1
As filed with the Securities and Exchange Commission on May 11, 2001
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 for Service: Copy to:
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 June 13, 2001
pursuant to Rule 488.
The title of the securities being registered is AIM International
Equity Fund Class A shares, Class B shares and Class C shares. No filing fee is
due in reliance on Section 24(f) of the Investment Company Act of 1940.
2
AIM JAPAN GROWTH FUND
a Portfolio of
AIM GROWTH SERIES
11 Greenway Plaza, Suite 100
Houston, Texas 77046
June __, 2001
Dear Shareholder:
A special meeting of the shareholders of AIM Growth Series will be held
on August 17, 2001. At that meeting, you will be asked to elect as trustees of
AIM Growth Series the individuals that are identified in this combined proxy
statement and prospectus. The Board of Trustees recommends that you vote FOR the
election of those trustees.
The enclosed combined proxy statement and prospectus also seeks your
approval of a proposed combination of AIM Japan Growth Fund with AIM
International Equity Fund. AIM Japan Growth Fund ("Japan Growth") is an
investment portfolio of AIM Growth Series, a Delaware business trust. AIM
International Equity Fund ("International Equity") is an investment portfolio of
AIM International Funds, Inc., a Maryland corporation.
The investment objective of Japan Growth and International Equity are
the same. Each fund seeks long-term growth of capital. A I M Advisors, Inc.
serves as the investment adviser to Japan Growth and International Equity. As
discussed in the accompanying document, International Equity is significantly
larger than Japan Growth, and can invest in securities issued by companies
located anywhere in the world, while Japan Growth focuses its investments in
Japanese companies. International Equity has generally provided a better return
to its shareholders than Japan Growth, and International Equity's ratio of
expenses to net assets is lower than that of Japan Growth. The accompanying
document describes the proposed transaction and compares the investment
policies, operating expenses and performance history of Japan Growth and
International Equity in more detail. You should review the enclosed materials
carefully.
Shareholders of Japan Growth 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
Japan Growth into International Equity. After careful consideration, the Board
of Trustees of AIM Growth Series has unanimously approved the proposal and
recommends that you vote FOR the proposal.
3
Your vote is important. Please take a moment after reviewing the
enclosed materials 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, Georgeson
Shareholder Communications, Inc., reminding you to vote your shares. You may
also vote your shares on the internet at http://www.aimfunds.com by following
the instructions that appear on the enclosed proxy insert.
Sincerely,
/s/ ROBERT H. GRAHAM
---------------------------
Robert H. Graham
Chairman
4
AIM JAPAN 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 AUGUST 17, 2001
TO THE SHAREHOLDERS OF AIM JAPAN GROWTH FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders of AIM
Growth Series ("AGS") will be held at 11 Greenway Plaza, Suite 100, Houston, TX
77046-1173 on August 17, 2001, at 3:00 p.m., local time. At the Special Meeting,
shareholders of AIM Japan Growth Fund ("Japan Growth"), an investment portfolio
of AGS, will be asked to consider the following proposals:
1. To elect twelve trustees of AGS, each of which will serve
until his or her successor is elected and qualified.
2. To approve an Agreement and Plan of Reorganization (the
"Agreement") by and among AGS, acting on behalf of Japan
Growth, AIM International Funds, Inc. ("AIF"), acting on
behalf of AIM International Equity Fund ("International
Equity") and A I M Advisors, Inc. The Agreement provides for
the combination of Japan Growth with International Equity (the
"Reorganization"). Pursuant to the Agreement, all of the
assets of Japan Growth will be transferred to International
Equity. International Equity will assume all of the
liabilities of Japan Growth, and AIF will issue Class A shares
of International Equity to Japan Growth's Class A
shareholders, Class B shares of International Equity to Japan
Growth's Class B shareholders, and Class C shares of
International Equity to Japan Growth's Class C shareholders.
The value of each Japan Growth shareholder's account with
International Equity immediately after the Reorganization will
be the same as the value of such shareholder's account with
Japan Growth 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.
3. 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 May 30,
2001, 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 website 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
executing and submitting a revised proxy, by giving written notice of revocation
to AGS or by voting in person at the Special Meeting.
/s/ CAROL F. RELIHAN
------------------------------
Carol F. Relihan
Vice President and Secretary
June __, 2001
5
AIM JAPAN GROWTH FUND
A PORTFOLIO OF
AIM GROWTH SERIES
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
AIM INTERNATIONAL EQUITY 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: June __, 2001
This document is being furnished in connection with a special meeting
of shareholders of AIM Growth Series ("AGS"), a Delaware business trust, to be
held on August 17, 2001 (the "Special Meeting"). At the Special Meeting, the
shareholders of AGS are being asked to elect trustees. The Board of Trustees of
AGS recommends that you vote for the election of trustees named in this combined
proxy statement and prospectus.
The shareholders of AIM Japan Growth Fund ("Japan Growth"), an
investment portfolio of AGS, will also be asked to consider and approve an
Agreement and Plan of Reorganization (the "Agreement") by and among AGS, acting
on behalf of Japan Growth, AIM International Funds, Inc. ("AIF"), acting on
behalf of AIM International Equity Fund ("International Equity"), and A I M
Advisors, Inc. ("AIM Advisors"). The Agreement provides for the combination of
Japan Growth with International Equity (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 Japan Growth.
Pursuant to the Agreement, all of the assets of Japan Growth will be
transferred to International Equity, International Equity will assume all of the
liabilities of Japan Growth, and AIF will issue Class A shares of International
Equity to Japan Growth's Class A shareholders, Class B shares of International
Equity to Japan Growth's Class B shareholders, and Class C shares of
International Equity to Japan Growth's Class C shareholders. The value of each
Japan Growth shareholder's account with International Equity immediately after
the Reorganization will be the same as the value of such shareholder's account
with Japan Growth 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.
International Equity is a series portfolio of AIF, an open-end, series
management investment company. The investment objective of International Equity
is the same as the investment objective of Japan Growth -- long-term growth of
capital. Japan Growth seeks to
6
meet its investment objective by investing primarily in equity securities of
issuers domiciled in Japan while International Equity invests in a diversified
portfolio of international equity securities. See "Comparison of Investment
Objectives and Policies."
This Combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus") sets forth the information that a shareholder of Japan
Growth should know before voting on the Agreement. It should be read and
retained for future reference.
The current Prospectus of Japan Growth, dated May 1, 2001 (the "Japan
Growth Prospectus"), together with the related Statement of Additional
Information also dated May 1, 2001, are on file with the Securities and Exchange
Commission (the "SEC") and are incorporated by reference herein. The Prospectus
of International Equity dated March 1, 2001 (the "International Equity
Prospectus"), and the related Statement of Additional Information also dated
March 1, 2001, as supplemented May 4, 2001, have been filed with the SEC and are
incorporated by reference herein. A copy of the International Equity Prospectus
is attached as Appendix II to this Proxy Statement/Prospectus. The SEC maintains
a website 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. These documents are also 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. Additional information about Japan
Growth and International Equity may also be obtained on the internet 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.
7
TABLE OF CONTENTS
Page
----
INTRODUCTION ............................................................... 1
PROPOSAL 1: ELECTION OF TRUSTEES OF AIM GROWTH SERIES ...................... 2
Nominees for Trustee .............................................. 2
Responsibilities of the Board ..................................... 6
Reasons for Election of Trustees at the Present Time .............. 6
Length of Service by the Trustees on the Board .................... 7
Ways in Which the Board Represents Your Interests ................. 7
Committees of the Board ........................................... 8
Board Meetings .................................................... 8
Compensation of the Trustees ...................................... 9
AIM Funds Retirement Plan for Eligible Trustees/Directors ......... 10
Deferred Compensation Agreements .................................. 11
Compensation of AGS Officers ...................................... 12
Auditors .......................................................... 12
The Board's Recommendation on Proposal 1 .......................... 12
PROPOSAL 2: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION ............... 13
Synopsis ................................................................... 13
The Reorganization ................................................ 13
Reasons for the Reorganization .................................... 13
Comparison of International Equity and Japan Growth ............... 14
Risk Factors ............................................................... 19
Comparative Risks ................................................. 19
Risks Associated with International Equity ........................ 19
Comparison of Investment Objectives and Policies ........................... 21
Investment Objectives of International Equity and Japan Growth .... 21
Investment Policies of International Equity ....................... 21
Investment Policies of Japan Growth ............................... 21
International Equity Portfolio Management ......................... 22
Management's Discussion and Analysis of Performance ............... 22
Financial Highlights ....................................................... 22
Additional Information About the Agreement ................................. 26
Terms of the Reorganization ....................................... 26
The Reorganization ................................................ 26
Board Considerations .............................................. 26
Other Terms ....................................................... 29
Federal Tax Consequences .......................................... 30
i
8
Accounting Treatment .............................................. 32
Additional Information About International Equity and Japan Growth ......... 32
Rights of Shareholders ..................................................... 32
Ownership of International Equity and Japan Growth Shares .................. 36
Significant Holders ............................................... 36
Ownership of Officers and Directors/Trustees ...................... 37
Capitalization ............................................................. 37
Legal Matters .............................................................. 38
Information Filed with the Securities and Exchange Commission .............. 39
APPENDIX I ................................ Agreement and Plan of Reorganization
APPENDIX II ................................. Prospectus of International Equity
APPENDIX III.......... International Equity Discussion & Analysis of Performance
ii
9
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the
AIM logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor,
AIM LINK, AIM Institutional Funds, aimfunds.com, Invest with DISCIPLINE,
Invierta con DISCIPLINA, La Familia AIM de Fondos, and La Familia AIM de Fondos
and Design are registered service marks, and AIM Bank Connection and AIM
Internet Connect 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 representation other than those contained in this
prospectus, and you should not rely on such other information or
representations.
iii
10
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
Japan Growth for use at the special meeting of shareholders to be held at 11
Greenway Plaza, Suite 100, Houston, TX 77046, on August 17, 2001, 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 election of trustees and 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 shares of beneficial interests that are
issued and outstanding in Japan Growth at the Special Meeting will constitute a
quorum. If a quorum is present, the affirmative vote of a plurality of votes
cast is necessary to elect trustees, and approval of the Agreement by Japan
Growth requires the affirmative vote of a majority of the shares cast by
shareholders of Japan Growth. 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 May 30, 2001 (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 Japan Growth 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 Georgeson Shareholder Communications,
Inc. ("GSC") to assist it in the solicitation of proxies for the Special
Meeting. AGS expects to solicit proxies principally by mail, but AGS or GSC 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 $112,000. Japan Growth and International Equity will bear their
own costs and expenses incurred in connection with the Reorganization. However,
A I M Advisors, Inc. ("AIM Advisors") has agreed to reimburse expenses and waive
certain of its fees so that the expense cap for Japan Growth is not exceeded. As
a result, it is expected that AIM Advisors will effectively bear all of the
transaction expenses for Japan Growth.
AGS intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about June __, 2001.
1
11
PROPOSAL 1:
ELECTION OF TRUSTEES OF AIM GROWTH SERIES
All of the shareholders of AGS will vote on the election of trustees.
There are shareholders of other series of shares of AGS that, along with the
shareholders of Japan Growth, constitute all of the shareholders of AGS.
NOMINEES FOR TRUSTEE
For election of trustees at the meeting, the Board has approved the
nomination of: Frank S. Bayley, Bruce L. Crockett, Owen Daly II, Albert R.
Dowden, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H. Graham,
Prema Mathai-Davis, Lewis F. Pennock, Ruth H. Quigley and Louis S. Sklar, each
to serve as trustee until his or her successor is elected and qualified.
The proxies will vote for the election of these nominees unless you
withhold authority to vote for any or all of them in the proxy. Each of the
nominees has indicated that he or she is willing to serve as trustee. If any or
all of the nominees should become unavailable for election due to events not now
known or anticipated, the persons named as proxies will vote for such other
nominee or nominees as the trustees who are not interested persons of AGS, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act") (the
"independent trustees"), may recommend.
Messrs. Graham and Bayley and Miss Quigley are currently trustees of
AGS, AIM Investment Funds, AIM Series Trust and AIM Floating Rate Fund
(collectively, with their series portfolios, the "AIM Group I Funds"). Messrs.
Crockett, Daly, Dowden, Dunn, Fields, Frischling, Mathai-Davis, Pennock and
Sklar are not currently trustees of any of the AIM Group I Funds, but each does
serve as a director/trustee of the following open-end management investment
companies advised or managed by AIM Advisors: AIM Advisor Funds, AIM Equity
Funds, AIM Funds Group, AIM International Funds, Inc., AIM Investment Securities
Funds, AIM Special Opportunities Funds, AIM Summit Fund, AIM Tax-Exempt Funds,
AIM Variable Insurance Funds, Short-Term Investments Co., Short-Term Investments
Trust and Tax-Free Investments Co. (these investment companies and their series
portfolios, if any, are referred to collectively as the "AIM Group II Funds,"
the AIM Group I Funds and the AIM Group II Funds together constitute the "AIM
Funds"). Mr. Graham also serves as Chairman, President and a director/trustee of
the AIM Group II Funds. Mr. Bayley and Miss Quigley are expected to be appointed
directors/trustees of the AIM Group II Funds. No trustee or nominee is a party
adverse to AGS or any of its affiliates in any material pending legal
proceedings, nor does any trustee or nominee have an interest materially adverse
to AGS.
The following table sets forth information concerning the nominees:
2
12
NAME, ADDRESS AND AGE(VERIFY) TRUSTEE SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
**Frank S. Bayley (61) AIM Investment Partner, law firm of Baker & McKenzie;
Two Embarcadero Center Funds: 5/30/87 Director and Co-Chairman, C.D. Stimson
Suite 2400 Company (a private investment company);
San Francisco, CA 94111 AIM Growth Series: Trustee, The Badgley Funds; and Trustee of
7/30/85 the AIM Group I Funds.
AIM Series Trust:
8/11/97
Bruce L. Crockett (57) N/A Chairman, Crockett Technologies Associates
906 Frome Lane (consulting firm), DataPipe.com, NetSat28,
McLean, VA 22102 Teletronics; and Director, ACE Limited
(insurance company), Databid.com, IBNET,
Multi-cast Technologies (internet video
streaming), Para-Protect Services, Inc.
(information systems security), University of
Rochester Board of Trustees. Formerly, Director,
President and Chief Executive Officer, COMSAT
Corporation; and Chairman, Board of Governors of
INTELSAT (international communications company).
Director/Trustee of the AIM Group II Funds.
***Owen Daly II (76) N/A Formerly, Director, Cortland Trust, Inc.
Six Blythewood Road (investment company), CF&I Steel Corp.,
Baltimore, MD 21210 Monumental Life Insurance Company and
Monumental General Insurance Company; and
Chairman of the Board of Equitable
Bancorporation. Director/Trustee of the AIM
Group II Funds.
3
13
NAME, ADDRESS AND AGE(VERIFY) TRUSTEE SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Albert R. Dowden (59) N/A Chairman of the Board of Directors, Cortland
1815 Central Park Drive Trust, Inc. (investment company) and DHJ
P.O. Box 774000 - PMB #222 Media, Inc.; and Director, Magellan
Steamboat Springs, CO 80477 Insurance Company. Formerly, Director,
President and Chief Executive Officer, Volvo
Group North America, Inc.; Senior Vice
President, AB Volvo; and Director, The Hertz
Corporation, Genmar Corporation (boat
manufacturer), National Media Corporation
and Annuity and Life Re (Holdings), Ltd.
Member of Advisory Board of Rotary Power
International. Director/Trustee of the AIM
Group II Funds.
Edward K. Dunn, Jr. (66) N/A Chairman of the Board of Directors,
2 Hopkins Plaza, Mercantile Mortgage Corporation. Director,
8th Floor, Suite 805 Aegon USA Inc. (a subsidiary of Aegon N.V.).
Baltimore, MD 21201 Formerly, Vice Chairman of the Board of
Directors and President and Chief Operating
Officer, Mercantile-Safe Deposit & Trust
Co.; and President, Mercantile Bankshares.
Director/Trustee of the AIM Group II Funds.
Jack M. Fields (49) N/A Chief Executive Officer, Texana Global, Inc.
434 New Jersey Avenue, S.E. (foreign trading company) and Twenty First
Washington, D.C. 20003 Century Group, Inc. (a governmental affairs
company); and Director, Telscape
International and Administaff. Formerly,
Member of the U.S. House of Representatives.
Director/Trustee of AIM Group II Funds.
****Carl Frischling (64) N/A Partner, Kramer Levin Naftalis & Frankel LLP
919 Third Avenue (law firm). Director, Cortland Funds and
New York, NY 10022 Lazard Funds. Director/Trustee of the AIM
Group II Funds.
4
14
NAME, ADDRESS AND AGE(VERIFY) TRUSTEE SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
*Robert H. Graham (54) AIM Investment Director, President and Chief Executive
11 Greenway Plaza Funds: 8/31/98 Officer, A I M Management Group Inc.;
Suite 100 Director and President, A I M Advisors,
Houston, TX 77046-1173 AIM Growth Series: Inc.; Director and Senior Vice President,
8/31/98 AIM Capital Management, Inc., A I M
Distributors, Inc., AIM Fund Services, Inc.
AIM Series Trust: and Fund Management Company; and Director
8/31/98 and Chief Executive Officer, Managed
Products, AMVESCAP PLC (parent of AIM and
global investment management firm).
Director/Trustee of the AIM Group I Funds
and the AIM Group II Funds.
Prema Mathai-Davis (50) N/A Member, Visiting Committee, Harvard
370 East 76th Street University Graduate School of Education, New
New York, NY 10021 School University. Director, Covenant House,
Marymount School, New York Hall of Science.
Formerly, Chief Executive Officer, YWCA of
the USA; Commissioner, New York City
Department of the Aging; and Commissioner,
New York City Metropolitan Transportation
Authority. Director/Trustee of the AIM Group
II Funds.
Lewis F. Pennock (58) N/A Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825 Director/Trustee of the AIM Group II Funds.
Houston, TX 77057
**Ruth H. Quigley (66) AIM Investment Private investor; President, Quigley,
1055 California Street Funds: 5/30/87 Friedlander & Co., Inc. (a financial
San Francisco, CA 94108 advisory services firm) from 1984 to 1986;
AIM Growth Series: and Trustee of the AIM Group I Funds.
1/18/77
AIM Series Trust:
8/11/97
Louis S. Sklar (61) N/A Executive Vice President, Development and
The Williams Tower Operations, Hines Interests Limited
50th Floor Partnership (real estate development).
2800 Post Oak Blvd. Director/Trustee of the AIM Group II Funds.
Houston, TX 77056
5
15
* Mr. Graham is an interested person of AIM Advisors and the AIM Funds,
as defined in the 1940 Act, primarily because of his positions with AIM and its
affiliated companies, as set forth above, and through his ownership of stock of
AMVESCAP PLC, which, through A I M Management Group Inc., owns all of the
outstanding stock of AIM Advisors.
