<PAGE> 1
ANNUAL REPORT / OCTOBER 31 1999
AIM EUROPEAN DEVELOPMENT FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
------------------------------------
HOMMAGE A BLERIOT, NO. 2, FRAGMENT
BY ROBERT DELAUNAY
LOUIS BLERIOT, A FRENCH ENGINEER AND INVENTOR, WAS THE
FIRST PERSON TO FLY ACROSS THE ENGLISH CHANNEL FROM
FRANCE, TRANSPORTED BY A 28-HORSEPOWER MONOPLANE OF
HIS OWN DESIGN. NEARLY 100 YEARS LATER, THE SAME SPIRIT
OF ENTREPRENEURSHIP AND COURAGE THAT LAUNCHED
BLERIOT'S FLIGHT HAS SENT EUROPE'S MARKETS SOARING.
------------------------------------
AIM European Development Fund is for shareholders who seek long-term growth of
capital. The fund invests in a diversified portfolio of equity securities of
companies located in Europe with strong earnings momentum.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM European Development Fund's performance figures are historical and they
reflect changes in net asset value and the reinvestment of distributions.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance 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 and Class C shares will differ from
that of Class A shares due to differences in sales charge structure and
expenses.
o The fund's average annual total returns (including sales charges), for the
period ended 9/30/99 (the most recent calendar quarter-end), were as
follows: Class A shares, one year, 15.94%; inception (11/3/97), 21.65%.
Class B shares, one year, 16.75%; inception (11/3/97), 22.70%. Class C
shares, one year, 20.75%; inception (11/3/97), 24.43%.
o During the year ended 10/31/99, Class A shares paid distributions of $0.0125
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 U.S. dollar relative to the values of other currencies, the
custodial arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
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 Lipper European Funds Index represents an average of the
performance of the 30 largest European-region mutual funds tracked by Lipper
Inc., an independent mutual funds performance monitor. The results shown
reflect reinvestment of dividends.
o The unmanaged MSCI Europe Index is a group of unmanaged European securities
tracked by Morgan Stanley Capital International.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not include
sales charges.
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. 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 of the fund.
AIM EUROPEAN DEVELOPMENT FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
[PHOTO OF The fiscal year discussed in this report reconfirmed our
Charles T. faith in two long-established principles of investing:
Bauer, portfolio diversification and long-term thinking. We could
Chairman of title this report "What a Difference a Year Makes."
the Board of An investor surveying conditions when the fiscal year
THE FUND opened on October 31, 1998, saw a market dominated by
APPEARS HERE] large-capitalization stocks and high-quality bonds,
especially U.S. Treasuries. Ten months into 1998, two
well-known indexes of large-capitalization U.S. company
stocks, the S&P 500 and the Dow Jones Industrial Average,
were up by double digits, but the smaller-company stocks in
the Russell 2000 had lost 12.80%. Overseas, many markets
were languishing, especially in Asia, where many financial
difficulties originated in 1997.
In bond markets also, name-brand quality was the place
to be. The Lehman Corporate/Government Bond Index, which
follows intermediate and long-term government and investment-grade debt, was up
8.56%, while the Lehman High Yield Index, which tracks riskier "junk bonds,"
had dropped 2.30%.
It would be easy for an investor to conclude that blue chips, whether equity
or fixed-income, were the only place to be. That investor, of course, would be
wrong.
MARKETS TURN
While large-capitalization stocks continue to do very well, during 1999 markets
broadened considerably, with many investment sectors performing a complete
turnaround. Year to date by October 31, 1999, the small-cap stocks in the
Russell 2000 were back in positive territory, and the many Asian markets had
staged a comeback. The same holds true for bonds. The higher-quality Lehman
index is down 1.49% year to date through October 31, 1999, while high-yield
bonds have moved into positive returns.
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.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by 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 can help assure 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 October 31, 1999, 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 EUROPEAN DEVELOPMENT FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND COMES ON STRONG AS EUROPE
MOVES INTO GROWTH MODE
EUROPEAN MARKETS GOT OFF TO A SLOW START THIS YEAR BUT GRADUALLY GAINED
MOMENTUM. HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
The fund continued its run of strong performance, reporting returns for the
fiscal year ended October 31, 1999, of 26.81% for Class A shares, 25.87% for
Class B shares and 25.85% for Class C shares based on net asset value--or
without sales charges. The fund's performance significantly outpaced the
benchmark for its peer group of diversified European funds, the MSCI Europe
Index, which returned 12.52% for the reporting period. In addition, the fund
enjoyed a more than 30% increase in net assets during the fiscal year--rising
from $136.4 million to $178.1 million at the close of the reporting period.
DESCRIBE THE EUROPEAN MARKET ENVIRONMENT AND HOW THE FUND WAS POSITIONED.
