Asian Growth Fund have the same investment
objective. The investment objective of each Fund is to seek long-term
growth of capital.
The Plan requires approval of New Pacific Growth Fund shareholders and will
be submitted to the shareholders for their consideration at a meeting to be
held in May 2000. If the Plan is approved by shareholders of New Pacific
Growth Fund and certain conditions required by the Plan are satisfied, the
transaction is expected to become effective shortly thereafter.
Effective March 22, 2000, the following heading and paragraphs replace in
their entirety the heading and paragraphs appearing under the heading "Fund
Management - The Advisors" on page 4 of the Prospectus:
"THE ADVISOR
A I M Advisor, Inc. (the advisor) serves as the fund's
investment advisor. The advisor is located at 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment
advisory services to the fund, including obtaining and
evaluating economic, statistical and financial information to
formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its
organization in 1976. Today, the advisor, together with its
subsidiaries, advises or manages over 120 investment portfolios,
including the fund, encompassing a broad range of investment
objectives."
Effective March 22, 2000, the following paragraph replaces in its entirety
the paragraph appearing under the heading "Fund Management - Portfolio
Managers" on page 4 of the Prospectus:
"The advisor uses a team approach to investment management. The
individual members of the team who are primarily responsible for
the day-to-day management of the fund's portfolio, all of whom
are officers of A I M Capital Management, Inc., a wholly owned
subsidiary of the advisor, are
o Shuxin Cao, Portfolio Manager, who has been responsible for
the fund since 2000 and has been associated with the
advisor and/or its affiliates since 1997. Prior to 1997,
Mr. Cao was an international equity analyst for Boatmen's
Trust Company.
o A. Dale Griffin, III, Senior Portfolio Manager, who has been
responsible for the fund since 2000 and has been associated
with the advisor and/or its affiliates since 1989.
o Barrett K. Sides, Portfolio Manager, who has been responsible
for the fund since 2000 and has been associated with the
advisor and/or its affiliates since 1990."
Effective April 28, 2000, Class A, Class B and Class C shares of the fund
will be closed to new investors.
<PAGE> 2
AIM NEW PACIFIC GROWTH FUND
CLASS A, B AND C SHARES
Supplement dated February 11, 2000
to the Prospectus dated May 3, 1999
Advisor Class shares of AIM New Pacific Growth Fund converted to Class A shares
of the fund effective the close of business on February 11, 2000. Advisor Class
shares of the fund are no longer offered for sale or exchange.
<PAGE> 3
AIM NEW PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------
AIM New Pacific Growth Fund seeks to provide long-term growth of
capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 4
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - --- - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 5
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in equity securities of issuers domiciled in twelve countries,
other than Japan, located in the Pacific region, including developing countries,
i.e., those that are in the initial stages of their industrial cycles. These
countries are designated as the fund's primary investment area, and the list of
countries may be revised with the approval of the fund's Board of Trustees. The
fund typically considers a company to be domiciled in a particular country if it
(1) is organized under the laws of a particular country or has a principal
office in a particular country; or (2) derives 50% or more of its total revenues
from business in that country, provided that, in the view of the portfolio
managers, the value of the issuers' securities tend to reflect such country's
development to a greater extent than developments elsewhere.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area, including developing
countries. The fund may also invest up to 35% of its total assets in U.S. and
foreign investment-grade debt securities, or securities deemed by the portfolio
managers to be of comparable quality. The fund may invest in securities of
issuers located in developing countries, i.e., those that are in the initial
stages of their industrial cycle.
In selecting investments, the portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The portfolio managers allocate
investments among fixed-income securities based on their views as to the best
values then available in the marketplace. The portfolio managers consider
whether to sell a particular security when any of those factors materially
changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, or high-quality debt
securities. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
Pacific region countries, such as substantial economic or regulatory changes.
Because the fund focuses its investments in Pacific region countries, the value
of your shares may rise and fall more than the value of shares of a fund that
invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 6
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1989 ....................................... 48.12%
1990 ....................................... -10.96%
1991 ....................................... 13.07%
1992 ....................................... -7.96%
1993 ....................................... 60.60
1994 ....................................... -19.73%
1995 ....................................... 7.45%
1996 ....................................... 20.04%
1997 ....................................... -44.25%
1998 ....................................... -19.09%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
23.94% (quarter ended December 31, 1993) and the lowest quarterly return was
- -31.51% (quarter ended December 31, 1997).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
(for the periods ended
December 31, 1998)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (23.57)% (15.09)% (0.27)% 8.15% 1/19/77
Class B (23.56) (14.97) -- (7.09) 4/1/93
Class C -- -- -- -- 5/3/99
MSCI AC
Pacific
Free
ex-Japan
Index(1) (2.07) (7.75) 6.76 8.73(2) 12/31/87(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country Pacific Free ex-Japan
Index measures the performance of 11 developed and emerging countries in the
Pacific rim, excluding Japan. The index excludes shares that are not readily
purchased by non-local investors.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest history.