** Dates of service based on predecessor funds.
*** The Board has extended Mr. Daly's retirement date to December 31, 2001.
**** Mr. Frischling is counsel to the independent directors/trustees of the
AIM Group II Funds.
RESPONSIBILITIES OF THE BOARD
The Board is responsible for the general oversight of the business of
AGS. The Board periodically reviews the investment performance of AGS's
investment portfolios, including Japan Growth, as well as the quality of other
services provided to AGS and its shareholders by each of AGS's service
providers, including AIM Advisors and its affiliates. At least annually, the
Board reviews the fees paid by AGS for these services and the overall level of
the operating expenses of AGS's investment portfolios.
REASONS FOR ELECTION OF TRUSTEES AT THE PRESENT TIME
Four trustees currently serve on the Board of AGS. Mr. C. Derek
Anderson has announced his intention to retire in 2001 to pursue other business
interests. This would result in only three trustees remaining on the Board.
The Board has determined that it would be beneficial to have a board
larger than three members. Expansion of the Board requires shareholder approval
because, under the 1940 Act, the Board may fill vacancies or appoint new
trustees only if, immediately thereafter, at least two-thirds of the trustees
will have been elected by shareholders.
The Nominating Committee of the Board has met to discuss Board
candidates and has recommended that the persons who currently serve as
independent directors/trustees of the AIM Group II Funds be nominated for
election as trustees of AGS. In making such recommendation, the Nominating
Committee took into consideration the knowledge, diversification of background
and experience of the directors/trustees of the AIM Group II Funds. The
Nominating Committee also considered other benefits of consolidating the boards
of the AIM Group I Funds and the AIM Group II Funds, including uniform
oversight and standardization of policies. The Nominating Committee also noted
that administrative efficiencies may result from board consolidation, since
having two separate boards results in duplication of fund expenses and
management time in connection with administrative tasks related to board
matters. The Nominating Committee also concluded that consolidating the boards
would result in a per-fund decrease in trustee costs to each series portfolio of
AGS, since directors'/trustees' fees would be allocated across all funds
included in The AIM Family of Funds--Registered Trademark--.
In connection with the consolidation of the boards, it is expected
that Mr. Bayley and Miss Quigley would be appointed to the boards of the AIM
Group II Funds.
AIM Advisors supports the Board's decision to consolidate the boards
of trustees of AIM Group I Funds and AIM Group II Funds.
6
16
LENGTH OF SERVICE BY THE TRUSTEES ON THE BOARD
Trustees generally hold office until their successors are elected and
qualified. Pursuant to a policy adopted by the Board, each duly elected or
appointed independent trustee may continue to serve as a trustee until December
31 of the year in which the trustee turns 72. Independent trustees who were 65
or older and serving on the board of one or more of the AIM Funds when the
policy was initially adopted in 1992 for the AIM Group II Funds may continue to
serve until December 31 of the year in which the trustee turns 75. A trustee of
AGS may resign or be removed for cause by a vote of the holders of a majority of
the outstanding shares of that trust at any time. A majority of the Board may
extend from time to time the retirement date of a trustee. The Board has agreed
to extend the retirement date of Mr. Daly, who had he been a trustee of AGS
otherwise would have retired December 31, 2000, to December 31, 2001. In making
this decision, the Board took into account Mr. Daly's experience and active
participation as a director and trustee of the AIM Group II Funds.
WAYS IN WHICH THE BOARD REPRESENTS YOUR INTERESTS
The Board seeks to represent shareholder interests by:
o reviewing the investment performance of AGS's investment
portfolios with the investment portfolios' portfolio
managers and senior management of AIM Advisors;
7
17
o reviewing the quality of the various other services provided
to AGS and its shareholders by each of AGS's service
providers, including AIM Advisors and its affiliates;
o reviewing the fees paid to AIM Advisors and its affiliates to
ensure that such fees remain reasonable and competitive with
those of other mutual funds, while at the same time providing
sufficient resources to continue to provide high-quality
services in the future;
o monitoring potential conflicts between AGS and AIM Advisors
and its affiliates to help ensure that AGS's investment
portfolios continue to be managed in the best interests of
its shareholders; and
o monitoring potential conflicts among Funds to help ensure
that shareholders continue to realize the benefits of
participation in a large and diverse family of funds.
COMMITTEES OF THE BOARD
The standing Committees of the Board are the Audit Committee and the
Nominating Committee.
The members of each Audit Committee and Nominating Committee are Miss
Quigley and Messrs. Anderson and Bayley. It is expected that all of the
independent trustees will serve on these committees. The Audit Committee is
responsible for:
o considering management's recommendation of independent
accountants for AGS and evaluating such accountants'
independence, performance and fees;
o reviewing and coordinating audit plans prepared by AGS's
independent accountants;
o reviewing financial statements contained in periodic reports
to shareholders with AGS's independent accountants and
management.
The Nominating Committee is responsible for:
o considering and nominating individuals to stand for election
as independent trustees;
o reviewing from time to time the compensation payable to the
independent trustees; and
o making recommendations to the Board regarding matters related
to compensation.
Each Nominating Committee will consider nominees recommended by a
shareholder to serve as trustees, 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 trustees will be elected, and
(ii) that the Nominating Committee or the Board, as applicable, shall make the
final determination of persons to be nominated.
BOARD MEETINGS
The Board typically conducts regular meetings eight (VERIFY) times a
year. In addition, the Board or any Committee may hold special meetings by
telephone or in person to discuss specific matters that may require action prior
to the next regular meeting.
8
18
During the fiscal year ended December 31, 2000 for AGS, the Board held
[7] meetings, the Audit Committee held __ meetings, and the Nominating Committee
held __ meetings. All of the current trustees and Committee members then serving
attended at least 75% of the meetings of the Board or applicable Committee, if
any, held during the most recent fiscal year.
COMPENSATION OF THE TRUSTEES
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board or any Committee attended. Each trustee who is not
also an officer of AGS is compensated for his or her services according to a fee
schedule which recognizes the fact that such trustee also serves as a
trustee/director of some or all of the AIM Funds. Each such trustee receives a
fee, allocated among the funds for which he or she serves as a trustee/director,
which consists of an annual retainer component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
for each trustee:
RETIREMENT TOTAL
BENEFITS ACCRUED COMPENSATION
AGGREGATE COMPENSATION BY ALL AIM FROM
TRUSTEE FROM AGS(1) FUNDS(2) ALL AIM FUNDS(3)
------- ---------------------- ---------------- ----------------
Robert H. Graham $ 0 N/A $ 0
Frank S. Bayley $32,491 N/A $105,000
Ruth H. Quigley $32,491 N/A $105,000
Bruce L. Crockett $ 0 $ 60,951 $111,500
Owen Daly II $ 0 $ 97,195 [_______]
Albert R. Dowden $ 0 $ 0 $ 13,435
Edward K. Dunn, Jr. $ 0 $111,500 $111,500
Jack M. Fields $ 0 $108,500 $108,500
Carl Frischling(4) $ 0 $111,500 $111,500
Prema Mathai-Davis $ 0 $111,500 $111,500
Lewis F. Pennock $ 0 $111,500 $111,500
Louis S. Sklar $ 0 $111,500 $111,500
(1) Data reflects aggregate compensation received from AGS for the fiscal
year ended December 31, 2000.
9
19
(2) Data reflects retirement benefits accrued by the directors/trustees of
the AIM Group II Funds for the calendar year ended December 31, 2000.
The trustees of the AIM Group I Funds currently accrue no retirement
benefits. Upon the consolidation of the Boards of the AIM Group I Funds
and the AIM Group II Funds, the trustees of the AIM Group I Funds will
begin accruing retirement benefits.
(3) Mr. Graham, Mr. Bayley and Miss Quigley serve as trustees for the
four AIM Group I Funds; Mr. Graham and the remaining nominees serve as
trustees/directors of the twelve AIM Group II Funds. Data reflects
total compensation earned during the calendar year ended December 31,
2000.
(4) During the calendar year ended December 31, 2000, the AIM Group II
Funds paid $545,540 in legal fees for services rendered by Kramer Levin
Naftalis & Frankel LLP to the independent trustees/directors of the AIM
Group II Funds. Mr. Frischling is a partner in the firm.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE TRUSTEES/DIRECTORS
Effective as of the date on which the Boards of Trustees/Directors of
the AIM Group I Funds and the AIM Group II Funds are combined, each AIM Group I
Fund will adopt the retirement plan currently in effect for the AIM Group II
Funds. Each trustee of an AIM Fund who has at least five years of credited
service as a trustee will be entitled to receive an annual retirement benefit.
These retirement benefits are payable quarterly for a period of up to ten years.
The retirement benefit will equal a maximum of 75% of the trustee's annual
retainer paid or accrued by any participating AIM Fund to such trustee during
the twelve-month period prior to retirement and based on the number of such
trustee's years of service (not to exceed ten years). A death benefit is also
available under the retirement plan that provides a surviving spouse with a
quarterly installment of 50% of a deceased trustee's retirement benefits for up
to ten years. A trustee must have attained the age of 65 (55 in the event of
death or disability) to receive any retirement benefit.
Table 1 below shows estimated credited years of service under the
Retirement Plan for each participating trustee as of December 31, 2000.
TABLE 1
TRUSTEE ESTIMATED CREDITED YEARS OF SERVICE
- ------- -----------------------------------
Frank S. Bayley
Bruce L. Crockett 14
Owen Daly II 14
Albert R. Dowden 0
Edward K. Dunn, Jr. 3
Jack M. Fields 4
Carl Frischling 23
10
20
Prema Mathai-Davis 2
Lewis F. Pennock 19
Ruth H. Quigley
Louis S. Sklar 11
- ----------
Table 2 below shows the aggregate estimated annual benefits payable by
all AIM Funds upon retirement for specified years of service.
TABLE 2
NUMBER OF YEARS OF SERVICE ESTIMATED ANNUAL BENEFITS
WITH THE AIM FUNDS UPON RETIREMENT
- -------------------------- -------------------------
10 $75,000
9 $67,500
8 $60,000
7 $52,500
6 $45,000
5 $37,500
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(the deferring trustees) have each executed a deferred compensation agreement.
Pursuant to the agreements, the deferring trustees may elect to defer receipt of
up to 100% of their compensation payable by AGS, assuming their election to the
Board, and such amounts are placed into a deferral account. Currently, the
deferring trustees may select various AIM Funds in which all or part of their
deferral accounts shall be deemed to be invested. Distributions from the
deferring trustees' accounts will be paid in cash, in generally equal quarterly
installments over a period of five (5) or ten (10) years (depending on the
agreement) beginning on the date the deferring trustee's retirement benefits
commence under the plan. The Board, in its sole discretion, may accelerate or
extend the distribution of such deferral accounts after the deferring trustee's
retirement benefits commence under the plan. AGS's Board of Trustees may, in its
sole discretion, accelerate or extend the distribution of such deferral accounts
after the deferring trustee's termination of service as a trustee of AGS. If a
deferring trustee 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. The agreements are not funded and, with respect
to the payments of amounts held in the deferral accounts, the deferring trustees
have the status of unsecured creditors of AGS and of each other AIM Fund from
which they are deferring compensation.
11
21
COMPENSATION OF AGS OFFICERS
AGS does not pay its officers for the services they provide to AGS and
its investment portfolios. Instead, the officers, who are also officers or
employees of AIM Advisors or its affiliates, are compensated by A I M Management
Group Inc. or its affiliates.
AUDITORS
The firm of PricewaterhouseCoopers LLP has been selected as independent
accountants for each of the five portfolios of AGS, including Japan Growth.
PricewaterhouseCoopers LLP, in accordance with Independence Standards Board
Standard No. 1, has confirmed to the Board of AGS that they are independent
accountants with respect to AGS and each of its portfolios.
The independent accountants examine annual financial statements for AGS and
provide other non-audit and tax-related services to AGS. The independent
accountants also provide certain non-audit services to AIM Advisors and its
affiliates. The Board of AGS has considered whether the non-audit services
provided by PricewaterhouseCoopers LLP to AGS and AIM Advisors and its
affiliates who provide services to AGS are compatible with maintaining the
independence of PricewaterhouseCoopers LLP in its audit of the portfolios of
AGS.
FUND RELATED FEES
AUDIT FEES. For the fiscal year ended December 31, 2000, AGS paid
approximately $185,510 in fees for professional services rendered by
PricewaterhouseCoopers LLP for the audit of annual financial statements for the
five series portfolios of AGS.
ALL OTHER FEES. For the fiscal year ended December 31, 2000,
PricewaterhouseCoopers LLP was also paid by AGS approximately $12,500 for
tax-related services rendered to the five series portfolios of AGS.
NON-FUND RELATED FEES
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There
were no fees billed for financial information systems design and implementation
services rendered by PricewaterhouseCoopers LLP to AIM Advisors and its
affiliates that provide services to AGS during the fiscal year ended December
31, 2000.
ALL OTHER FEES. The aggregate fees billed for all other non-audit
services rendered by PricewaterhouseCoopers LLP to AIM Advisors and its
affiliates who provide services to AGS was approximately $792,000 for the fiscal
year ended December 31, 2000.
THE BOARD'S RECOMMENDATION ON PROPOSAL 1
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1.
12
22
PROPOSAL 2:
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
SYNOPSIS
THE REORGANIZATION
The Reorganization will result in the combination of Japan Growth with
International Equity. Japan Growth is a portfolio of AGS, a Delaware business
trust. International Equity is a portfolio of AIF, a Maryland corporation.
If shareholders of Japan Growth approve the Agreement and other closing
conditions are satisfied, all of the assets of Japan Growth will be transferred
to International Equity, International Equity will assume all of the liabilities
of Japan Growth, and AIF will issue Class A shares of International Equity to
Japan Growth's Class A shareholders, Class B shares of International Equity to
Japan Growth's Class B shareholders and Class C shares of International Equity
to Japan Growth's Class C shareholders. The shares of International Equity
issued in the Reorganization will have an aggregate net asset value equal to the
value of Japan Growth's net assets transferred to International Equity.
Shareholders will not pay any initial sales charge for shares of International
Equity received in connection with the Reorganization. The value of each
shareholder's account with International Equity immediately after the
Reorganization will be the same as the value of such shareholder's account with
Japan Growth 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.
Japan Growth 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.
REASONS FOR THE REORGANIZATION
The Board of Trustees of AGS, including the independent trustees, has
determined that the reorganization of Japan Growth into International Equity is
in the best interests of Japan Growth and its shareholders and that the
interests of the shareholders of Japan Growth 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 -- long-term growth of capital.
International Equity is significantly larger than Japan Growth, with total net
assets at March 31, 2001 of approximately $2.7 billion, compared with total net
assets for Japan Growth of approximately $88.8 million on that date. Japan
Growth has experienced net redemptions of its shares for three of the last five
years.
13
23
International Equity invests in a diversified portfolio of securities
of issuers located in foreign countries, while Japan Growth focuses its
investments on issuers domiciled in Japan. The Board of Trustees noted that
International Equity has outperformed Japan Growth, providing a better total
return to shareholders. Since inception, International Equity Class A shares
have an average annual return of 11.64% compared to an average annual return of
9.42% for Japan Growth Class A shares. The total operating expenses of
International Equity, expressed as a percentage of assets, are also lower than
those of Japan Growth. Although past performance does not guarantee future
results, the combination of better performance and lower expenses should make
International Equity a better investment for Japan Growth shareholders.
COMPARISON OF INTERNATIONAL EQUITY AND JAPAN GROWTH
Investment Objective and Policies
The investment objective of International Equity is the same as the
investment objective of Japan Growth -- long-term growth of capital.
International Equity seeks to achieve its investment objective by
investing, normally, at least 70% of its total assets in marketable equity
securities of foreign companies that are listed on a recognized foreign
securities exchange or traded in a foreign over-the-counter market. The fund
will normally invest in companies located in at least four countries outside of
the United States, with an emphasis on companies in the developed countries of
Western Europe and the Pacific Basin. At March 31, 2001, International Equity
had 13.7% of its assets invested in issuers in Japan. International Equity's
portfolio managers focus on companies that have experienced above-average,
long-term growth in earnings and have strong prospects for future growth.
Japan Growth seeks to achieve its investment objective by investing,
normally, at least 65% of its total assets in equity securities of issuers
domiciled in Japan. In selecting investments, Japan Growth's portfolio managers
seek to identify industries that, in view of political and economic
considerations, including currency movements, are likely to produce
above-average growth rates.
Investment Advisory Services
AIM Advisors serves as investment adviser and INVESCO Asset Management
(Japan) Limited, an affiliate of the adviser, serves as the subadviser to Japan
Growth. AIM Advisors also serves as investment adviser to International Equity.
Because INVESCO Asset Management (Japan) Limited does not serve as subadviser
for International Equity, the Reorganization will end its role in the management
of the assets of Japan Growth.
Performance
Average annual total returns for the periods indicated for Class A
shares of International Equity and Japan Growth, including sales charges, are
shown below. Past performance cannot guarantee comparable future results.
14
24
International Equity Japan Growth
Class A Shares Class A Shares
-------------------- --------------
1 Year Ended December 31, 2000 (29.78)% (56.28)%
3 Years Ended December 31, 2000 7.29% 0.13%
5 Years Ended December 31, 2000 9.20% (3.08)%
10 Years Ended December 31, 2000 or
Since Inception* 11.64% 0.56%
- ----------
*Inception date for International Equity is April 7, 1992.
Expenses
A comparison of annual operating expenses as a percentage of net assets
("Expense Ratio"), based on the fiscal year ended December 31, 2000 for the
Class A, Class B and Class C shares of Japan Growth and for the fiscal year
ended October 31, 2000 for the Class A, Class B and Class C shares of
International Equity are shown below. Pro forma estimated Expense Ratios of
International Equity giving effect to the Reorganization are also provided.
15
25
AIM JAPAN AIM INTERNATIONAL AIM INTERNATIONAL EQUITY FUND
GROWTH FUND EQUITY 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
------- ------- ------- ------- ------- ------- ------- ------- -------
SHAREHOLDER
TRANSACTION
EXPENSES
Maximum sales
load imposed on
purchase of
shares (as a
percentage of
offering price) 5.50% None None 5.50% None None 5.50% None None
Deferred Sales
Load (as a
percentage of
original
purchase price
or redemption
proceeds, as
applicable) None(1) 5.00% 1.00% None(1) 5.00% 1.00% None(1) 5.00% 1.00%
ANNUAL
OPERATING
EXPENSES (AS A
% OF NET
ASSETS)
Management
fees ............... 0.98% 0.98% 0.98% 0.91% 0.91% 0.91% 0.91% 0.91% 0.91%
Distribution
and/or Service
(12b-1) Fees ....... 0.35% 1.00% 1.00% 0.30% 1.00% 1.00% 0.30% 1.00% 1.00%
Other expenses ..... 0.46% 0.46% 0.46% 0.27% 0.31% 0.31% 0.28% 0.31% 0.31%
----- ----- ----- ----- ----- ----- ----- ----- -----
Total fund
operating
expenses ........... 1.79% 2.44% 2.44% 1.48% 2.22% 2.22% 1.49% 2.22% 2.22%
Fee waiver(2) ...... 0.00% 0.00% 0.00% (0.04)% (0.04)% (0.04)% (0.04)% (0.04)% (0.04)%
----- ----- ----- ----- ----- ----- ----- ----- -----
Net expenses ....... 1.79% 2.44% 2.44% 1.44% 2.18% 2.18% 1.45% 2.18% 2.18%
===== ===== ===== ===== ===== ===== ===== ===== =====
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
16
26
(2) AIM Advisors has contractually agreed to waive 0.05% on average net
assets in excess of $500 million for International Equity Class A,
Class B and Class C shares.