European market fundamentals were good: inflation was low, employment and
exports picked up and consumer confidence was high. Throughout the year economic
growth clearly accelerated, with most economies' growth expectations
experiencing upward revisions. Likewise, earnings growth has been strong the
last few months as European companies have benefited from economic growth, the
recovery in Asia and a strong U.S. dollar, which has helped many companies that
export to the United States.
On a country-by-country analysis, France, the Netherlands, Spain, Finland
and Ireland led the region with strong growth, while Italy and Europe's
proverbial economic powerhouse, Germany, lagged the field. Despite Germany's
poor overall economic showing, a steady improvement in the economic outlook and
strong individual company performance made it one of our top countries for
investment. Telecommunications and engineering giant Mannesmann represented a
major fund holding, while at the other end of the spectrum, members of the Neuer
Markt--Germany's small-cap market--provided exposure to smaller growth
companies. In general, France and the United Kingdom were where we found the
most promising growth stocks. In fact, four of the fund's top 10 holdings are UK
companies.
HOW DID THE MARKET ENVIRONMENT AFFECT FUND PERFORMANCE?
The first quarter was a tough one for the fund, as well as for European growth
investors in general. The fund suffered as more cyclical stocks rallied and
markets obsessed about potential U.S. rate hikes--giving little attention to
earnings growth. After the Fed made its first hike in U.S. interest rates,
however, markets shifted their focus to earnings growth again, which benefited
the fund's performance.
As the market broadened to include participation by companies of all sizes,
the fund's performance benefited from its all-capitalization investment
strategy. Although we continued to maintain a slight emphasis on large-cap
holdings, we saw excellent performance in our small- and mid-cap stocks in the
third quarter.
WHAT EFFECT DID THE DECLINING EURO HAVE ON EUROPEAN MARKETS AND FUND
PERFORMANCE?
The euro launched with a bang at the beginning of the year but fizzled in the
face of strong U.S. economic growth and a weakening economic outlook in Europe.
As investors anticipated rising interest rates in the United States--and not
Europe--they began moving money into dollars and selling the euro, causing the
currency to weaken during the first half of the year.
On the other hand, the currency's lower value has helped boost earnings for
Euroland companies that export to the United Sates or deal in dollar-denominated
goods, such as computer components. The fund specifically has benefited from
such export-oriented companies as Porsche, the German sports car manufacturer,
which derives the majority of its sales from the United States, and UK video
game producer Eidos.
EUROPE HAS SEEN A FLURRY OF MERGER-AND -ACQUISITION ACTIVITY DURING THE
REPORTING PERIOD. HOW HAS THIS TREND AFFECTED THE FUND?
The restructuring story in Europe continues to have tremendous momentum, as
evidenced by this year's merger activity. The pace of merger-and-acquisition
activity has been such that in the third quarter of 1999, the European market
outpaced the U.S. market for the first time ever--accounting for $377 billion in
transactions vs. $322 billion for the United States.
Among the largest deals was the recently approved $18.3 billion merger
TOTAL RETURN
10/31/98-10/31/99,
excluding sales charges
================================================================================
FUND CLASS A SHARES 26.81%
FUND CLASS B SHARES 25.87%
FUND CLASS C SHARES 25.85%
MSCI EUROPE INDEX 12.52%
================================================================================
See important fund and index disclosures inside front cover.
AIM EUROPEAN DEVELOPMENT FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/99, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES TOP 10 COUNTRIES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Carrefour Supermarche S.A. (France) 2.69% 1. Computers (Software & Services) 10.39% 1. United Kingdom 26.51%
2. Kingston Communications (Hull) PLC
(United Kingdom) 2.66 2. Broadcasting (Television, Radio & Cable) 8.84 2. France 21.34
3. Nokia Oyj (Finland) 2.49 3. Communications Equipment 5.74 3. Germany 9.26
4. Orange PLC (United Kingdom) 1.99 4. Retail (Food Chains) 5.48 4. Netherlands 6.92
5. Matalan PLC (United Kingdom) 1.98 5. Services (Commercial & Consumer) 5.22 5. Switzerland 5.57
6. JOT Automation Group Oyj (Finland) 1.81 6. Banks (Major Regional) 4.61 6. Finland 5.57
7. Modern Times Group MTG A.B.-Class B
(Sweden) 1.80 7. Manufacturing (Specialized) 4.41 7. Sweden 4.67
8. Total Fina S.A.-Class B (France) 1.78 8. Telecommunications (Long Distance) 4.37 8. Spain 4.30
9. Eidos PLC-ADR (United Kingdom) 1.70 9. Telecommunications (Cellular/Wireless) 4.14 9. Ireland 2.59
10. Havas Advertising S.A. (France) 1.56 10. Telephone 3.38 10. Denmark 2.36
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
===================================================================================================================================
</TABLE>
of French retailers Promodes and Carrefour--the largest holding in our
portfolio. This union will produce the world's second-largest retailer with a
strong presence in international markets where Wal-Mart is looking to compete.