2
<PAGE> 7
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- --------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 1.07 1.07 1.07
Total Annual Fund
Operating Expenses 2.40 3.05 3.05
Expense
Reimbursement(2) 0.40 0.40 0.40
Net Expenses 2.00 2.65 2.65
- --------------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to limit net expenses.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $780 $1,257 $1,760 $3,136
Class B 808 1,242 1,801 3,214
Class C 408 942 1,601 3,365
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $780 $1,257 $1,760 $3,136
Class B 308 942 1,601 3,214
Class C 308 942 1,601 3,365
- ----------------------------------------------
</TABLE>
3
<PAGE> 8
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asia Limited (the subadvisor), an affiliate of the advisor, is the
fund's subadvisor and is responsible for its day-to-day management. The advisor
is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The
subadvisor is located at 12/F, Three Exchange Square, 8 Connaught Place, Hong
Kong. The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor since its organization in
1972. Today, the advisor, together with its subsidiaries, advises or manages
over 110 investment portfolios, including the fund, encompassing a broad range
of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 1.01% of average daily net assets,
consisting of a management and administrative fee of 0.98% and an accounting fee
of 0.03%.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - Anna Tong, Portfolio Manager, who has been responsible for the fund since 1998
and has been associated with the advisor and/or its affiliates since 1985.
- - Sammy Lau, Portfolio Manager, who has been responsible for the fund since 1998
and has been associated with the advisor and/or its affiliates since December
1994. From November 1993 to November 1994, he was an Associate at J.P. Morgan
(Hong Kong).
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM New Pacific Growth Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 9
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------
YEAR ENDED DECEMBER 31,
1998(a) 1997(a) 1996(a) 1995(a) 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 6.48 $ 13.12 $ 12.47 $ 12.10 $ 15.86
Income from investment operations:
Net investment income (loss) 0.06(b) 0.05 0.02 0.11 0.02
Net realized and unrealized gain (loss) on
investments (1.30) (5.84) 2.44 0.79 (3.15)
Net increase (decrease) from investment
operations (1.24) (5.79) 2.46 0.90 (3.13)
Distributions to shareholders:
From net investment income (0.05) (0.03) -- (0.10) (0.01)
From net realized gain on investments -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income -- -- -- -- --
In excess of net realized gain on investments -- -- -- -- (0.07)
Total distributions (0.05) (0.85) (1.81) (0.53) (0.63)
Net asset value, end of period $ 5.19 $ 6.48 $ 13.12 $ 12.47 $ 12.10
Total investment return(c) (19.09)% (44.24)% 20.04% 7.45% (19.73)%
- -----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $80,824 $135,807 $361,244 $383,722 $404,680
Ratio of net investment income (loss) to average
net assets 1.30% 0.41% 0.17% 0.91% 0.11%
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.00% 1.66% 1.86% 1.89% 1.81%
Without expense reductions and/or
reimbursement 2.40% 1.93% 1.99% 1.94% N/A
Portfolio turnover rate(d) 96% 80% 93% 63% 87%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Includes reimbursement of Fund operating expenses per share of $0.02.
(c) Total investment return does not include sales charges.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------
YEAR ENDED DECEMBER 31,
1998(a) 1997(a) 1996(a) 1995(a) 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 6.28 $ 12.80 $ 12.29 $ 11.96 $ 15.79
Income from investment operations:
Net investment income (loss) 0.03(b) (0.03) (0.06) 0.03 (0.06)
Net realized and unrealized gain (loss) on
investments (1.26) (5.67) 2.38 0.75 (3.15)
Net increase (decrease) from investment
operations (1.23) (5.70) 2.32 0.78 (3.21)
Distributions to shareholders:
From net investment income (0.01) -- -- (0.02) --
From net realized gain on investments -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income -- -- -- -- --
In excess of net realized gain on investments -- -- -- -- (0.07)
Total distributions (0.01) (0.82) (1.81) (0.45) (0.62)
Net asset value, end of period $ 5.04 $ 6.28 $ 12.80 $ 12.29 $ 11.96
Total investment return(c) (19.55)% (44.65)% 19.28% 6.54% (20.30)%
- ----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $31,837 $55,820 $151,805 $130,887 $120,171
Ratio of net investment income (loss) to average
net assets 0.65% (0.24)% (0.48)% 0.26% (0.54)%
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.65% 2.31% 2.51% 2.54% 2.46%
Without expense reductions and/or
reimbursement 3.05% 2.58% 2.64% 2.59% N/A
Portfolio turnover rate(d) 96% 80% 93% 63% 87%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Includes reimbursement of Fund operating expenses per share of $0.02.
(c) Total investment return does not include contingent deferred sales charges.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
5
<PAGE> 10
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 11
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- -----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.50% 5.82%
$ 25,000 but less than $50,000 5.25 5.54
$ 50,000 but less than $100,000 4.75 4.99
$100,000 but less than $250,000 3.75 3.90
$250,000 but less than $500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- -----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $50,000 4.75% 4.99%
$ 50,000 but less than $100,000 4.00 4.17
$100,000 but less than $250,000 3.75 3.90
$250,000 but less than $500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $100,000 1.00% 1.01%
$100,000 but less than $250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 12
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 13
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 14
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the New York Stock
Exchange (NYSE) is open for business in order to effect the
redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the NYSE, we generally will transmit payment on the next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 15
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 16
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
NYSE, events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Directors or Trustees of the AIM Fund. The
effect of using fair value pricing is that an AIM Fund's net asset value will be
subject to the judgment of the Board of Directors or Trustees or its designee
instead of being determined by the market. Because some of the AIM Funds may
invest in securities that are primarily listed on foreign exchanges, the value
of those funds' shares may change on days when you will not be able to purchase
or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 17
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 18
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- ----------------------------------
AIM New Pacific Growth Fund
SEC 1940 Act file number: 811-2699
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com NPG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