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. The example also assumes
that the fund's gross operating expenses remain the same. To the extent fees are
waived, the expenses will be lower.
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
AIM JAPAN GROWTH FUND
Class A shares(1):
Assuming complete redemption at end of period: $722 $1,082 $1,466 $2,539
Assuming no redemption: $722 $1,082 $1,466 $2,539
Class B shares:
Assuming complete redemption at end of period(2): $747 $1,061 $1,501 $2,616
Assuming no redemption: $247 $ 761 $1,301 $2,616
Class C shares:
Assuming complete redemption at end of period(2): $347 $ 761 $1,301 $2,776
Assuming no redemption: $247 $ 761 $1,301 $2,776
AIM INTERNATIONAL EQUITY FUND
Class A shares(1):
Assuming complete redemption at end of period: $692 $ 992 $1,314 $2,221
Assuming no redemption: $692 $ 992 $1,314 $2,221
Class B shares:
Assuming complete redemption at end of period(2): $725 $ 994 $1,390 $2,386
Assuming no redemption: $225 $ 694 $1,190 $2,368
Class C shares:
Assuming complete redemption at end of period(2): $325 $ 694 $1,190 $2,554
Assuming no redemption: $225 $ 694 $1,190 $2,554
COMBINED FUND
Class A shares(1):
Assuming complete redemption at end of period: $693 $ 995 $1,318 $2,232
Assuming no redemption: $693 $ 995 $1,318 $2,232
Class B shares:
Assuming complete redemption at end of period(2): $725 $ 994 $1,390 $2,370
Assuming no redemption: $225 $ 694 $1,190 $2,370
Class C shares:
Assuming complete redemption at end of period(2): $325 $ 694 $1,190 $2,554
Assuming no redemption: $225 $ 694 $1,190 $2,554
- ---------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
17
27
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. 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.
Sales Charges
No sales charges are applicable to shares of International Equity
received in connection with the Reorganization.
International Equity Class A shares, which will be issued to Japan
Growth Class A shareholders pursuant to the Agreement, are sold at net asset
value plus an initial sales charge of 5.50%. International Equity 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 5.00% on certain redemptions
made within six years from the date such shares were purchased. International
Equity Class C Shares are offered at net asset value, without an initial sales
charge, and are subject to maximum contingent deferred sales charge of 1.00% on
certain redemptions made within one year from the date such shares were
purchased.
International Equity pays a fee in the amount of 0.30% of the average
daily net assets of Class A shares to AIM Distributors for distribution
services. International Equity 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 International Equity Prospectus attached as Appendix II to
this Proxy Statement/Prospectus.
The Class A shares of Japan Growth are sold at net asset value plus an
initial sales charge of 5.50%. Japan 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 5.00% on certain redemptions made within six
years from the date such shares were purchased. Japan Growth 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 1.00% on certain redemptions made
within one year from the date such shares were purchased.
Japan Growth 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.
Japan Growth 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.
18
28
Distribution; Purchase, Exchange and Redemption
Shares of International Equity and Japan Growth are both distributed by
AIM Distributors. Purchase and redemption procedures are the same for both
funds. Generally, shares of both funds may be exchanged for shares of other
funds within The AIM Family of Funds--Registered Trademark-- of the same class.
Further Information
Additional information concerning International Equity is contained in
this Proxy Statement/Prospectus and in the current prospectus for International
Equity that is attached hereto as Appendix II. Further information concerning
Japan Growth can be found in its prospectus which has been made part of this
Proxy Statement/Prospectus by reference. See the cover page for information on
how to receive further information.
RISK FACTORS
COMPARATIVE RISKS
International Equity and Japan Growth are subject to substantially
similar investment risks. However, shareholders should keep in mind that the
potential risks and benefits associated with investments in Japan Growth and in
International Equity differ because of differences in geographic
diversification. Japan Growth normally seeks to invest at least 65% of its total
assets in equity securities of issuers domiciled in Japan. As a result, the
performance of Japan Growth depends to a significant extent on the condition and
performance of the Japanese economy. Investors in Japan Growth are thus directly
exposed to a significant degree to both the upturns and downturns in the
Japanese Markets.
The investments of International Equity, on the other hand, are much
more diverse across international markets, with significant holdings in Europe,
Asia, North America and Latin America. Rather than concentrating its investments
in companies of a single country, International Equity seeks to invest in
securities of issuers from a number of different countries. As of March 31,
2001, approximately 14% of International Equity's assets were invested in
securities of issuers domiciled in Japan. As a result, following the
Reorganization Japan Growth shareholders will lose any benefits associated with
a fund that is heavily dependent on the performance of Japanese companies. In
return, such shareholders will gain the benefit of increased diversity in the
world economy offered by International Equity. You should carefully consider
these benefits and risks in determining whether to vote in favor of the proposed
Reorganization.
RISKS ASSOCIATED WITH INTERNATIONAL EQUITY
International Equity 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. International Equity invests in securities of foreign companies,
which
19
29
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 International Equity'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 International Equity'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.
20
30
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES OF INTERNATIONAL EQUITY AND JAPAN GROWTH
The investment objective of International Equity is long-term growth of
capital. The investment objective of Japan Growth is long-term growth of
capital.
INVESTMENT POLICIES OF INTERNATIONAL EQUITY
International Equity seeks to meet its objective by investing in a
diversified portfolio of international equity securities the issuers of which
are considered by the fund's portfolio managers to have strong earnings
momentum. The fund invests, normally, at least 70% of its total assets in
marketable equity securities of foreign companies that are listed on a
recognized foreign securities exchange or traded in a foreign over-the-counter
market. International Equity will normally invest in companies located in at
least four countries outside of the United States, emphasizing investment in
companies in the developed countries of Western Europe and the Pacific Basin.
At the present time, International Equity's portfolio managers intend
to invest no more than 20% of the fund's total assets in foreign companies
located in developing countries, i.e., those that are in the initial stages of
their industrial cycles. The fund may invest up to 20% of its total assets in
securities exchangeable for or convertible into marketable equity securities of
foreign issuers. 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 the U.S. dollars or foreign currencies. Any percentage
limitations with respect to assets of the fund are applied at the time of
purchase.
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 fund's
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.
INVESTMENT POLICIES OF JAPAN GROWTH
Japan Growth seeks to meet its objective by investing, normally, at
least 65% of its total assets in equity securities of issuers domiciled in
Japan. The fund typically considers a company to be domiciled in Japan if it (1)
is organized under the laws of, or has a principal office in, Japan; or (2)
normally derives 50% or more of its total revenues from business in Japan,
provided that, in the view of the portfolio managers, the value of the issuer's
securities tend to reflect Japan's development to a greater extent than
developments elsewhere.
Japan Growth may invest up to 35% of its total assets in equity
securities of issuers domiciled outside of Japan. The fund may also invest up to
35% of its total assets in U.S. and
21
31
foreign investment-grade debt securities, or securities deemed by the portfolio
managers to be of comparable quality.
Japan Growth may also 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
industries that, in view of political and economic considerations, 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 industries. The portfolio managers allocate investments among
fixed-income securities based on their views as to the best values then
available in the marketplace.
INTERNATIONAL EQUITY PORTFOLIO MANAGEMENT
AIM Advisors uses a team approach to investment management. The
individual members of the team who are primarily responsible for the day-to-day
management of International Equity's portfolio are
o A. Dale Griffin, III, Senior Portfolio Manager, has been
responsible for International Equity since its inception in
1992 and has been associated with the advisor and/or its
affiliates since 1989,
o Jason T. Holzer, Senior Portfolio Manager, has been
responsible for the fund since 1999 and has been associated
with the advisor and/or its affiliates since 1996. From 1994
to 1996, he was an associate with JMB Realty,
o Clas G. Olsson, Senior Portfolio Manager, has been responsible
for the fund since 1997 and has been associated with the
advisor and/or its affiliates since 1994,
o Barrett K. Sides, Senior Portfolio Manager, has been
responsible for the fund since 1995 and has been associated
with the advisor and/or its affiliates since 1990.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of International Equity for the fiscal
year ended October 31, 2000, is set forth in Appendix III to this Proxy
Statement/Prospectus.
FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Class A share and a Class B
share of International Equity outstanding during each of the fiscal years ended
October 31, 2000 and for a Class C share of International Equity outstanding
during the fiscal years ended October 31, 2000, 1999 and 1998 and for the period
August 4, 1997 (inception date), through October 31, 1997. This information has
been audited by AIF's independent accountants whose unqualified report on the
financial statements of International Equity are included in its annual report
to shareholders for the fiscal year ended October 31, 2000. International
Equity's annual report to shareholders dated October 31, 2000, 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.
22
32
AIM INTERNATIONAL EQUITY FUND CLASS A SHARES
CLASS A
----------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------------
2000(a) 1999 1998(a) 1997(a) 1996(a)
---------- ---------- ---------- ---------- -----------
Net asset value, beginning of period $ 21.73 $ 17.59 $ 16.64 $ 15.37 $ 13.65
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.08 (0.03) 0.05 0.04 0.04
- --------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized
and unrealized) 0.72 4.49 0.96 1.68 2.07
================================================================================================================================
Total from investment operations 0.80 4.46 1.01 1.72 2.11
================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.11) (0.06) (0.02) (0.01)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.93) (0.21) -- (0.43) (0.38)
================================================================================================================================
Total distributions (0.93) (0.32) (0.06) (0.45) (0.39)
================================================================================================================================
Net asset value, end of period $ 21.60 $ 21.73 $ 17.59 $ 16.64 $ 15.37
================================================================================================================================
Total return(b) 3.16% 25.73% 6.11% 11.43% 15.79%
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,325,636 $2,058,419 $1,724,635 $1,577,390 $1,108,395
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.44%(c) 1.48% 1.45% 1.47% 1.58%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.48%(c) 1.52% 1.49% 1.51% 1.60%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 0.30%(c) (0.14)% 0.28% 0.24% 0.25%
================================================================================================================================
Portfolio turnover rate 87% 86% 78% 50% 66%
================================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $2,554,953,820.
23
33
AIM INTERNATIONAL EQUITY FUND CLASS B SHARES
CLASS B
-----------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a) 1996(a)
---------- ---------- ---------- ---------- ------------
Net asset value, beginning of period $ 21.11 $ 17.13 $ 16.27 $ 15.13 $ 13.54
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.17) (0.09) (0.09) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized
and unrealized) 0.74 4.36 0.95 1.66 2.04
=================================================================================================================================
Total from investment operations 0.63 4.19 0.86 1.57 1.97
=================================================================================================================================
Less distributions from net realized gains (0.93) (0.21) -- (0.43) (0.38)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 20.81 $ 21.11 $ 17.13 $ 16.27 $ 15.13
=================================================================================================================================
Total return(b) 2.42% 24.72% 5.29% 10.61% 14.88%
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 997,843 $ 887,106 $ 744,987 $ 678,809 $ 368,355
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.18%(c) 2.27% 2.22% 2.25% 2.35%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.31% 2.26% 2.28% 2.37%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets (0.44)%(c) (0.93)% (0.49)% (0.53)% (0.53)%
=================================================================================================================================
Portfolio turnover rate 87% 86% 78% 50% 66%
=================================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $1,120,452,259.
24
34
AIM INTERNATIONAL EQUITY FUND CLASS C SHARES
CLASS C
-----------------------------------------------------------------
AUGUST 4, 1997
(DATE SALES
COMMENCED) TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
-----------------------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a)
--------- --------- --------- --------------
Net asset value, beginning of period $ 21.13 $ 17.14 $ 16.27 $ 17.64
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.17) (0.09) (0.02)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.73 4.37 0.96 (1.35)
========================================================================================================================
Total from investment operations 0.62 4.20 0.87 (1.37)
========================================================================================================================
Less distributions from net realized gains (0.93) (0.21) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 20.82 $ 21.13 $ 17.14 $ 16.27
========================================================================================================================
Total return(b) 2.37% 24.76% 5.35% 7.77%
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 253,998 $ 118,208 $ 58,579 $ 12,829
========================================================================================================================
Ratio of expenses to average net assets:
- ------------------------------------------------------------------------------------------------------------------------
With fee waivers 2.18%(c) 2.27% 2.22% 2.27%(d)
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.31% 2.26% 2.30%(d)
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average net assets (0.44)%(c) (0.93)% (0.49)% (0.55)%(d)
========================================================================================================================
Portfolio turnover rate 87% 86% 78% 50%
========================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $219,394,811.
(d) Annualized.
25
35
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.
THE REORGANIZATION
International Equity will acquire all of the assets of Japan Growth in
exchange for shares of International Equity and the assumption by International
Equity of the liabilities of Japan Growth. Consummation of the Reorganization
(the "Closing") is expected to occur on September 10, 2001, 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 September 7, 2001.
At the Effective Time, all of the assets of Japan Growth shall be
delivered to the Custodian for the account of International Equity in exchange
for the assumption by International Equity of all of the liabilities of any kind
of Japan Growth and delivery by AIF directly to (i) Japan Growth Class A
shareholders of a number of International Equity Class A shares and to (ii)
Japan Growth Class B shareholders of a number of International Equity Class B
shares and to (iii) Japan Growth Class C shareholders of a number of
International Equity Class C shares, having an aggregate net asset value equal
to the net value of the assets of Japan Growth transferred.
BOARD CONSIDERATIONS
The Board of Trustees of AGS has determined that the Reorganization of
Japan Growth is in the best interests of the shareholders of Japan Growth and
will not dilute the interests of Japan Growth Shareholders. The Board of
Trustees recommends approval of the Agreement by the shareholders of Japan
Growth 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 May 11, 2001, AIM
Advisors proposed that the Board of Trustees consider the Reorganization of
Japan Growth into International Equity. The Trustees received from AIM Advisors
written materials that contained information concerning Japan Growth and
International Equity, including comparative total return and fee and expense
information, a comparison of the investment objectives of Japan Growth and
International Equity and pro forma expense ratios of International Equity. AIM
Advisors also provided the trustees with written materials concerning the
structure of the proposed Reorganization and the Federal tax consequences of the
Reorganization. The Board of Trustees considered the proposed Reorganization
again at a meeting held on June [11/12], 2001.
In considering the Reorganization, the Board of Trustees noted that
Japan Growth and International Equity have the same investment objective --
long-term growth of capital.
26
36
International Equity seeks to achieve its investment objective by investing in
international equity securities of issuers considered by its portfolio managers
to have strong earnings momentum. International Equity normally invests at least
70% of its total assets in marketable equity securities of foreign companies
that are listed on a recognized foreign securities exchange or traded in a
foreign over-the-counter market. Japan Growth seeks to achieve its investment
objective by normally investing at least 65% of its total assets in equity
securities of issuers domiciled in Japan. The Board of Trustees noted that the
broader range of investment options available to International Equity provides
AIM Advisors greater flexibility to respond to changing market conditions.
International Equity is significantly larger than Japan Growth. It had
total net assets as of March 31, 2001 of approximately $2.7 billion, compared
with net assets for Japan Growth of approximately $88.8 million on that date.
Although Japan Growth had positive net investment flows for a brief period in
1999, it has experienced net redemptions for 3 of the last 5 years. The
redemption rate for Japan Growth over the last 12 months has been 97.13% versus
the industry average of 20.41%. AIM Advisors indicated that as such redemptions
continue, and assets dwindle, it would likely reach a point where it would no
longer be willing to subsidize Japan Growth's operations through fee waivers and
expense reimbursements.
In addition, the Board of Trustees considered that the market for Japan
Growth is a very narrow niche specialty product; Japan Growth represents .07% of
long-term equity assets. It is a fund that attracts market timers, in spite of
AIM Advisors' best efforts to eliminate them. In 2000, it had purchases of $438
million and redemptions of $496 million, indicating extensive market timing
activity. These fund flows adversely affect AIM Advisors' ability to manage
Japan Growth's investments and fund performance.
The Board of Trustees considered the performance of Japan Growth in
relation to the performance of International Equity, noting that International
Equity has generally outperformed Japan Growth. International Equity has
provided a higher average annual return to its shareholders in each of the most
recent one, three, five-year periods and since inception. However, Japan Growth
did outperform International Equity in the calendar years 1999 and 1994 when its
returns were 130.79% and 6.56%, respectively. During those same years,
International Equity's total returns were 55.08% and -3.34%.
The Board of Trustees also noted that the portfolio managers for
International Equity have experience with Japanese investments. As of March 31,
2001, International Equity had 13.7% of its assets invested in issuers located
in Japan. In addition, as of February 28, 2001, International Equity's portfolio
and Japan Growth's portfolio contained an overlapping in holdings of 10
securities comprising 29.0% and 15.0% of the total nets assets of Japan Growth
and International Equity, respectively.
In addition, the Board of Trustees compared the relative performance of
International Equity and Japan Growth in their respective fund sectors. As of
March 2001, the Lipper Inc. rankings for International Equity and Japan Growth
were as follows:
27
37
LIPPER RANK (Percentile)(1)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
International Equity(2) 86% 62% 42% N/A
Japan Growth(3) 76% 82% 62% 34%
- -----------
(1) Under the Lipper ranking system, the lower the percentile rank, the
better the performance.
(2) Lipper places International Equity in the ________ category.
(3) Lipper places Japan Growth in the ________ category.
AIM Advisors noted that Japan Growth's performance has been poor. It
ranks in the bottom half of its Lipper and Morningstar categories for 1, 3 and 5
years and bottom quartile for 1 and 3 years. An investor who invested $10,000 in
1998 would now have $10,610.
The Board also considered the expenses incurred by the two funds. The
total operating expenses of Japan Growth for the most recently completed fiscal
year, expressed as a percentage of average daily net assets, are higher than the
total operating expenses of International Equity. In addition, the total
operating expenses of International Equity are even lower after giving effect to
International Equity's contractual fee waiver. AIM Advisors reported to the
Board of Trustees that on a pro forma basis, the net operating expense ratios
after fee waivers for International Equity Class A shares, Class B shares and
Class C shares are expected to be 0.34%, 0.26% and 0.26% lower than the total
operating expense ratios for the respective class shares of Japan Growth.