Numerous other fund holdings were also affected by the rash of mergers and
acquisitions. So while the fund remains focused on earnings winners,
merger-and-acquisition activity provides a powerful tailwind for European equity
markets as a whole.
WHAT SECTORS HAVE YOU FAVORED?
We continue to favor growth-oriented sectors: telecommunications, financials,
specialty retailers and computer services companies. We've seen some very strong
performance in the growth sectors, such as telecommunications equipment
manufacturing and telecommunications services, which have benefited the fund's
performance.
The service sectors have clearly shown stronger growth over the last couple
of years compared to the industrial sectors. We believe this will continue to be
the case as European economies follow the changes seen in the U.S. economy over
the last decade and turn more to technology, telecommunications and financial
services for growth.
WHAT IS YOUR OUTLOOK FOR THE EUROPEAN MARKETS?
Expectations for positive economic growth, stronger corporate earnings and
improving consumer demand, coupled with several underlying themes, paint a
bright picture for the European market. For example, Europe's entrepreneurial
movement is accelerating due in part to more accessible funding through Europe's
specialized exchanges, such as Germany's Neuer Markt and France's Nouveau
Marche. In addition, the restructuring story in Europe continues to have
tremendous momentum. Finally, privatization and merger activity remain strong
drivers for Europe's transformation.
As borders disappear in the merger-and- acquisitions arena, there are signs
of movement toward a unified trading system, which could help reduce costs,
increase liquidity, facilitate cross-border comparisons and generally make
equity investing more attractive.
Corporate tax reform proposals may also enhance Europe's equity performance.
If enacted, one proposal could take Germany from being the country with the
highest corporate tax rate to one of the lowest. Such a move would not only help
make German corporations more profitable but also put pressure on other
countries to follow suit in order to remain competitive.
See important fund and index disclosures inside front cover.
AIM EUROPEAN DEVELOPMENT FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM EUROPEAN DEVELOPMENT FUND VS. BENCHMARK INDEXES
11/3/97-10/31/99
in thousands
================================================================================
AIM European MSCI Europe Lipper European AIM European AIM European
Development Index Funds Development Development
Fund, Class A Index Fund, Class B Fund, Class C
Shares Shares Shares
- --------------------------------------------------------------------------------
11/97 9,234 10,154 10,075 10,000 10,000
1/98 10,028 12,662 10,694 10,600 10,600
4/98 12,911 12,907 12,738 13,610 13,610
7/98 14,537 11,868 13,346 15,300 15,310
10/98 12,250 12,961 11,533 12,870 12,880
1/99 14,323 13,099 12,985 15,030 15,040
4/99 13,197 12,982 13,002 13,820 13,820
7/99 13,907 13,459 13,065 14,530 14,540
10/99 15,534 13,846 13,468 15,800 16,210
Source: Lipper Inc.
Past performance cannot guarantee comparable future results.
================================================================================
ABOUT THIS CHART
This chart compares your fund's Class A, Class B and Class C shares to benchmark
indexes. 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 for each index are for the period 11/30/9
- -10/31/99). It is important to understand the differences between your fund and
an index. An index measures the performance of a hypothetical portfolio. A
market index such as the MSCI Europe 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) 24.75%
1 year 19.88
CLASS B SHARES
- --------------------------------------------------------------------------------
Inception (11/3/97) 25.82%
1 year 20.87
CLASS C SHARES
- --------------------------------------------------------------------------------
Inception (11/3/97) 27.45%
1 year 24.85
================================================================================
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 see inside the 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 EUROPEAN DEVELOPMENT FUND
4
<PAGE> 7
ANNUAL REPORT / FOR CONSIDERATION
CHOOSE YOUR INVESTMENT PALETTE
[PAINT BRUSH]
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.
For example, Treasury securities are considered a relatively safe investment
because they are guaranteed by the U.S.
[PAINT APLATTE]
AIM EUROPEAN DEVELOPMENT FUND
5
<PAGE> 8
ANNUAL REPORT / FOR CONSIDERATION
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 EUROPEAN DEVELOPMENT FUND
6
<PAGE> 9
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>
7
<PAGE> 10
<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>
8
<PAGE> 11
<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.
9
<PAGE> 12
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.
10
<PAGE> 13
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.
11
<PAGE> 14
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
12
<PAGE> 15
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.
13
<PAGE> 16
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.
14
<PAGE> 17
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
15
<PAGE> 18
<TABLE>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II SUB-ADVISOR
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer INVESCO Global Asset Management Limited
Cedar House
Edward K. Dunn Jr. Robert G. Alley 41 Cedar Ave.