AIM Advisors noted that, based on past performance, International
Equity's better performance and lower expense ratio may make International
Equity a more attractive investment for shareholders than Japan Growth.
In its evaluation of the Reorganization, the Board considered the fact
that the Reorganization will dramatically decrease the exposure of Japan Growth
shareholders to Japanese equity securities. Japan Growth currently invests at
least 65% of its total assets in equity securities of issuers domiciled in
Japan. International Equity, by contrast, has a much greater dispersion of
investments around the world. In particular, as of March 31, 2001, about 21% of
the Fund's assets were invested in Asian securities and 13.7% of the Fund's
assets were invested in Japanese securities. The Board of Trustees, however,
determined that the loss of exposure to the Japanese markets was counterbalanced
by greater diversification offered by International Equity. The Board of
Trustees also believes that International Equity, which has significant
investments in Japan (representing over 4 times the assets of Japan Growth)
presents a viable option to the shareholders of Japan Growth.
In addition, the Reorganization may result in reduced revenues for AIM
Advisors, since AIM Advisors receives slightly lower management fees on the
assets presently held by International Equity. 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.
28
38
The Board of Trustees also noted that no initial sales or other charges
would be imposed on any of the shares of International Equity issued to the
shareholders of Japan Growth in connection with the Reorganization. Finally, the
Board of Trustees reviewed the principal terms of the Agreement. The Board of
Trustees noted that Japan Growth would be provided with an opinion of counsel
that the Reorganization would be tax-free as to Japan Growth and its
shareholders.
Based on the foregoing, and the information presented, at its meeting
held on June [11/12], 2001, the Board of Trustees determined that the
Reorganization will not dilute the interests of the shareholders of Japan Growth
and is in the best interest of the Japan Growth Shareholders in view of the
better historical performance, lower operating expenses and greater geographical
diversification of International Equity. Therefore, the Board of Trustees
recommends the approval of the Reorganization by the shareholders of Japan
Growth.
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 Japan
Growth or International Equity are subject to various conditions, including the
following:
o the assets of Japan Growth to be acquired by International
Equity 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 Japan Growth 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 Japan Growth shall have approved the
Agreement; and
o AGS and AIF shall have received an opinion from Ballard Spahr
Andrews & Ingersoll, LLP, that the consummation of the
transactions contemplated by the Agreement will not result in
the recognition of gain or loss for Federal income tax
purposes for Japan Growth, International Equity or their
shareholders.
Japan Growth and International Equity will bear their own costs and
expenses in connection with the Reorganization. However, AIM Advisors has agreed
to reimburse expenses and waive certain of its fees so that the expense cap for
Japan Growth is not exceeded. As a result, it is expected that AIM Advisors will
effectively bear all of the transaction expenses for Japan Growth.
29
39
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 Japan Growth.
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 Japan Growth shareholders do not approve the Agreement
or if the Closing does not occur on or before December 1, 2001.
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 Japan Growth upon the
transfer of its assets to International Equity;
o no gain or loss will be recognized by any shareholder of Japan
Growth upon the exchange of shares of Japan Growth solely for
shares of International Equity;
o the tax basis of the shares of International Equity to be
received by a shareholder of Japan Growth will be the same as
the tax basis of the shares of Japan Growth surrendered in
exchange therefor;
o the holding period of the shares of International Equity to be
received by a shareholder of Japan Growth will include the
holding period for which such shareholder held the shares of
Japan Growth exchanged therefor, provided that such shares of
Japan Growth are capital assets in the hands of such
shareholder as of the Closing;
o no gain or loss will be recognized by International Equity on
the receipt of assets of Japan Growth in exchange for shares
of International Equity and International Equity's assumption
of Japan Growth's liabilities;
o the tax basis of the assets of Japan Growth in the hands of
International Equity will be the same as the tax basis of such
assets in the hands of Japan Growth immediately prior to the
Reorganization;
o International Equity will succeed to and take into account the
capital loss carryover and certain other tax attributes of
Japan Growth, subject to all relevant conditions and
limitations on the use of such tax benefits; and
o the holding period of the assets of Japan Growth to be
received by International Equity will include the holding
period of such assets in the hands of Japan Growth immediately
prior to the Reorganization.
30
40
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 Japan
Growth to redeem a number of shares of International Equity
received in the Reorganization that would reduce Japan Growth
shareholders' ownership of International Equity shares to a
number of shares having a value, as of the Closing Date, of
less than 50% of the value of all of the formerly outstanding
shares of Japan Growth as of the Closing Date;
o following the Reorganization, International Equity will
continue the historic business of Japan Growth (for this
purpose "historic business" shall mean the business most
recently conducted by Japan Growth which was not entered into
in connection with the Reorganization) or use a significant
portion of Japan Growth's historic business assets in its
business;
o at the direction of Japan Growth, International Equity will
issue directly to each Japan Growth shareholder pro rata the
shares of International Equity that Japan Growth
constructively receives in the Reorganization and Japan Growth
will distribute its other properties (if any) to its
shareholders on, or as promptly as practicable after, the
Closing;
o International Equity has no plan or intention to reacquire any
of its shares issued in the Reorganization, except to the
extent that International Equity is required by the Investment
Company Act of 1940 (the "1940 Act") to redeem any of its
shares presented for redemption;
o International Equity does not plan or intend to sell or
otherwise dispose of any of the assets of Japan Growth
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 International Equity, Japan Growth and the shareholders of
Japan Growth will pay their respective expenses, if any,
incurred in connection with the Reorganization;
o International Equity will acquire 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 Japan Growth
immediately before the Reorganization, including for this
purpose any amounts used by Japan Growth to pay its
reorganization expenses and all redemptions and distributions
made by Japan Growth immediately before the Reorganization
(other than redemptions pursuant to a demand of a shareholder
in the ordinary course of Japan Growth'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 International Equity and Japan Growth have each elected to be
taxed as a RIC under Section 851 of the Code and will each
have qualified for the special Federal
31
41
tax treatment afforded RICs under the Code for all taxable
periods (including the last short taxable period of Japan
Growth ending on the Closing and the taxable year of
International Equity 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 JAPAN GROWTH. JAPAN GROWTH 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.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to International Equity of the assets of Japan
Growth will be the same as the book cost basis of such assets to Japan Growth.
ADDITIONAL INFORMATION ABOUT INTERNATIONAL
EQUITY AND JAPAN GROWTH
A meeting of the shareholders of Japan Growth is scheduled to be held
on August 17, 2001. At that meeting, the Japan Growth shareholders will consider
the election of trustees. The shareholders of AGS, including the shareholders of
Japan Growth, will be asked to elect trustees as described in Proposal 1
contained in this combined proxy statement and prospectus.
For more information with respect to AIF and International Equity
concerning the following topics, please refer to International Equity's
Prospectus as indicated: (i) see "Investment Objective and Strategies" and "Fund
Management" for further information regarding AIF and International Equity; (ii)
see "Investment Objective and Strategies," "Fund Management," and "Other
Information" for further information regarding management of AIF and
International Equity; (iii) see "Fund Management" and "Other Information" for
further information regarding the shares of AIF and International Equity; (iv)
see "Fund Management," "Other Information," and "Shareholder Information" for
further information regarding the purchase, redemption and repurchase of shares
of AIF and International Equity.
For more information with respect to AGS and Japan Growth concerning
the following topics, please refer to Japan Growth's Prospectus as indicated:
(i) see "Investment Objective and Strategies" and "Fund Management" for further
information regarding AGS and Japan Growth; (ii) see discussion in "Investment
Objective and Strategies," "Fund Management," and "Other Information" for
further information regarding the shares of AGS and Japan Growth; (iii) see
"Fund Management," "Other Information," and "Shareholder Information" for
further information regarding the purchase, redemption and repurchase of AGS and
Japan Growth.
RIGHTS OF SHAREHOLDERS
The following discussion provides information with respect to the
differences in the rights of shareholders under Maryland law and Delaware law.
32
42
General
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
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.
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 Trust shall not be subject to any personal liability for
acts or obligations of the Trust and that every written agreement, obligation or
other undertaking made or issued by the Trust 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 Trust's 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 Trust itself is unable to meet its obligations and
the express disclaimer of shareholder liabilities is determined not to be
effective. Given the nature of the assets and operations of the Trust, the
possibility of the Trust being unable to meet its obligations is considered
remote, and even if a claim were brought against the Trust 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.
33
43
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.
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 bylaws 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 Trusts' 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
34
44
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 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.
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 Trust's assets and are bound by the terms of the transaction.
35
45
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.
OWNERSHIP OF INTERNATIONAL EQUITY AND JAPAN GROWTH SHARES
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person
who as of May 30, 2001, to the knowledge of AGS, owned 5% or more of any class
of the outstanding shares of Japan Growth:
JAPAN GROWTH
NAME AND NUMBER OF SHARES PERCENT
ADDRESS CLASS OF SHARES OWNED OWNED OF RECORD*
- -------- --------------- ---------------- ----------------
*AGS has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
Listed below is the name, address and percent ownership of each person
who as of May 30, 2001 to the knowledge of AIF, owned 5% or more of the
outstanding shares of International Equity:
36
46
INTERNATIONAL EQUITY
NAME AND NUMBER OF SHARES PERCENT
ADDRESS CLASS OF SHARES OWNED OWNED OF RECORD*
- -------- --------------- ---------------- ----------------
*AIF has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
OWNERSHIP OF OFFICERS AND DIRECTORS/TRUSTEES
To the best of the knowledge of AIF, the ownership of shares of
International Equity by officers and directors of AIF as a group constituted
less than 1% of the outstanding shares of such fund as of May 30, 2001. To the
best of the knowledge of AGS, the ownership of shares of Japan Growth by
officers or trustees of AGS as a group constituted less than 1% of the
outstanding shares of such fund as of May 30, 2001.
CAPITALIZATION
The following table sets forth as of October 31, 2000, (i) the
capitalization of International Equity Class A, Class B and Class C Shares, (ii)
the capitalization of Japan Growth Class A, Class B and Class C shares, and
(iii) the pro forma capitalization of International Equity Class A, Class B, and
Class C shares as adjusted to give effect to the transactions contemplated by
the Agreement.
37
47
INTERNATIONAL EQUITY AND JAPAN GROWTH
PRO FORMA
INTERNATIONAL EQUITY
JAPAN GROWTH INTERNATIONAL EQUITY CLASS A SHARES
CLASS A SHARES CLASS A SHARES AS ADJUSTED
-------------- -------------------- --------------------
Net Assets $98,066,334 $2,325,635,811 $2,423,702,145
Shares Outstanding 8,749,244 107,655,983 112,196,679
Net Asset Value Per Share $ 11.21 $ 21.60 $ 21.60
PRO FORMA
INTERNATIONAL EQUITY
JAPAN GROWTH INTERNATIONAL EQUITY CLASS B SHARES
CLASS B SHARES CLASS B SHARES AS ADJUSTED
-------------- -------------------- --------------------
Net Assets $50,217,878 $997,842,582 $1,048,060,460
Shares Outstanding 4,715,359 47,952,089 50,365,284
Net Asset Value Per Share $ 10.65 $ 20.81 $ 20.81
PRO FORMA
INTERNATIONAL EQUITY
JAPAN GROWTH INTERNATIONAL EQUITY CLASS C SHARES
CLASS C SHARES CLASS C SHARES AS ADJUSTED
-------------- -------------------- --------------------
Net Assets $7,520,410 $253,998,429 $261,518,839
Shares Outstanding 706,120 12,196,926 12,558,126
Net Asset Value Per Share $ 10.65 $ 20.82 $ 20.82
LEGAL MATTERS
Certain legal matters concerning AIF and its participation in the
Reorganization, the issuance of shares of International Equity 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.
38
48
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 Japan Growth is Registration No. 2-57526. 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 International
Equity is Registration No. 33-44611. 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
International Equity 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 website at http://www.sec.gov that contains
information regarding AIF, AGS and other registrants that file electronically
with the SEC.
39
49
APPENDIX I
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM [INSERT NAME] FUND
a separate portfolio of
AIM [INSERT NAME OF COMPANY]
June __, 2001
50
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.............................................................................................1
Section 1.1. Definitions............................................................................1
ARTICLE 2 TRANSFER OF ASSETS......................................................................................5
Section 2.1. Reorganizations........................................................................5
Section 2.2. Computation of Net Asset Value.........................................................5
Section 2.3. Valuation Date.........................................................................5
Section 2.4. Delivery...............................................................................6
Section 2.5. Termination of Series..................................................................6
Section 2.6. Issuance of Acquiring Fund Shares......................................................6
Section 2.7. Investment Securities..................................................................7
Section 2.8. Liabilities............................................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY I.............................................................7
Section 3.1. Organization; Authority................................................................7
Section 3.2. Registration and Regulation of Company I...............................................7
Section 3.3. Financial Statements...................................................................8
Section 3.4. No Material Adverse Changes; Contingent Liabilities....................................8
Section 3.5. Target Fund Shares; Liabilities; Business Operations...................................8
Section 3.6. Accountants............................................................................9
Section 3.7. Binding Obligation.....................................................................9
Section 3.8. No Breaches or Defaults................................................................9
Section 3.9. Authorizations or Consents............................................................10
Section 3.10. Permits...............................................................................10
Section 3.11. No Actions, Suits or Proceedings......................................................10
Section 3.12. Contracts.............................................................................10
Section 3.13. Properties and Assets.................................................................11
Section 3.14. Taxes.................................................................................11
Section 3.15. Benefit and Employment Obligations....................................................11
Section 3.16. Brokers...............................................................................12
Section 3.17. Voting Requirements...................................................................12
Section 3.18. State Takeover Statutes...............................................................12
Section 3.19. Books and Records.....................................................................12
Section 3.20. Prospectus and Statement of Additional Information....................................12
Section 3.21. No Distribution.......................................................................12
Section 3.22. Liabilities of Target Fund............................................................12
Section 3.23. Value of Shares.......................................................................12
Section 3.24. Shareholder Expenses..................................................................13
Section 3.25. Intercompany Indebtedness.............................................................13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF COMPANY II...........................................................13
Section 4.1. Organization; Authority...............................................................13
i
51
Section 4.2. Registration and Regulation of Company II.............................................13
Section 4.3. Financial Statements..................................................................13
Section 4.4. No Material Adverse Changes; Contingent Liabilities...................................13
Section 4.5. Registration of Acquiring Fund Class A Shares, Acquiring Fund Class B Shares and
Acquiring Fund Class C Shares.........................................................14
Section 4.6. Accountants...........................................................................15
Section 4.7. Binding Obligation....................................................................15
Section 4.8. No Breaches or Defaults...............................................................15
Section 4.9. Authorizations or Consents............................................................15
Section 4.10. Permits...............................................................................15
Section 4.11. No Actions, Suits or Proceedings......................................................16
Section 4.12. Taxes.................................................................................16
Section 4.13. Brokers...............................................................................17
Section 4.14. Representations Concerning the Reorganization.........................................17
Section 4.15. Prospectus and Statement of Additional Information....................................17
Section 4.16. Value of Shares.......................................................................18
Section 4.17. Intercompany Indebtedness; Consideration..............................................18
ARTICLE 5 COVENANTS..............................................................................................18
Section 5.1. Conduct of Business...................................................................18
Section 5.2. Announcements.........................................................................18
Section 5.3. Expenses..............................................................................19
Section 5.4. Further Assurances....................................................................19
Section 5.5. Notice of Events......................................................................19
Section 5.6. Access to Information.................................................................19
Section 5.7. Consents, Approvals and Filings.......................................................19
Section 5.8. Submission of Agreement to Shareholders...............................................20
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION.............................................................20
Section 6.1. Conditions Precedent of Company II....................................................20
Section 6.2. Mutual Conditions.....................................................................21
Section 6.3. Conditions Precedent of Company I.....................................................22
ARTICLE 7 TERMINATION AGREEMENT..................................................................................22
Section 7.1. Termination...........................................................................22
Section 7.2. Survival After Termination............................................................23
ARTICLE 8 MISCELLANEOUS..........................................................................................23
Section 8.1. Survival of Representations and Warranties............................................23
Section 8.2. Governing Law.........................................................................23
Section 8.3. Binding Effect, Persons Benefiting, No Assignment.....................................23
Section 8.4. Obligations of Company II and Company I...............................................23
Section 8.5. Amendments............................................................................24
Section 8.6. Enforcement...........................................................................24
Section 8.7. Interpretation........................................................................24
ii
52
Section 8.8. Counterparts..........................................................................24
Section 8.9. Entire Agreement; Schedules...........................................................24
Section 8.10. Notices...............................................................................25
Section 8.11. Representations by AIM Advisors.......................................................25
Schedule 6.1(d) Opinion of Counsel to Company I
Schedule 6.2(g) Tax Opinions
Schedule 6.3(d) Opinion of Counsel to Company II
iii
53
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June ___,
2001 (this "Agreement"), by and among AIM [INSERT NAME OF COMPANY], a Delaware
business trust ("Company I"), acting on behalf of AIM [INSERT NAME] Fund
("Target Fund"), a separate series of Company I, AIM [INSERT NAME OF COMPANY], a
[MARYLAND CORPORATION] [DELAWARE BUSINESS TRUST] ("Company II"), acting on
behalf of AIM [INSERT NAME] Fund ("Acquiring Fund"), a separate series of
Company II, and A I M Advisors, Inc. ("AIM Advisors"), a Delaware corporation.
WITNESSETH
WHEREAS, Company I is a management 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 Target
Fund, for sale to the public; and
WHEREAS, Company II is a management investment company
registered with the SEC under the Investment Company Act that offers separate
series of its shares representing interests in investment portfolios, including
Acquiring Fund, for sale to the public; and
WHEREAS, AIM Advisors provides investment advisory services to
both Company I and Company II; and
WHEREAS, Target Fund desires to provide for its reorganization
through the transfer of all of its assets to Acquiring Fund in exchange for the
assumption by Acquiring Fund of all of the liabilities of Target Fund and the
issuance by Company II of shares of Acquiring Fund 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, Company I, Company
II 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.
54
"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.
"Company I" means AIM [INSERT NAME OF COMPANY], a Delaware
business trust.
"Company I Registration Statement" means the registration
statement on Form N-1A of Company I, as amended, 1940 Act Registration No.
_____________.
"Company II" means AIM [INSERT NAME OF COMPANY], a Delaware
business trust.
"Company II Registration Statement" means the registration
statement on Form N-1A of AIM [INSERT NAME OF COMPANY], as amended, 1940 Act
Registration No.811-6463.
"Acquiring Fund" means AIM [INSERT NAME OF COMPANY] Fund, a
separate series of Company II.
"Acquiring Fund Class A Shares" means Class A Shares of the
[CAPITAL STOCK] of Acquiring Fund issued by Company II.
"Acquiring Fund Class B Shares" means Class B Shares of the
[CAPITAL STOCK] of Acquiring Fund issued by Company II.
"Acquiring Fund Class C Shares" means Class C Shares of the
[CAPITAL STOCK] of Acquiring Fund issued by Company II.
"Acquiring Fund Financial Statements" shall have the meaning
set forth in Section 4.3 of this Agreement.
"Acquiring Fund Shares" means shares of the [CAPITAL STOCK] of
Company II 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 Company I on behalf
of Target Fund, or otherwise providing benefits to any current or former
employee, officer or trustee of Company I.
"Closing" means the transfer of the assets of Target Fund to
Acquiring Fund, the assumption of all of Target Fund's liabilities by Acquiring
Fund and the issuance of Acquiring Fund Shares directly to Target Fund
Shareholders as described in Section 2.1 of this Agreement.
"Closing Date" means August ___, 2001 or such other date as
the parties may mutually determine.
2
55
"Code" means the Internal Revenue Code of 1986, as amended,
and all rules and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting
in its capacity as custodian for the assets of Acquiring Fund and Target Fund.
"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 NASD Regulation, 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.
"Target Fund" means AIM [INSERT NAME OF COMPANY] Fund, a
separate series of Company I.
"Target Fund Class A Shares" means Class A Shares of the
[capital stock] of Target Fund issued by Company I.
"Target Fund Class B Shares" means Class B Shares of the
[capital stock] of Target Fund issued by Company I.
"Target Fund Class C Shares" means Class C Shares of the
[capital stock] of Target Fund issued by Company I.
"Target Fund Financial Statements" shall have the meaning set
forth in Section 3.3 of this Agreement.
"Target Fund Shareholders" means the holders of record as of
the Effective Time of the issued and outstanding shares of beneficial interest
in Target Fund.
"Target Fund Shareholders Meeting" means a meeting of the
shareholders of Target Fund convened in accordance with applicable law and the
Agreement and Declaration of Trust of Company I to consider and vote upon the
approval of this Agreement and the Reorganization of Target Fund contemplated by
this Agreement.
"Target Fund Shares" means the issued and outstanding shares
of beneficial interest in Target Fund.
3
56
"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 Target
Fund by Acquiring Fund in consideration of the assumption by Acquiring Fund of
all of the liabilities of Target Fund and the issuance by Company II of
Acquiring Fund Shares directly to Target Fund Shareholders as described in this
Agreement, and the termination of Target Fund's status as designated series of
shares of Company I.
"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.
4
57
ARTICLE 2
TRANSFER OF ASSETS
Section 2.1. Reorganizations.
(a) Reorganization of Target Fund. At the Effective Time, all
of the assets of Target Fund shall be delivered to the Custodian for the account
of Acquiring Fund in exchange for the assumption by Acquiring Fund of all of the
liabilities of any kind of Target Fund and delivery by Company II directly to
(i) the holders of record as of the Effective Time of the issued and outstanding
Class A shares of Target Fund of a number of Acquiring Fund 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 Target Fund of a number of Acquiring Fund 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 Target Fund of a number of Acquiring
Fund 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 Target Fund so transferred, assigned and delivered, all
determined and adjusted as provided in Section 2.2 below. Upon delivery of such
assets, AIM [INSERT NAME OF COMPANY] 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 Acquiring Fund Shares, and the net
value of the assets of Target Fund, shall, in each case, be determined as of the
close of regular trading on the NYSE on the Valuation Date.
(b) The net asset value of Acquiring Fund Shares shall be
computed in accordance with the policies and procedures of Acquiring Fund as
described in the Company II Registration Statement.
(c) The net value of the assets of Target Fund to be
transferred to Acquiring Fund pursuant to this Agreement shall be computed in
accordance with the policies and procedures of Target Fund as described in the
Company I Registration Statement.
(d) All computations of value regarding the net assets of
Target Fund and the net asset value of Acquiring Fund Shares to be issued
pursuant to this Agreement shall be made by agreement of Company I and Company
II. 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 Target Fund and the net
asset value per share of Acquiring Fund 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 Target Fund will be
permanently closed as of the close of business on the Valuation Date and only
requests for the redemption of shares of Target Fund received in proper form
prior to the close of regular trading on the NYSE on the Valuation Date shall be
accepted by Target
5
58
Fund. Redemption requests thereafter received by Target Fund shall be deemed to
be redemption requests for Acquiring Fund Class A Shares, Acquiring Fund Class B
Shares or Acquiring Fund Class C Shares, as applicable (assuming that the
transactions contemplated by this Agreement have been consummated), to be
distributed to Target Fund Shareholders under this Agreement.
Section 2.4. Delivery.
(a) Assets held by Target Fund shall be delivered by Company I
to the Custodian on the Closing Date. No later than three (3) business days
preceding the Closing Date, Company I shall instruct the Custodian to transfer
such assets to the account of Acquiring Fund. 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 Target Fund 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 Acquiring Fund
at the Custodian.
(b) If, on the Closing Date, Target Fund is unable to make
delivery in the manner contemplated by Section 2.4(a) of securities held by
Target Fund for the reason that any of such securities purchased prior to the
Closing Date have not yet been delivered to Target Fund or its broker, then
Company II shall waive the delivery requirements of Section 2.4(a) with respect
to said undelivered securities if Target Fund 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 Company II 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 Target Fund as a designated series of
shares of Company I shall be terminated; provided, however, that the termination
of the status of Target Fund as a series of shares of Company I shall not be
required if the Reorganization shall not have been consummated.
Section 2.6. Issuance of Acquiring Fund Shares. At the Effective Time,
Target Fund Shareholders of record as of the close of regular trading on the
NYSE on the Valuation Date holding Target Fund Class A shares shall be issued
that number of full and fractional Class A shares of Acquiring Fund having a net
asset value equal to the net asset value of Target Fund Class A shares held by
Target Fund Shareholders on the Valuation Date, Target Fund Shareholders of
record as of the Valuation Date holding Target Fund Class B shares shall be
issued that number of full and fractional Class B shares of Acquiring Fund
having a net asset value equal to the net asset value of Target Fund Class B
Shares held by Target Fund Shareholders on the Valuation Date, and Target Fund
Shareholders of record as of the Valuation Date holding Target Fund Class C
shares shall be issued that number of full and fractional Class C shares of
Acquiring Fund having a net asset value equal to the net asset value of Target
Fund Class C shares held by Target Fund Shareholders on the Valuation Date. All
issued and outstanding shares of beneficial interest in Target Fund shall
thereupon be canceled on the books of Company I. Company I shall provide
instructions to the transfer agent of Company II with
6
59
respect to Acquiring Fund Class A Shares, Acquiring Fund Class B Shares and
Acquiring Fund Class C Shares to be issued to Target Fund Shareholders. Company
II 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. Company II shall record on its books
the ownership of Acquiring Fund Class A, Acquiring Fund Class B and Acquiring
Fund Class C Shares by Target Fund Shareholders and shall forward a confirmation
of such ownership to Target Fund Shareholders. No redemption or repurchase of
such shares credited to former Target Fund Shareholders in respect of Target
Fund shares represented by unsurrendered shares certificates shall be permitted
until such certificates have been surrendered to Company II for cancellation, or
if such certificates are lost or misplaced, until lost certificate affidavits
have been executed and delivered to Company II.
Section 2.7. Investment Securities. On or prior to the Valuation Date,
Company I shall deliver a list setting forth the securities Target Fund then
owned together with the respective Federal income tax bases thereof. Company I
shall provide to Company II 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 Acquiring Fund hereunder. Such records shall be made available by
Company I prior to the Valuation Date for inspection by the Treasurer (or his or
her designee) or the auditors of Company II upon reasonable request.
Section 2.8. Liabilities. Target Fund 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 COMPANY I
Company I, on behalf of Target Fund, represents and warrants
to Company II that:
Section 3.1. Organization; Authority. Company I 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 Company I. Company I is
duly registered with the SEC as an investment company under the Investment
Company Act and all Target Fund Shares which have been or are being offered for
sale have been duly registered under the Securities Act 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 Company I to
revoke or rescind any such registration or qualification. Target Fund 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.
Target Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the Company I
Registration Statement currently in effect. The value of the net assets of
Target Fund is determined using portfolio valuation methods that
7
60
comply in all material respects with the requirements of the Investment Company
Act and the policies of Target Fund and all purchases and redemptions of Target
Fund 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 Target Fund 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 [INSERT LAST FISCAL YEAR END], of Target Fund previously
delivered to Company II (the "Target Fund Financial Statements") present fairly
in all material respects the financial position of Target Fund 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
[INSERT LAST FISCAL YEAR END] no material adverse change has occurred in the
financial condition, results of operations, business, assets or liabilities of
Target Fund or the status of Target Fund 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 Target Fund or occurring in the ordinary course of business of Target Fund or
Acquiring Fund. There are no contingent liabilities of Target Fund not disclosed
in the Target Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles.
Section 3.5. Target Fund Shares; Liabilities; Business Operations.
(a) Target Fund 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 Target Fund nor any person related to Target Fund (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 Target
Fund for consideration other than shares of Target Fund, except for shares
redeemed in the ordinary course of Target Fund's business as an open-end
investment company as required by the Investment Company Act, or (ii) made
distributions with respect to Target Fund'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 Target Fund on the Effective
Date.
(c) At the time of its Reorganization, Target Fund shall not
have outstanding any warrants, options, convertible securities or any other type
of right pursuant to which any Person could acquire Target Fund Shares, except
for the right of investors to acquire Target Fund 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.
8
61
(d) From the date it commenced operations and ending on the
Closing Date, Target Fund 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, Target
Fund 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 Acquiring Fund.
(e) Company I 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 Target Fund Financial Statements for the period ended [INSERT
LAST FISCAL YEAR END], is the independent public accountant 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 Company I on behalf of Target Fund and,
assuming this Agreement has been duly executed and delivered by Company II and
approved by Target Fund Shareholders, constitutes the legal, valid and binding
obligation of Company I enforceable against Company I in accordance with its
terms from and with respect to the revenues and assets of Target Fund, 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 Company I on behalf of Target Fund and performance by Company
I of its obligations hereunder has been duly authorized by all necessary trust
action on the part of Company I, other than Target Fund 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 Company I 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 Target Fund (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 Company I is a party or
by which it may be bound and which relates to the assets of Target Fund or to
which any property of Target Fund 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 Company I or any
property of Target Fund. Company I 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.
9
62
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 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 Company I
in connection with the due execution and delivery by Company I of this Agreement
and the consummation by Company I of the transactions contemplated hereby.
Section 3.10. Permits. Company I 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 Target Fund, 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 Company I 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 Company I, has any litigation been overtly threatened in
writing or, if probable of assertion, orally, against Company I 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
Company I, threatened in writing or, if probable of assertion, orally, against
Company I affecting any property, asset, interest or right of Target Fund, that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to Target Fund. 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 Company I's conduct of the business of Target
Fund affecting in any significant respect the conduct of such business. Company
I is not, and has not been to the knowledge of Company I, the target of any
investigation by the SEC or any state securities administrator with respect to
its conduct of the business of Target Fund.
Section 3.12. Contracts. Company I 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
Target Fund, by which the assets, business, or operations of Target Fund may be
bound or affected, or under which it or the assets, business or operations of
Target Fund 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 Company I there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
10
63
Section 3.13. Properties and Assets. Target Fund has good and
marketable title to all properties and assets reflected in the Target Fund
Financial Statements as owned by it, free and clear of all Liens, except as
described in Target Fund Financial Statements.
Section 3.14. Taxes.
(a) Target Fund 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. Target Fund 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. Target Fund 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) ensure continued qualification of Target Fund as a "regulated investment
company" for tax purposes and (ii) eliminate any tax liability of Target Fund
arising by reason of undistributed investment company taxable income or net
capital gain, Company I will declare prior to the Valuation Date to the
shareholders of Target Fund a dividend or dividends that, together with all
previous such dividends, shall have the effect of distributing (A) all of Target
Fund's investment company taxable income (determined without regard to any
deductions for dividends paid) for the taxable year ended [INSERT FISCAL YEAR
END] and for the short taxable year beginning on [INSERT BEGINNING OF CURRENT
FISCAL YEAR] and ending on the Closing Date and (B) all of Target Fund's net
capital gain recognized in its taxable year ended [INSERT FISCAL YEAR END] and
in such short taxable year (after reduction for any capital loss carryover).
(b) Target Fund 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 Target Fund 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 Target Fund, 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 Target
Fund 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 Company I, the fiscal year of
Target Fund has not been changed for tax purposes since the date on which it
commenced operations [VERIFY].
Section 3.15. Benefit and Employment Obligations. On or prior
to the Closing Date, Target Fund 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.
11
64
Section 3.16. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Company I 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 Company I or any action taken by it.
Section 3.17. Voting Requirements. The vote of a majority of the shares
cast at a meeting of Target Fund shareholders 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 Target Fund necessary to approve this
Agreement and the Reorganization of Target Fund 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.
Section 3.19. Books and Records. The books and records of Company I
relating to Target Fund, reflecting, among other things, the purchase and sale
of Target Fund Shares, the number of issued and outstanding shares owned by
Target Fund 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 Target Fund 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. Acquiring Fund 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 Target Fund. The liabilities of Target
Fund that are to be assumed by Acquiring Fund in connection with the
Reorganization, or to which the assets of Target Fund to be transferred in the
Reorganizations are subject, were incurred by Target Fund in the ordinary course
of its business. The fair market value of the assets of Target Fund to be
transferred to Acquiring Fund in the Reorganization will equal or exceed the sum
of the liabilities to be assumed by Acquiring Fund plus the amount of
liabilities, if any, to which such transferred assets will be subject.
Section 3.23. Value of Shares. The fair market value of Acquiring Fund
Class A Shares received by Target Fund Shareholders in the Reorganization will
be approximately equal to the fair market value of Target Fund Class A shares
constructively surrendered in exchange therefor, the fair market value of
Acquiring Fund Class B Shares received by Target Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of Target
Fund Class B shares constructively surrendered in exchange therefor, and the
fair market value of Acquiring Fund Class C Shares received by Target Fund
Shareholders in the Reorganization will be
12
65
approximately equal to the fair market value of Target Fund Class C shares
constructively surrendered in exchange therefor.
Section 3.24. Shareholder Expenses. Target Fund 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 Company I and Company II that was issued or acquired, or
will be settled, at a discount.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY II
Company II, on behalf of Acquiring Fund, represents and
warrants to Company I as follows:
Section 4.1. Organization; Authority. Company II is duly organized,
validly existing and in good standing under the [MARYLAND GENERAL CORPORATION
LAW,] with all requisite [CORPORATE] power and authority to enter into this
Agreement and perform its obligations hereunder.
Section 4.2. Registration and Regulation of Company II. Company II is
duly registered with the SEC as an investment company under the Investment
Company Act. Acquiring Fund 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. Acquiring Fund is in compliance in all material respects
with the applicable investment policies and restrictions set forth in the
Company II Registration Statement. The value of the net assets of Acquiring Fund
is determined using portfolio valuation methods that comply in all material
respects with the requirements of the Investment Company Act and the policies of
Acquiring Fund and all purchases and redemptions of Acquiring Fund 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 Acquiring Fund 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 [INSERT FISCAL YEAR END], of Acquiring Fund previously
delivered to Company I (the "Acquiring Fund Financial Statements") present
fairly in all material respects the financial position of Acquiring Fund 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
[INSERT FISCAL YEAR END], no material adverse change has occurred in the
financial condition, results of operations, business, assets or liabilities of
Acquiring Fund or the status of Acquiring Fund 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 Acquiring Fund or occurring in the ordinary course of
business of Acquiring Fund or
13
66
Company II. There are no contingent liabilities of Acquiring Fund not disclosed
in the Acquiring Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles.
Section 4.5. Registration of Acquiring Fund Class A Shares, Acquiring
Fund Class B Shares and Acquiring Fund Class C Shares.
(a) The [CAPITAL STOCK] of Company II is divided into six
portfolios, including Acquiring Fund. Acquiring Fund currently has three classes
of shares, Class A shares, Class B shares and Class C shares. Under its Charter,
Company II is authorized to issue [INSERT NUMBER] (_____________) Class A
shares, [INSERT NUMBER] (___________) Class B shares and [INSERT NUMBER]
(______________) Class C shares of Acquiring Fund.
(b) Acquiring Fund 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 Company II then in effect.
(c) Acquiring Fund 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, Acquiring Fund shall not have outstanding any warrants, options,
convertible securities or any other type of right pursuant to which any Person
could acquire Acquiring Fund Class A, Acquiring Fund Class B or Acquiring Fund
Class C shares, except for the right of investors to acquire Acquiring Fund
Class A Shares, Acquiring Fund Class B Shares or Acquiring Fund Class C 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 Company II's Registration
Statement on Form N-14 shall be furnished to Target Fund Shareholders entitled
to vote at the Target Fund Shareholders Meeting. The Combined Proxy
Statement/Prospectus and related Statement of Additional Information of
Acquiring Fund, 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 Company I for inclusion in the
Combined Proxy Statement/Prospectus.
(e) The shares of Acquiring Fund which have been or are being
offered for sale (other than the Acquiring Fund Shares to be issued in
connection with the Reorganizations) have been duly registered under the
Securities Act by the Company II 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
14
67
have been or are being offered for sale, and no action has been taken by Company
II to revoke or rescind any such registration or qualification.
Section 4.6. Accountants. [KPMG LLP], which has reported upon the
Acquiring Fund Financial Statements for the period ended [INSERT END OF LAST
FISCAL YEAR], 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 Company II on behalf of Acquiring Fund
and, assuming this Agreement has been duly executed and delivered by Company I,
constitutes the legal, valid and binding obligation of Company II, enforceable
against Company II in accordance with its terms from and with respect to the
revenues and assets of Acquiring Fund, 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 Company II on behalf of Acquiring Fund and performance by
Company II of its obligations hereunder have been duly authorized by all
necessary [CORPORATE] action on the part of Company II and (i) do not, and on
the Closing Date will not, result in any violation of the Charter or by-laws of
Company II 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 Acquiring Fund (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 Company
II is a party or by which it may be bound and which relates to the assets of
Acquiring Fund or to which any properties of Acquiring Fund 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 Company
II or any property of Acquiring Fund. Company II 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 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 Company II in connection
with the due execution and delivery by Company II of this Agreement and the
consummation by Company II of the transactions contemplated hereby.
Section 4.10. Permits. Company II has in full force and effect all
Permits necessary for it to conduct its business as presently conducted as it
relates to Acquiring Fund, 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
15
68
or in the aggregate, a Material Adverse Effect. To the knowledge of Company II
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 Company II, has any litigation been overtly threatened in
writing or, if probable of assertion, orally, against Company II 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
Company II, threatened in writing or, if probable of assertion, orally, against
Company II, affecting any property, asset, interest or right of Acquiring Fund,
that could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to Acquiring Fund. 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 Company II's conduct of the
business of Acquiring Fund affecting in any significant respect the conduct of
such business. Company II is not, and has not been, to the knowledge of Company
II, the target of any investigation by the SEC or any state securities
administrator with respect to its conduct of the business of Acquiring Fund.