Chairman, Mercantile Mortgage Corp.; Vice President Hamilton, HM12 Bermuda
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and Melville B. Cox TRANSFER AGENT
President, Mercantile Bankshares Vice President
A I M Fund Services, Inc.
Jack Fields Edgar M. Larsen P.O. Box 4739
Chief Executive Officer Vice President Houston, TX 77210-4739
Texana Global, Inc.;
Formerly Member Mary J. Benson CUSTODIAN
of the U.S. House of Representatives Assistant Vice President and
Assistant Treasurer State Street Bank and Trust Company
Carl Frischling 225 Franklin Street
Partner Sheri Morris Boston MA 02110
Kramer, Levin, Naftalis & Frankel LLP Assistant Vice President and
Assistant Treasurer COUNSEL TO THE FUND
Robert H. Graham
President and Chief Executive Officer Renee A. Friedli Ballard Spahr
A I M Management Group Inc. Assistant Secretary Andrews & Ingersoll, LLP
1735 Market Street
Prema Mathai-Davis P. Michelle Grace Philadelphia, PA 19103
Chief Executive Officer, YWCA of the U.S.A.; Assistant Secretary
Commissioner, New York City Dept. for the COUNSEL TO THE DIRECTORS
Aging; and member of the Board of Directors, Nancy L. Martin
Metropolitan Transportation Authority of Assistant Secretary Kramer, Levin, Naftalis & Frankel LLP
New York State 919 Third Avenue
Ofelia M. Mayo New York, NY 10022
Lewis F. Pennock Assistant Secretary
Attorney DISTRIBUTOR
Lisa A. Moss
Louis S. Sklar Assistant Secretary A I M Distributors, Inc.
Executive Vice President 11 Greenway Plaza
Hines Interests Kathleen J. Pflueger Suite 100
Limited Partnership Assistant Secretary Houston, TX 77046
Samuel D. Sirko AUDITORS
Assistant Secretary
KPMG LLP
Stephen I. Winer 700 Louisiana
Assistant Secretary Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM European Development Fund paid ordinary dividends in the amount of $0.0125
per share to shareholders during the Fund's tax year ended October 31, 1999. Of
these amounts, 0% is eligible for the dividends received deduction for
corporations.
16
<PAGE> 19
------------------------------------
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> 20
THE AIM FAMILY OF FUNDS--REGISTERED TRADEMARK--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS A I M Management Group Inc.
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund has provided leadership in the
AIM Blue Chip Fund AIM Asian Growth Fund mutual fund industry since
AIM Capital Development Fund AIM Developing Markets Fund 1976 and managed approximately
AIM Constellation Fund AIM Euroland Growth Fund(4) $120 billion in assets for
AIM Dent Demographic Trends Fund AIM European Development Fund more than 6.4 million
AIM Large Cap Growth Fund AIM International Equity Fund shareholders, including
AIM Mid Cap Equity Fund AIM Japan Growth Fund individual investors,
AIM Mid Cap Growth Fund AIM Latin American Growth Fund corporate clients and
AIM Mid Cap Opportunities Fund AIM New Pacific Growth Fund financial institutions, as of
AIM Select Growth Fund September 30, 1999.
AIM Small Cap Growth Fund(2) GLOBAL GROWTH FUNDS The AIM Family of
AIM Small Cap Opportunities Fund(3) AIM Global Aggressive Growth Fund Funds--Registered
AIM Value Fund AIM Global Growth Fund Trademark--is distributed
AIM Weingarten Fund nationwide, and AIM today is
GLOBAL GROWTH & INCOME FUNDS the 10th-largest mutual fund
GROWTH & INCOME FUNDS AIM Global Growth & Income Fund complex in the United States
AIM Advisor Flex Fund AIM Global Utilities Fund in assets under management,
AIM Advisor Large Cap Value Fund according to Strategic
AIM Advisor Real Estate Fund GLOBAL INCOME FUNDS Insight, an independent mutual
AIM Balanced Fund AIM Emerging Markets Debt Fund fund monitor.
AIM Basic Value Fund AIM Global Government Income Fund
AIM Charter Fund AIM Global Income Fund
AIM Strategic Income Fund
INCOME FUNDS
AIM Floating Rate Fund THEME FUNDS
AIM High Yield Fund AIM Global Consumer Products and Services Fund
AIM High Yield Fund II AIM Global Financial Services Fund
AIM Income Fund AIM Global Health Care Fund
AIM Intermediate Government Fund AIM Global Infrastructure Fund
AIM Limited Maturity Treasury Fund AIM Global Resources Fund
AIM Global Telecommunications and Technology Fund(5)
TAX-FREE INCOME FUNDS AIM Global Trends Fund(6)
AIM High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
MONEY MARKET FUNDS
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1)AIM Aggressive Growth Fund reopened to new investors on November 16, 1998.
(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 January 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE
--Registered Trademark--
EDF-AR-1
A I M Distributors, Inc.