Section 4.12. Taxes.
(a) Acquiring Fund 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. Acquiring Fund 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. Acquiring Fund 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) Acquiring Fund 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 Acquiring Fund Financial Statements for all Taxes in respect of
all periods ending 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 Acquiring Fund, 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
16
69
waivers of the time to assess any such Taxes are outstanding nor are any written
requests for such waivers pending and no Return of Acquiring Fund 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 Acquiring Fund has not been changed for
tax purposes since the date on which it commenced operations. [VERIFY]
Section 4.13. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Company II 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 Company II or any action taken by it.
Section 4.14. Representations Concerning the Reorganization.
(a) Company II has no plan or intention to reacquire any
Acquiring Fund Shares issued in the Reorganization, except to the extent that
Acquiring Fund 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) Acquiring Fund has no plan or intention to sell or
otherwise dispose of any of the assets of Target Fund 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, Acquiring Fund will continue
an "historic business" (within the meaning of Section 1.368-1(d) of the Income
Tax Regulations under the Code) of Target Fund or use a significant portion of
Target Fund's historic business assets in a business.
(d) Prior to or in the Reorganization, neither Acquiring Fund
nor any person related to Acquiring Fund (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 Target Fund with consideration other than shares of Acquiring
Fund. There is no plan or intention by Acquiring Fund or any person related to
Acquiring Fund to acquire or redeem any of the Acquiring Fund 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 Acquiring Fund'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 Acquiring Fund 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 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.
17
70
Section 4.16. Value of Shares. The fair market value of Acquiring Fund
Class A Shares received by Target Fund Shareholders in each Reorganization will
be approximately equal to the fair market value of Target Fund Class A shares
constructively surrendered in exchange therefor, the fair market value of
Acquiring Fund Class B Shares received by Target Fund Shareholders in each
Reorganization will be approximately equal to the fair market value of Target
Fund Class B shares constructively surrendered therefor, and the fair market
value of Acquiring Fund Class C Shares received by Target Fund Shareholders in
each Reorganization will be approximately equal to the fair market value of
Target Fund Class C shares constructively surrendered therefor.
Section 4.17. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Company I and Company II that was issued or
acquired, or will be settled, at a discount. No consideration other than
Acquiring Fund Shares (and Acquiring Fund's assumption of Target Fund's
liabilities, including for this purpose all liabilities to which the assets of
Target Fund are subject) will be issued in exchange for the assets of Target
Fund acquired by Acquiring Fund in connection with the Reorganization. The fair
market value of the assets of Target Fund transferred to Acquiring Fund in the
Reorganization will equal or exceed the sum of the liabilities assumed by
Acquiring Fund, 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), Company I shall conduct the business of Target Fund 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 Target Fund
in the ordinary course in all material respects.
(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), Company II shall conduct the business of Acquiring Fund
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 Acquiring
Fund in the ordinary course in all material respects.
Section 5.2. Announcements. Company I and Company II 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 Company I nor Company II 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.
18
71
Section 5.3. Expenses. Target Fund and Acquiring Fund shall each,
respectively, bear the expenses they incur in connection with this Agreement and
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.
Section 5.5. Notice of Events. Company II shall give prompt notice to
Company I, and Company I shall give prompt notice to Company II, of (a) the
occurrence or non-occurrence of any event which to the knowledge of Company II
or to the knowledge of Company I, the occurrence or non-occurrence of which
would be likely to result in any of the conditions specified in (i) in the case
of Company I, Sections 6.1 and 6.2 or (ii) in the case of Company II, 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) Company I will, during regular business hours and on
reasonable prior notice, allow Company II and its authorized representatives
reasonable access to the books and records of Company I pertaining to the assets
of Target Fund and to officers of Company I knowledgeable thereof; provided,
however, that any such access shall not significantly interfere with the
business or operations of Company I.
(b) Company II will, during regular business hours and on
reasonable prior notice, allow Company I and its authorized representatives
reasonable access to the books and records of Company II pertaining to the
assets of Acquiring Fund and to officers of Company II knowledgeable thereof;
provided, however, that any such access shall not significantly interfere with
the business or operations of Company II.
Section 5.7. Consents, Approvals and Filings. Each of Company I and
Company II 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 Company I and Company II
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
19
72
Governmental Authorities and consents of all third parties necessary for the
consummation of the Reorganizations and the other transactions contemplated
herein. Each of Company I and Company II 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. Company I shall
take all action necessary in accordance with applicable law and its Agreement
and Declaration of Trust and by-laws to convene the Target Fund Shareholders
Meeting. Company I shall, through its Board of Trustees, recommend to Target
Fund Shareholders approval of this Agreement and the transactions contemplated
by this Agreement. Company I shall use its reasonable best efforts to hold a
Target Fund Shareholders Meeting as soon as practicable after the date hereof.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1. Conditions Precedent of Company II. The obligation of
Company II 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 Company II.
(a) The representations and warranties of Company I on behalf
of Target Fund 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) Company I shall have complied with and satisfied in all
material respects all agreements and conditions relating to Target Fund
participating in the Reorganization set forth herein on its part to be performed
or satisfied at or prior to the Closing Date.
(c) Company II shall have received at the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of Company I, in such
individual's capacity as an officer of Company I 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 Company I certifying as to the accuracy and
completeness of the attached Agreement and Declaration of Trust and by-laws of
Company I, and resolutions, consents and authorizations of or regarding Company
I with respect to the execution and delivery of this Agreement and the
transactions contemplated hereby.
(d) Company II shall have received the signed opinion of
Kirkpatrick & Lockhart LLP, counsel to Company I, or other counsel reasonably
acceptable to Company II, in form and substance reasonably acceptable to counsel
for Company II, 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.
20
73
Section 6.2. Mutual Conditions. The obligations of Company I and
Company II 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 Company I and Company II, 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 Company I and Company II
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 Target Fund and
related matters shall have been approved and adopted at the Target Fund
Shareholders Meeting by the shareholders of Target Fund on the record date by
the Required Shareholder Vote.
(c) The assets of Target Fund to be acquired by Acquiring Fund
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 Target Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by Target Fund 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
Target Fund's business as a series of an open-end management investment company)
after the date of this Agreement shall be included as assets of Target Fund 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 Company
II with respect to Acquiring Fund Shares to be issued to Target Fund
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) Company I and Company II shall have received on or before
the Closing Date an opinion of Ballard Spahr Andrews & Ingersoll, LLP ("BSA&I")
in form and substance reasonably acceptable to Company I and Company II, as to
the matters set forth on Schedule 6.2(f). In rendering such opinion, BSA&I may
request and rely upon representations
21
74
contained in certificates of officers of Company I and Company II and others and
the officers of Company I and Company II shall use their best efforts to make
available such truthful certificates.
Section 6.3. Conditions Precedent of Company I. The obligation of
Company I 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 Company I.
(a) The representations and warranties of Company II on behalf
of Acquiring Fund 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) Company II shall have complied with and satisfied in all
material respects all agreements and conditions relating to Acquiring Fund
participating in the Reorganization set forth herein on its part to be performed
or satisfied at or prior to the Closing Date.
(c) Company I shall have received on the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of Company II, in
such individual's capacity as an officer of Company II 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 Company II certifying as to the accuracy and
completeness of the attached [CHARTER] and by-laws, as amended, of Company II
and resolutions, consents and authorizations of or regarding Company II with
respect to the execution and delivery of this Agreement and the transactions
contemplated hereby.
(d) Company I shall have received the signed opinion of
Ballard Spahr Andrews & Ingersoll, LLP, counsel to Company II, or other counsel
reasonably acceptable to Company I, in form and substance reasonably acceptable
to counsel for Company II, 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 on or prior to the
Closing Date as follows:
(i) by mutual written consent of Company I and
Company II; or
(ii) at the election of Company I or Company II:
(A) if the Closing Date shall not be on or
before [INSERT DATE], or such later date as the
parties hereto may agree upon,
22
75
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 Target Fund
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
Target Fund is not consummated, this Agreement shall become void and of no
further force and effect with respect to such Reorganization and the respective
Target Fund, 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.
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.
Section 8.4. Obligations of Company II and Company I.
(a) Company I and Company II hereby acknowledge and agree that
Acquiring Fund is a separate investment portfolio of Company II, that Company II
is executing this Agreement on behalf of Acquiring Fund, and that any amounts
payable by Company II under
23
76
or in connection with this Agreement shall be payable solely from the revenues
and assets of Acquiring Fund. Company I further acknowledges and agrees that
this Agreement has been executed by a duly authorized officer of Company II in
his or her capacity as an officer of Company II intending to bind Company II as
provided herein, and that no officer, [DIRECTOR] or shareholder of Company II
shall be personally liable for the liabilities or obligations of Company II
incurred hereunder.
(b) Company I and Company II hereby acknowledge and agree that
Target Fund is a separate investment portfolio of Company I, that Company I is
executing this Agreement on behalf of Target Fund and that any amounts payable
by Company I under or in connection with this Agreement shall be payable solely
from the revenues and assets of Target Fund. Company II further acknowledges and
agrees that this Agreement has been executed by a duly authorized officer of
Company I in his or her capacity as an officer of Company I intending to bind
Company I as provided herein, and that no officer, trustee or shareholder of
Company I shall be personally liable for the liabilities of Company I incurred
hereunder.
Section 8.5. Amendments. This Agreement may not be amended, altered or
modified except by a written instrument executed by Company I and Company II.
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 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.
24
77
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 Company I:
AIM [INSERT NAME OF COMPANY]
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, DC 20036-1800
Attn: Arthur J. Brown, Esq.
Fax: (202) 778-9100
(b) If to Company II:
AIM [INSERT NAME OF COMPANY]
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
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 Company I, AIM Advisors represents to Company II that to
the best of its knowledge the representations and warranties of Company I and
Target Fund contained in this Agreement are true and correct as of the date of
this Agreement. In its capacity as investment adviser to Company II, AIM
Advisors represents to Company I that to the best of its knowledge the
representations and warranties of Company II and Acquiring Fund contained in
this Agreement
25
78
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 Company I and Company II do not have actual
knowledge to the contrary after due inquiry.
26
79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM [INSERT NAME OF COMPANY], acting
on behalf of AIM [INSERT FUND NAME]
By:
--------------------------------------
AIM [INSERT COMPANY NAME], acting
on behalf of AIM [INSERT FUND NAME]
By:
--------------------------------------
A I M Advisors, Inc.
By:
--------------------------------------
27
80
Schedule 6.1(d)
Opinion of Counsel to Company I
1. Company I is duly organized and validly existing as a business
trust under the Delaware Business Trust Act.
2. Company I 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
Company I have been duly authorized and approved by all
requisite trust action on the part of Company I. The Agreement
has been duly executed and delivered by Company I and
constitutes the valid and binding obligation of Company I.
4. Target Fund 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, Company I 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, no litigation or governmental
proceeding is pending or threatened in writing against Acquiring Fund (i) with
respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
81
Schedule 6.2(f)
Tax Opinions
(i) The transfer of the assets of Target Fund to Acquiring
Fund in exchange for Acquiring Fund Shares distributed directly to Target Fund
Shareholders, as provided in the Agreement, will constitute a "reorganization"
within the meaning of Section 368(a) of the Code and that Target Fund and
Acquiring Fund 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 Target Fund on the transfer
of its assets to Acquiring Fund solely in exchange for Acquiring Fund Class A
Shares, Acquiring Fund Class B Shares and Acquiring Fund Class C Shares or on
the distribution of Acquiring Fund Class A Shares, Acquiring Fund Class B Shares
and Acquiring Fund Class C Shares to Target Fund Shareholders.
(iii) In accordance with Section 1032 of the Code, no gain or
loss will be recognized by Acquiring Fund upon the receipt of assets of Target
Fund in exchange for Acquiring Fund Class A Shares, Acquiring Fund Class B
Shares and Acquiring Fund Class C Shares issued directly to Target Fund
Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no gain
or loss will be recognized by Target Fund Shareholders on the receipt of
Acquiring Fund Class A Shares, Acquiring Fund Class B Shares and Acquiring Fund
Class C Shares in exchange for Target Fund Shares.
(v) In accordance with Section 362(b) of the Code, the basis
to Acquiring Fund of the assets of Target Fund will be the same as the basis of
such assets in the hands of Target Fund immediately prior to the Reorganization.
(vi) In accordance with Section 358(a) of the Code, a Target
Fund Shareholder's basis for Acquiring Fund Class A Shares, Acquiring Fund Class
B Shares or Acquiring Fund Class C Shares received by the Target Fund
Shareholder will be the same as his basis for Target Fund Shares exchanged
therefor.
(vii) In accordance with Section 1223(1) of the Code, a Target
Fund Shareholder's holding period for Acquiring Fund Class A Shares, Acquiring
Fund Class B Shares or Acquiring Fund Class C Shares will be determined by
including Target Fund Shareholder's holding period for Target Fund Shares
exchanged therefor, provided that the Target Fund Shareholder held Target Fund
Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the
holding period with respect to the assets of Target Fund transferred to
Acquiring Fund in the Reorganization will include the holding period for such
assets in the hands of Target Fund
82
Schedule 6.3(d)
Opinion of Counsel to Company II
1. Company II is a [CORPORATION] validly existing and in good
standing under the [MARYLAND GENERAL CORPORATION LAW.]
2. Company II 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
Company II have been duly authorized and approved by all
requisite [CORPORATE] action on the part of Company II. The
Agreement has been duly executed and delivered by Company II
and constitutes the valid and binding obligation of Company
II.
4. Acquiring Fund 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, Company II 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, no litigation or governmental
proceeding is pending or threatened in writing against Acquiring Fund (i) with
respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
83
APPENDIX II
AIM INTERNATIONAL
EQUITY FUND
---------------------------------------------------------------------------
AIM International Equity Fund seeks to provide long-term growth of capital.
AIM--Registered Trademark--
PROSPECTUS
MARCH 1, 2001
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.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
84
-----------------------------
AIM INTERNATIONAL EQUITY FUND
-----------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
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 Advisor 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-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM Internet
Connect 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.
85
-----------------------------
AIM INTERNATIONAL EQUITY FUND
-----------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide long-term growth of capital. The
investment objective of the fund may be changed by the Board of Directors
without shareholder approval.
The fund seeks to meet its objective 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 fund invests, normally,
at least 70% of its total assets in marketable equity securities of foreign
companies that are listed on a recognized foreign securities exchange or traded
in a foreign over-the-counter market. The fund will normally invest in companies
located in at least four countries outside of the United States, emphasizing
investment in companies in the developed countries of Western Europe and the
Pacific Basin.
At the present time, the fund's portfolio managers intend to invest no more
than 20% of the fund's total assets in foreign companies located in developing
countries, i.e., those that are in the initial stages of their industrial
cycles. The fund may invest up to 20% of its total assets in securities
exchangeable for or convertible into marketable equity securities of foreign
issuers. 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. Any percentage
limitations with respect to assets of the fund are applied at the time of
purchase.
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 fund's 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
fund's 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.
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 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 devaluated 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.
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
86
-----------------------------
AIM INTERNATIONAL EQUITY 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]
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1993 ........................................... 45.78%
1994 ........................................... -3.34%
1995 ........................................... 16.41%
1996 ........................................... 18.98%
1997 ........................................... 5.70%
1998 ........................................... 13.42%
1999 ........................................... 55.08%
2000 ........................................... -25.69%
During the periods shown in the bar chart, the highest quarterly return was
43.09% (quarter ended December 31, 1999) and the lowest quarterly return was
- -14.64% (quarter ended September 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.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2000) 1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------
Class A (29.78)% 9.20% 11.64% 04/07/92
Class B (29.63) 9.32 8.93 09/15/94
Class C (26.88) -- 5.14 08/04/97
MSCI EAFE Index(1) (14.17) 7.13 9.63(2) 03/31/92(2)
- ------------------------------------------------------------
(1) The Morgan Stanley Capital International Europe, Australia and Far East
Index measures performance of global stock markets in 20 developed
countries.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
87
-----------------------------
AIM INTERNATIONAL EQUITY 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:
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS 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%
- -------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
Management Fees 0.91% 0.91% 0.91%
Distribution and/or
Service (12b-1) Fees 0.30 1.00 1.00
Other Expenses 0.27 0.31 0.31
Total Annual Fund
Operating Expenses 1.48 2.22 2.22
Fee Waiver(2) 0.04 0.04 0.04
Net Expenses 1.44 2.18 2.18
- -----------------------------------------------------------
(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 waive 0.05% on average
net assets in excess of $500 million.
You may also be charged a transaction or other fee by the financial institution
managing your account.
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------
Class A.... $692 $992 $1,314 $2,221
Class B.... 725 994 1,390 2,386
Class C.... 325 694 1,190 2,554
- --------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
Class A $692 $992 $1,314 $2,221
Class B 225 694 1,190 2,368
Class C 225 694 1,190 2,554
- ----------------------------------------------
3
88
-----------------------------
AIM INTERNATIONAL EQUITY FUND
-----------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. 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 130
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 2000, the advisor received compensation
of 0.87% 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 are
- - A. Dale Griffin, III, Senior Portfolio Manager, who has been responsible for
the fund since its inception in 1992 and has been associated with the advisor
and/or its affiliates since 1989.
- - Jason T. Holzer, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was an associate with JMB Realty.
- - Clas G. Olsson, Senior Portfolio Manager, who has been responsible for the
fund since 1997 and has been associated with the advisor and/or its affiliates
since 1994.
- - Barrett K. Sides, Portfolio Manager, who has been responsible for the fund
since 1995 and has been associated with the advisor and/or its affiliates
since 1990.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM International Equity 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, if any, 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.
4
89
-----------------------------
AIM INTERNATIONAL EQUITY 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. The Board of Directors of the fund has selected new
independent auditors for the fund's current fiscal year. For more information
regarding the change in independent auditors, see the Statement of Additional
Information.
CLASS A
------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------
2000(a) 1999 1998(a) 1997(a) 1996(a)
---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 21.73 $ 17.59 $ 16.64 $ 15.37 $ 13.65
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.08 (0.03) 0.05 0.04 0.04
- --------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 0.72 4.49 0.96 1.68 2.07
==========================================================================================================================
Total from investment operations 0.80 4.46 1.01 1.72 2.11
==========================================================================================================================
Less distributions:
Dividends from net investment income -- (0.11) (0.06) (0.02) (0.01)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.93) (0.21) -- (0.43) (0.38)
==========================================================================================================================
Total distributions (0.93) (0.32) (0.06) (0.45) (0.39)
==========================================================================================================================
Net asset value, end of period $ 21.60 $ 21.73 $ 17.59 $ 16.64 $ 15.37
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 3.16% 25.73% 6.11% 11.43% 15.79%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,325,636 $2,058,419 $1,724,635 $1,577,390 $1,108,395
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.44%(c) 1.48% 1.45% 1.47% 1.58%
- --------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.48%(c) 1.52% 1.49% 1.51% 1.60%
==========================================================================================================================
Ratio of net investment income to average net assets 0.30%(c) (0.14)% 0.28% 0.24% 0.25%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 87% 86% 78% 50% 66%
__________________________________________________________________________________________________________________________
==========================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $2,554,953,820.
5
90
-----------------------------
AIM INTERNATIONAL EQUITY FUND
-----------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
CLASS B
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a) 1996(a)
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 21.11 $ 17.13 $ 16.27 $ 15.13 $ 13.54
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.17) (0.09) (0.09) (0.07)
- ----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.74 4.36 0.95 1.66 2.04
======================================================================================================================
Total from investment operations 0.63 4.19 0.86 1.57 1.97
======================================================================================================================
Less distributions from net realized gains (0.93) (0.21) -- (0.43) (0.38)
======================================================================================================================
Net asset value, end of period $ 20.81 $ 21.11 $ 17.13 $ 16.27 $ 15.13
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.42% 24.72% 5.29% 10.61% 14.88%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $997,843 $887,106 $744,987 $678,809 $368,355
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.18%(c) 2.27% 2.22% 2.25% 2.35%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.31% 2.26% 2.28% 2.37%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.44)%(c) (0.93)% (0.49)% (0.53)% (0.53)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 87% 86% 78% 50% 66%
______________________________________________________________________________________________________________________
======================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $1,120,452,259.
6
91
-----------------------------
AIM INTERNATIONAL EQUITY FUND
-----------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
CLASS C
-----------------------------------------------
AUGUST 4,
YEAR ENDED OCTOBER 31, THROUGH
-------------------------------- OCTOBER 31,
2000(a) 1999(a) 1998(a) 1997(a)
-------- -------- -------- -----------
Net asset value, beginning of period $ 21.13 $ 17.14 $ 16.27 $ 17.64
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.17) (0.09) (0.02)
- -------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.73 4.37 0.96 (1.35)
=============================================================================================================
Total from investment operations 0.62 4.20 0.87 (1.37)
=============================================================================================================
Less distributions from net realized gains (0.93) (0.21) -- --
=============================================================================================================
Net asset value, end of period $ 20.82 $ 21.13 $ 17.14 $ 16.27
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 2.37% 24.76% 5.35% 7.77%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $253,998 $118,208 $ 58,579 $ 12,829
_____________________________________________________________________________________________________________
=============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.18%(c) 2.27% 2.22% 2.27%(d)
- -------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.31% 2.26% 2.30%(d)
=============================================================================================================
Ratio of net investment income (loss) to average net assets (0.44)%(c) (0.93)% (0.49)% (0.55)%(d)
_____________________________________________________________________________________________________________
=============================================================================================================
Portfolio turnover rate 87% 86% 78% 50%
_____________________________________________________________________________________________________________
=============================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $219,394,811.
(d) Annualized.
7
92
-------------
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:
CLASS A CLASS B CLASS 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
at the end of the month shares
which is eight years after
the date on which shares
were purchased along with a
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
(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 at the end of the month which is seven years after the date
on which shares were purchased. 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 the end of the month which is
eight years after the date on which you purchased your 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.
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
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
- -------------------------------------------------------------
A-1 MCF--10/00
93
-------------
THE AIM FUNDS
-------------
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
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
- -------------------------------------------------------------
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
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
- -------------------------------------------------------------
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:
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
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--10/00 A-2
94
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Large Cap Opportunities Fund, AIM Mid Cap Opportunities Fund and AIM Small Cap
Opportunities Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------------
A-3 MCF--10/00
95
-------------
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. 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--10/00 A-4
96
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
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--10/00
97
--------------
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 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;
MCF--10/00 A-6
98
--------------
THE AIM FUNDS
--------------
(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--10/00
99
--------------
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 that trade on days when the AIM Funds do not price their
shares, 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 on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. 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
generally taxable to you at different rates depending on the length of time
the fund holds its assets. Different tax rates may 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 THEIR
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--10/00 A-8
100
-----------------------------
AIM INTERNATIONAL EQUITY 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
- ---------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a
request by e-mail or
download prospectuses,
annual or semiannual
reports via our website:
HTTP://WWW.AIMFUNDS.COM
- ---------------------------------------------------------
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
publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM International Equity Fund
SEC 1940 Act file number: 811-6463
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INT-PRO-1 INVEST WITH DISCIPLINE
- --Registered Trademark-- --Registered Trademark--
101
INTERNATIONAL EQUITY DISCUSSION AND ANALYSIS
Reproduced below is a discussion of the performance of International Equity for
the year-ended October 31, 2000, that was prepared by its officers and AIM
Advisors and included in its Annual Report dated October 31, 2000.
APPENDIX III
ANNUAL REPORT / MANAGERS' OVERVIEW
AIM INTERNATIONAL EQUITY FUND WEATHERS GLOBAL TURBULENCE
HOW DID AIM INTERNATIONAL EQUITY FUND PERFORM OVER THE REPORTING PERIOD?
The fund faced a difficult market during the fiscal year ended October 31, 2000.
Class A shares reported a total return of 3.16%, Class B shares 2.42% and Class
C shares 2.37%. These returns are at net asset value, excluding sales charges.
The fund outperformed the MSCI EAFE--Registered Trademark-- Index, which
produced a -2.90% total return over the same time frame.
WHAT WERE THE MAJOR TRENDS IN INTERNATIONAL MARKETS OVER THE REPORTING PERIOD?
Stock markets worldwide entered 2000 with a roar, led by technology, media and
telecommunications (TMT) stocks. This rally lasted until March, when inflation
fears, rising interest rates and high stock prices sparked a worldwide tech
sell-off.
Since spring, volatility has been the watchword. In May and June, global
markets improved amid mounting evidence that the U.S. economy was slowing,
reducing the chance that the U.S. Federal Reserve Board (the Fed) would continue
to raise interest rates. But the market upturn was short-lived. In late summer
and early fall, the markets plunged again as investors worried about rising oil
prices, unrest in the Middle East and lower corporate earnings.
In September and October, a number of corporate heavyweights like Intel and
Du Pont (not fund holdings) reported earnings disappointments, as rising oil
prices and a weak euro crimped profit margins. These earnings dips rattled
markets worldwide.
WHAT HAPPENED IN EUROPE OVER THE FISCAL YEAR?
Europe's common currency, the euro, hit a record low in October. Since its
launch in January 1999 at $1.15, the currency has spent most of its existence
below parity with the U.S. dollar. During the reporting period, European
investors bought dollar-based assets, and U.S. investors tended to keep their
money in U.S. markets.
Near the end of the fiscal year, the European Central Bank increased
interest rates to 4.5%, spurred by rising oil prices, a higher-than-expected
rise in producer prices and employment increases in Germany and France.
WHAT WERE THE MAJOR MARKET DEVELOPMENTS IN ASIA?
The Japanese stock market has mirrored its U.S. counterpart in terms of
volatility following the spring technology sell-off. Japan's economy, the
world's second-largest, threatened to slip back into recession near the end of
the fiscal year. However, there are signs that corporate Japan is beginning to
take a more aggressive stance toward cost-cutting to bolster profits. Outside
Japan, investment in Asia has weakened because of political turmoil in many
countries and interest-rate concerns. Even Hong Kong, one of the best-performing
Asian countries, has showed signs of slowing.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Despite market volatility, we maintained our earnings-driven investment
strategy, focusing on the stocks of industry leaders with accelerating earnings
growth. This strategy led us to invest in TMT stocks. While these stocks were
out of favor with the market for much of the fiscal year, we still believe that
they show the best prospects for growth and capital appreciation. The fund also
held stocks in the health-care and financial industries, among the best-
performing areas of the stock market. In terms of market capitalization, the
fund maintained its emphasis on large-cap stocks.
- --------------------------------------------------------------------------------
READ THIS REPORT ONLINE!
Early in 2001, a new service will be available--electronic delivery of fund
reports and prospectuses. Soon, you can read the same AIM report you are
reading now--online. Once you sign up for the service, we will send you a link
to the report via e-mail. If you choose to receive your reports online, you will
not receive a paper copy by mail. You may cancel the service at any time by
visiting our Web site.
Please visit our Web site at www.aimfunds.com and go to "Your AIM Account."
Log into your account and then click on the "View Other Account Options"
dropdown menu and select "eDelivery."
- --------------------------------------------------------------------------------
-------------------------------------
THE FUND'S COUNTRY ALLOCATION IS DIC-
TATED BY OUR STOCK-SELECTION PROCESS,
WHICH LED US TO INVEST IN STOCKS IN
FRANCE, CANADA AND SWITZERLAND.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM INTERNATIONAL EQUITY FUND
2
102
ANNUAL REPORT / MANAGERS' OVERVIEW
IN WHAT COUNTRIES DID THE FUND HAVE INVESTMENTS?
The fund's country allocation is dictated by our stock-selection process, which
led us to invest in stocks in France, Canada and Switzerland. In fact, Canada
had one of the best-performing stock markets during the fiscal year.
We reduced holdings in Japan, Germany and the United Kingdom because we did
not find many stocks in these countries that produced accelerated earnings
growth. As of October 31, 2000, European holdings made up 61% of the fund, Asian
holdings about 20%, Canadian 8.71% and Latin American 5.1%.
WHAT WERE SOME OF THE FUND'S TOP HOLDINGS AS OF OCTOBER 31, 2000?
The fund's top holdings represent a fairly diversified portfolio:
o Novo Nordisk, based in Denmark, is the world's leading producer of insulin.
Its other health-care products include women's hormone-replacement drugs, human
growth hormones and drugs for hemophilia. The company has subsidiaries and
offices in nearly 70 countries, and nearly half its sales are in Europe.
o RAS (Riunione Adriatica di Sicurta) sells insurance through about 1,500
agencies in Italy. Founded in 1838, RAS consists of a group of about 100
insurance, financial and real estate companies.
o Celestica makes printed circuit assemblies and systems for companies such as
Cisco, IBM and Hewlett-Packard. Its products are used in computer servers,
workstations and communications devices. Based in Canada, Celestica was formerly
IBM's Toronto factory, spun off from Big Blue in 1996.
o BNP Paribas is one of Europe's largest banks, formed in 1999 by the merger
of Banque Nationale de Paris and Paribas. In the United States, it owns regional
bank holding company BancWest.
o TotalFinaElf explores for, produces, refines, markets and trades petroleum.
WHAT'S YOUR OUTLOOK FOR THE NEAR TERM?
We expect global markets to remain volatile for the foreseeable future.
However, we believe that global economic expansion is likely to continue, and
that earnings potential for TMT stocks remains strong.
Despite volatility in Europe, the region's economic and investment future
continues to look bright. Spending on technology and communications continues to
increase. In addition, restructuring, merger activity and tax reform bode well
for European economies.
In Asia, most analysts think that the continuing strength of the U.S.
economy will help boost Asian stock markets. The region benefits not only from
exports but from increasing local consumption--half of the world's population
lives in Asia. While the long-term outlook for Asia is favorable, markets are in
a holding pattern waiting for a catalyst to grow further.
In general, we have a positive outlook for the fund, our growth investment
style and international investing.
================================================================================
PORTFOLIO COMPOSITION
As of 10/31/00, based on total net assets
==================================================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES TOP 10 COUNTRIES
- ----------------------------------------------------------------------------------------------------------------------------------
1. Novo Nordisk AS-Class B (Denmark) 1.98% 1. Communications Equipment 10.13% 1. France 18.94%
2. RAS S.p.A (Italy) 1.93 2. Electronics (Semiconductors) 6.33 2. United Kingdom 14.62
3. Celestica Inc. (Canada) 1.91 3. Health Care (Drugs-Generic & Other) 6.05 3. Japan 11.68
4. BNP Paribas (France) 1.88 4. Banks (Major Regional) 4.91 4. Canada 8.71
5. Total Fina Elf S.A. (France) 1.86 5. Oil (International Integrated) 4.81 5. Switzerland 5.91
6. STMicroelectronics N.V. (Netherlands) 1.84 6. Electronics (Component Distributors) 4.70 6. Denmark 4.28
7. Vodafone AirTouch PLC (U.K.) 1.82 7. Telecommunications (Cellular/Wireless) 4.57 7. Germany 4.19
8. Aventis S.A. (Spain) 1.79 8. Services (Commercial & Consumer) 4.38 8. Netherlands 3.76
9. Nokia Oyj (Finland) 1.78 9. Telephone 3.81 9. Mexico 3.40
10. Alcatel S.A. (France) 1.73 10. Computers (Software & Services) 3.24 10. Hong Kong 3.23
The fund's portfolio composition is subject to change, and there is no assurance
that the fund will continue to hold any particular security.
==================================================================================================================================
[ART WORK]
See important fund and index disclosures inside front cover.
AIM INTERNATIONAL EQUITY FUND
3
103
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM INTERNATIONAL EQUITY FUND VS. BENCHMARK INDEXES
4/7/92-10/31/00
in thousands
=====================================================================================
AIM International
Equity Fund, Class MSCI EAFE--Registered Lipper International
A Shares Trademark-- Index Fund Index
- -------------------------------------------------------------------------------------
4/7/92 9454 10000 10000
10/92 9610 9821.64 9600.06
10/93 13200 13500.6 12869.9
10/94 14644 14863.3 14350.9
10/95 15411 14808.1 14283.9
10/96 17844 16358.7 16087.3
10/97 19884 17116 18237.5
10/98 21099 18766.9 19084.8
10/99 26529 23089.5 23483.4
10/00 27366 22421 24293.7
$27,337 $22,421 $24,294
Source: Lipper, Inc.
Past performance does not guarantee comparable future results.
=====================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
The chart compares your fund's Class A shares to benchmark indexes. It is
important to understand the difference between your fund and an index. An index
measures the performance of a hypothetical portfolio. Your fund's total return,
shown with the applicable sales charge, includes fund expenses and management
fees. A market index such as the EAFE--Registered Trademark-- is not managed,
incurring no sales charges, expenses or fees. An index of funds, such as the
Lipper International Fund Index, includes a number of mutual funds grouped by
investment objective or style. Each of those funds interprets its objective
differently, and each employs a different management approach and investment
strategy. (Please note that the results for these indexes are for the period
3/31/92-10/31/00.) If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return. Use
of these indexes is intended to give you a general idea of how your fund
performed compared to the stock market.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/00, including sales charges
================================================================================
CLASS A SHARES
Inception (4/7/92) 12.46%
5 years 10.91
1 year -2.50*
*3.16% excluding sales charges
CLASS B SHARES
Inception (9/15/94) 10.00%
5 years 11.05
1 year -2.51*
*2.42% excluding CDSC
CLASS C SHARES
Inception (8/4/97) 6.89%
1 year 1.38*
*2.37% excluding CDSC
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and Class C shares will differ from that
of its Class A shares due to differing fees and expenses. For fund performance
calculations and descriptions of the indexes on this page, please see the inside
front cover.
AIM INTERNATIONAL EQUITY FUND
4
104
AIM INTERNATIONAL EQUITY FUND
A PORTFOLIO OF
AIM INTERNATIONAL FUNDS, INC.
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
AIM JAPAN 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
(August 17, 2001 Special Meeting of Shareholders of AIM Growth Series)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement and Prospectus dated
June__, 2001 of AIM International Funds, Inc. (the "Company") for use in
connection with the Special Meeting of Shareholders of AIM Growth Series to be
held on August 17, 2001. 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 March 1,
2001, as supplemented May 4, 2001, 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 June __, 2001.
S-1
105
TABLE OF CONTENTS
THE COMPANY........................................................................S-3
DESCRIPTION OF PERMITTED INVESTMENTS...............................................S-3
DIRECTORS AND OFFICERS OF THE COMPANY..............................................S-3
ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION......S-3
PORTFOLIO TRANSACTIONS.............................................................S-3
DESCRIPTION OF SHARES..............................................................S-3
DETERMINATION OF NET ASSET VALUE...................................................S-3
TAXES..............................................................................S-4
PERFORMANCE DATA...................................................................S-4
FINANCIAL INFORMATION..............................................................S-4
Appendix I - AIM International Funds, Inc. Statement of Additional Information
Appendix II - Audited Financial Statements of AIM Japan Growth Fund
S-2
106
THE COMPANY
This Statement of Additional Information relates to AIM International Funds,
Inc. (the "Company") and its investment portfolio, AIM International Equity Fund
(the "Fund"). The Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
The Fund is a separate series of shares of capital stock of the Company. For
additional information about the Company, see heading "General Information About
the Company" in the Company's Statement of Additional Information attached
hereto as Appendix I.
DESCRIPTION OF PERMITTED INVESTMENTS
For a discussion of the fundamental and nonfundamental investment policies of
the Fund 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 directors and executive officers 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 and Other Services," "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 headings "How to
Purchase and Redeem Shares" and
S-3
107
"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.
FINANCIAL INFORMATION
The audited financial statements of the Fund and the report thereon by
PricewaterhouseCoopers 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 Japan Growth Fund and the report thereon
by PricewaterhouseCoopers LLP, are set forth in the Annual Report of AIM Japan
Growth Fund, dated December 31, 2000, which is incorporated herein by reference
and attached hereto as Appendix II.
S-4
108
APPENDIX I
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.)
Supplement dated May 4, 2001, to the
Statement of Additional Information dated March 1, 2001
For the period May 3, 2001 through July 30, 2001, AG Edwards will receive, for
purchases by their Growth & Income Model portfolio and their Growth Model
portfolio only, full dealer reallowance on Class A Shares, an additional 50
basis points on Class B Shares and an additional 25 basis points on Class C
Shares with respect to AIM INTERNATIONAL EQUITY FUND only.
109
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 MARCH 1, 2001,
RELATING TO THE AIM ASIAN GROWTH FUND PROSPECTUS DATED MARCH 1, 2001,
THE AIM EUROPEAN DEVELOPMENT FUND PROSPECTUS DATED MARCH 1, 2001,
THE AIM GLOBAL AGGRESSIVE GROWTH FUND PROSPECTUS DATED MARCH 1, 2001,
THE AIM GLOBAL GROWTH FUND PROSPECTUS DATED MARCH 1, 2001,
THE AIM GLOBAL INCOME FUND PROSPECTUS DATED MARCH 1, 2001,
AND THE AIM INTERNATIONAL EQUITY FUND PROSPECTUS DATED MARCH 1, 2001
110
TABLE OF CONTENTS
PAGE
INTRODUCTION..................................................................1
GENERAL INFORMATION ABOUT THE COMPANY.........................................1
The Company and its Shares...........................................1
PERFORMANCE...................................................................2
Total Return Calculations............................................4
Yield Quotations.....................................................4
Historical Portfolio Results.........................................5
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................8
General Brokerage Policy.............................................8
Allocation of Portfolio Transactions.................................9
Allocation of IPO Securities Transactions............................9
Section 28(e) Standards.............................................10
Transactions with Regular Brokers...................................11
Brokerage Commissions Paid..........................................11
Portfolio Turnover..................................................12
INVESTMENT STRATEGIES AND RISKS..............................................12
All Funds (except Income Fund)......................................13
Asian Fund..........................................................13
European Fund.......................................................14
Aggressive Growth Fund and Growth Fund..............................16
Income Fund.........................................................17
Equity Fund.........................................................20
Real Estate Investment Trusts ("REITs").............................21
Repurchase Agreements and Reverse Repurchase Agreements.............21
Lending of Portfolio Securities.....................................22
Interfund Loans.....................................................22
Securities Issued on a When-Issued or Delayed Delivery Basis........22
Short Sales.........................................................23
Margin Transactions.................................................23
Illiquid Securities.................................................23
Rule 144A Securities................................................23
Foreign Securities..................................................24
Foreign Exchange Transactions.......................................27
Equity-Linked Derivatives...........................................27
Investment in Other Investment Companies............................28
Temporary Defensive Investments.....................................28
OPTIONS, FUTURES AND CURRENCY STRATEGIES.....................................28
Introduction........................................................28
General Risks of Options, Futures and Currency Strategies...........28
Cover...............................................................29
Writing Call Options................................................30
Writing Put Options.................................................30
Purchasing Put Options..............................................30
Purchasing Call Options.............................................31
Over-The-Counter Options............................................31
i
111
Index Options.......................................................32
Limitations on Options..............................................32
Interest Rate, Currency and Stock Index Futures Contracts...........32
Options on Futures Contracts........................................33
Forward Contracts...................................................33
Limitations on Use of Futures, Options on Futures and Certain
Options on Currencies.........................................34
INVESTMENT RESTRICTIONS......................................................34
Fundamental Restrictions............................................34
Non-Fundamental Restrictions........................................35
MANAGEMENT...................................................................36
Directors and Officers..............................................36
Remuneration of Directors...........................................40
AIM Funds Retirement Plan for Eligible Directors/Trustees...........41
Deferred Compensation Agreements....................................42
Investment Advisory and Other Services..............................43
THE DISTRIBUTION PLANS.......................................................47
The Class A and C Plan..............................................47
The Class B Plan....................................................48
Both Plans..........................................................48
THE DISTRIBUTOR..............................................................52
SALES CHARGES AND DEALER CONCESSIONS.........................................54
REDUCTIONS IN INITIAL SALES CHARGES..........................................57
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS..................................60
HOW TO PURCHASE AND REDEEM SHARES............................................62
Backup Withholding..................................................63
NET ASSET VALUE DETERMINATION................................................65
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.....................................66
Reinvestment of Dividends and Distributions.........................66
Tax Matters.........................................................66
Qualification as a Regulated Investment Company.....................66
Fund Distributions..................................................67
Investment in Foreign Financial Instruments.........................68
Hedging Transactions................................................68
PFIC Investments....................................................69
Redemption or Exchange of Shares....................................70
Foreign Income Taxes................................................70
Backup Withholding..................................................71
Reinstatement Privilege.............................................71
Foreign Shareholders................................................71
Miscellaneous Considerations; Effect of Future Legislation..........72
SHAREHOLDER INFORMATION......................................................72
ii
112
MISCELLANEOUS INFORMATION.....................................................75
Changes for Certain Account Information..............................75
Audit Reports........................................................75
Legal Matters........................................................75
Custodian and Transfer Agent.........................................75
Principal Holders of Securities......................................75
Other Information....................................................79
APPENDIX A...................................................................A-1
APPENDIX B...................................................................B-1
APPENDIX C...................................................................C-1
FINANCIAL STATEMENTS..........................................................FS
iii
113
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 March 1,
2001, the AIM European Development Fund Prospectus dated March 1, 2001, the AIM
Global Aggressive Growth Fund Prospectus dated March 1, 2001, the AIM Global
Growth Fund Prospectus dated March 1, 2001, the AIM Global Income Fund
Prospectus dated March 1, 2001, and the AIM International Equity Fund Prospectus
dated March 1, 2001 (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.
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.
The assets received by the Company from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Company's books of account, and are to be
charged with the expenses with respect to such Fund and its respective classes.
Any general expenses of the Company not readily identifiable as belonging to a
particular Fund are allocated by or under the direction of the Board of
Directors, primarily on the basis of relative net assets, or other relevant
factors.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are
1
114
declared by the Board of Directors. Each such class represents interests in the
same portfolio of investments but, as further described in the Prospectuses,
each such class is subject to differing sales charges and expenses, which
differences will result in differing net asset values and dividends and
distributions. Upon any liquidation of the Company, shareholders of each class
are entitled to share pro rata in the net assets belonging to the applicable
Fund allocable to such class available for distribution after satisfaction of
outstanding liabilities of the Fund allocable to 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 (although Class B shareholders as well as Class A
shareholders of a given Fund must approve any material increase in fees payable
with respect to the Class A shares of such Fund under the Class A and C 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 net assets of the Fund allocable to such
class remaining after satisfaction of outstanding liabilities of the Fund
allocable to such class.
Class B shares automatically convert to Class A shares at the end of
the month which is eight years after the date of purchase. A pro rata portion of
shares from reinvested dividends and distributions convert at the same time. No
other shares have conversion rights. Because Class B shares convert into Class A
shares, the holders of Class B shares (as well as the holders of Class A shares)
of each Fund must approve any material increase in fees payable with respect to
that Fund under the Class A and C Plan or a new class of shares into which the
Class B shares will convert must be created which will be identical in all
material respects to the Class A shares prior to the material increase in fees.
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. 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
2
115
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 has a small asset base, such as Asian Fund and European Fund. There is no
guarantee that as the Funds' assets grow, they will continue to experience
substantially similar performance by investing in IPOs.
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:
Advertising Age Forbes New York Times
Barron's Fortune Pension World
Best's Review Hartford Courant Pensions & Investment
Broker World Inc. Personal Investor
Business Week Institutional Investor Philadelphia Inquirer
Changing Times Insurance Forum USA Today
Christian Science Monitor Insurance Week U.S. News & World Report
Consumer Reports Investor's Daily Wall Street Journal
Economist Journal of the American Washington Post
FACS of the Week Society of CLU & ChFC CNN
Financial Planning Kiplinger Letter CNBC
Financial Product News Money PBS
Financial Services Week Mutual Fund Forecaster
Financial World Nation's Business
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
3
116
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper, Inc.
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 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:
4
117
YIELD = 2[((a-b)/(c x d) + 1)(6)-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, 2000 were as follows:
With Without
Waivers Waivers
------- -------
Class A........................... 6.80% 6.10%
Class B........................... 6.64% 5.90%
Class C........................... 6.64% 5.90%
HISTORICAL PORTFOLIO RESULTS
Total returns for each of the Funds, with respect to its Class A
shares, for the one-year and five-year (if applicable) periods ended October 31,
2000 and since inception (which include the maximum sales charge and
reinvestment of all dividends and distributions), were as follows:
Average Annual Total Return Cumulative Total Return
--------------------------- -----------------------
Periods ended October 31, 2000 Periods ended October 31, 2000
------------------------------ ------------------------------
One Five Since One Five Since
Class A Shares: Year Years Inception Year Years Inception
- --------------- -------- ----- --------- -------- ------- ----------
Aggressive Growth Fund 18.39% 14.78% 16.93%** 18.39% 99.24% 160.72%**
Asian Fund (6.14)% N/A 0.55%*** (6.14)% N/A 1.66%***
European Fund 35.79% N/A 30.80%*** 35.79% N/A 123.27%***
Equity Fund (2.50)% 10.91% 12.46%* (2.50)% 67.86% 173.37%*
Growth Fund 6.18% 16.74% 17.39%** 6.18% 116.79% 167.07%**
Income Fund (6.02)% 2.84% 5.00%** (6.02)% 15.04% 34.81%**
* 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 Funds, with respect to its Class B
shares, for the one-year and five-year (if applicable) periods ended October 31,
2000 and since inception (which include the contingent deferred sales charge
applicable to the period and reinvestment of all dividends and distributions)
were as follows:
5
118
Average Annual Total Return Cumulative Total Return
--------------------------- -----------------------
Periods ended October 31, 2000 Periods ended October 31, 2000
------------------------------ ------------------------------
One Five Since One Five Since
Class B Shares: Year Years Inception Year Years Inception
- --------------- -------- ----- --------- -------- ------- ---------
Aggressive Growth Fund 18.56% 15.02% 17.23%* 18.56% 101.35% 164.76%*
Asian Fund (6.34)% N/A 0.71%** (6.34)% N/A 2.13%**
European Fund 37.72% N/A 31.75%** 37.72% N/A 128.20%**
Equity Fund (2.51)% 11.05% 10.00%* (2.51)% 68.90% 79.27%*
Growth Fund 5.90% 17.02% 17.70%* 5.90% 119.40% 171.45%*
Income Fund (6.52)% 3.03% 5.29%* (6.52)% 16.07% 37.13%*
* 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 Funds, with respect to its Class C shares
for the one-year period ended October 31, 2000 and since inception (which
include the maximum contingent deferred sales charge and reinvestment of all
dividends and distributions) were as follows:
Average Annual Total Return Cumulative Total Return
--------------------------- -----------------------
Periods ended October 31, 2000 Periods ended October 31, 2000
------------------------------ ------------------------------
One Since One Since
Class C Shares: Year Inception Year Inception
- --------------- -------- --------- -------- ---------
Aggressive Growth Fund 22.61% 11.79%* 22.61% 43.51%*
Asian Fund (2.30)% 1.65%** (2.30)% 5.03%**
European Fund 41.75% 32.37%** 41.75% 131.40%**
Equity Fund 1.38% 6.89%* 1.38% 24.10%*
Growth Fund 9.90% 14.12%* 9.90% 53.41%*
Income Fund (2.75)% 0.59%* (2.75)% 1.94%*
* 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, 2000, 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 $1,184, $939, $1,358, $975, $1,062 and $940,
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, 2000, and the five-year period ended
October 31, 2000, 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 $1,992,
$1,017, $2,233, $1,679, $2,168 and $1,150, respectively, assuming the maximum
sales charge was paid and all distributions were reinvested.
6
119
During the one-year period ended October 31, 2000, 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 $1,186, $937, $1,377, $975, $1,059 and $935,
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, 2000, and the
five-year period ended October 31, 2000, 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 $2,013, $1,021, $2,282, $1,689, $2,194 and $1,161, respectively, assuming
the maximum contingent deferred sales charge was paid and all distributions were
reinvested.
During the one-year period ended October 31, 2000, 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 $1,226, $977, $1,418, $1,014, $1,099 and $972,
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, 2000, and for the
period August 4, 1997 (inception date for Aggressive Growth Fund, Equity Fund,
Growth Fund and Income Fund) through October 31, 2000, 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 $1,435, $1,050, $2,314, $1,241, $1,534, and $1,019,
respectively, assuming the maximum contingent deferred sales charge was paid and
all distributions were reinvested.
Each Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper, 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:
Standard & Poor's 400 Midcap Index Dow Jones Industrial Average
Standard & Poor's Composite Index Lipper European Funds Index
of 500 Stocks Lipper International Funds Index
Consumer Price Index Morgan Stanley Capital International Indices,
Bond Buyer Index including:
NASDAQ EAFE Index
COFI AC Asia Free Ex-Japan
First Boston High Yield Index Europe Index
The Financial Times - Actuaries World Indices World Index
(a wide range of comprehensive measures AC World Index
of stock price performance for the world's Lehman World Government Bond Fund
major stock markets and regional areas) Salomon Bros World Gov't Bond Index
Russell 2000 Stock Index
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
7
120
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 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 an AIM Fund, 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 and may invest in
affiliated money market funds, 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.
8
121
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 numerous 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.
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 other accounts managed
by AIM 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
9
122
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 and accounts 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 Allocation, 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 an AIM Fund and/or account with substantially identical investment
objectives and policies participates 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 participates, 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 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.
10
123
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, 2000, International Equity Fund had common stock
holdings in OM Gruppen A.B. having a market value of $2,038,377. As of October
31, 2000, European Development Fund had common stock holdings in OM Gruppen A.B.
having a market value of $451,980. As of October 31, 2000, Aggressive Growth
Fund had common stock holdings of OM Gruppen A.B. having a market value of
$2,179,509. OM Gruppen A.B. is a regular broker/dealer of the Company, as
defined in Rule 10b-1.
As of October 31, 2000, Global Growth Fund had common stock holdings in
Morgan Stanley Dean Witter & Co. having a market value of $25,499,219. Morgan
Stanley Dean Witter & Co. is a regular broker/dealer of the Company, as defined
in Rule 10b-1.
As of October 31, 2000, Global Growth Fund had common stock holdings in
Goldman Sachs Group, Inc. having a market value of $7,985,000. Goldman Sachs
Group, Inc. is a regular broker/dealer of the Company, as defined in Rule 10b-1.
As of October 31, 2000, Global Income Fund had investments in Lehman
Brothers Holdings Inc. having a market value of $2,741,450. Lehman Brothers
Holdings Inc. is a regular broker/dealer of the Company, as defined in Rule
10b-1.
As of October 31, 2000, Global Income Fund had investments in Merrill
Lynch & Co. having a market value of $910,380. Merrill Lynch & Co. is a regular
broker/dealer of the Company, as defined in Rule 10b-1.
As of October 31, 2000, International Equity Fund had common stock
holdings of BNP Paribas having a market value of $67,102,925. As of October 31,
2000, European Fund had common stock holdings of BNP Paribas having a market
value of $7,734,189. As of October 31, 2000, Global Growth Fund had common
stock holdings of BNP Paribas having a market value of $20,521,036. BNP Paribas
is a regular broker/dealer of the Company, as defined in Rule 10b-1.
As of October 31, 2000, International Equity Fund had common stock
holdings of Societe Generale having a market value of $41,845,782. As of
October 31, 2000, European Fund had common stock holdings of Societe Generale
having a market value of $3,661,967. 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, 2000, 1999 and 1998, Aggressive
Growth Fund paid brokerage commissions of $4,389,277, $4,648,141 and $5,519,840,
respectively. For the fiscal year ended October 31, 2000, 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 $127,480,187 and the related brokerage commissions were
$123,730.
For the fiscal years ended October 31, 2000, 1999 and 1998, Equity Fund
paid brokerage commissions of $12,585,724, $9,975,166 and $8,743,049,
respectively. For the fiscal year ended October
11
124
31, 2000, 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 $91,153,894 and the related
brokerage commissions were $165,313.
For the fiscal years ended October 31, 2000, 1999 and 1998, Growth Fund
paid brokerage commissions of $3,310,002, $1,919,718 and $1,482,482,
respectively. For the fiscal year ended October 31, 2000, 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 $77,411,443 and the related brokerage commissions were $90,140.
For the fiscal years ended October 31, 2000, 1999 and 1998, Income Fund
paid brokerage commissions of $0, $813 and $2,638, respectively.
For the fiscal year ended October 31, 2000, 1999, and the period
November 3, 1997 to October 31, 1998, European Fund paid brokerage commissions
of $2,421,258, $915,158 and $563,626, respectively. For the fiscal year ended
October 31, 2000, 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 $36,902,441 and
the related brokerage commissions were $72,252.
For the fiscal year ended October 31, 2000, 1999, and the period
November 3, 1997 to October 31, 1998, Asian Fund paid brokerage commissions of
$399,380, $327,148 and $75,694, respectively. For the fiscal year ended October
31, 2000, 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 $35,346 and the related
brokerage commissions were $125.
PORTFOLIO TURNOVER
Any particular security will be sold, and the proceeds reinvested,
whenever such action is deemed prudent from the viewpoint of a Fund's investment
objective(s), regardless of the holding period of that security. Each Fund's
historical portfolio turnover rates are included in the Financial Highlights
tables of the Fund's prospectus. A high 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 a Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase. See "Tax Matters."
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's non-fundamental investment
objective(s) is set forth in the Prospectuses under the heading "Investment
Objective and Strategies." There can be no assurance that any Fund will achieve
its objective. The principal features of each Fund's investment program and the
principal risks associated with that investment program are discussed in the
Prospectuses under the heading "Investment Objective and Strategies" and
"Principal Risks of Investing in the Fund."
Set forth in this section is a description of each Fund's investment
policies, strategies and practices. The investment objective(s) of each Fund are
non-fundamental policies and may be changed by the Board of Directors without
shareholder approval. Each Fund's investment policies, strategies and practices
are also non-fundamental. The Board of Directors of the Company reserves the
right to change any of these non-fundamental investment policies, strategies or
practices without shareholder approval. However, shareholders will be notified
before any material change in the investment policies becomes effective. Each
Fund has adopted certain investment restrictions, some of which are fundamental
and cannot be changed without shareholder approval. See "Investment
Restrictions" in this Statement of Additional Information. Individuals
considering the purchase of shares of any Fund should recognize that there are
risks in the
12
125
ownership of any security. Any percentage limitations with respect to assets of
a Fund will be applied at the time of purchase.
Any percentage limitations with respect to assets of a Fund will be
applied at the time of purchase. A later change in percentage resulting from
changes in asset values will not be considered a violation of the percentage
limitations. The percentage limitations applicable to borrowings, reverse
repurchase agreements and dollar roll transactions will be applied in accordance
with applicable provisions of the 1940 Act and the rules and regulations
promulgated thereunder which specifically limit each Fund's borrowing abilities.
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 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 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
13
126
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, see "Investment
Strategies and Risks - Foreign Securities-Emerging Markets."
A description of other investment strategies Asian Fund may pursue
follows after the section entitled "Investment Strategies and Risks - Equity
Fund."
The Asian Fund considers issuers of securities located in the following
countries to be Asian issuers:
Bangladesh Indonesia Philippines Thailand
China Korea Singapore Vietnam
Hong Kong Malaysia Sri Lanka
India Pakistan Taiwan
In addition to Asian issuers, Asian Fund may invest up to 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:
Australia New Zealand
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 requirement by
investing up to 20% of its total assets in securities exchangeable for or
convertible into equity securities of
14
127
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 "Investment Strategies and Risks - Equity
Fund."
European Fund considers issuers of securities located in the following
countries to be European issuers:
Austria Germany Netherlands Slovenia
Belgium Greece Norway Spain
Croatia Hungary Poland Sweden
Czech Republic Ireland Portugal Switzerland
Denmark Italy Romania Turkey
Finland Liechtenstein Russia Ukraine
France Luxembourg Slovakia United Kingdom
In addition to European issuers, European Fund may invest up to 20% of
its total assets in securities of non-European issuers. The following is a list
of some of the non-European countries in which European Fund may invest from
time to time:
Bermuda Israel South Africa United States
Egypt
The above lists may include foreign countries that have not yet been
approved by the Company's 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 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
15
128
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.
Aggressive Growth 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 Aggressive Growth 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. Aggressive Growth
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 of small to medium-sized
companies may involve greater risk than is associated with investing in
16
129
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 Aggressive Growth Fund to buy and sell shares
without an unfavorable impact on prevailing market prices. Some of the companies
in which Aggressive Growth 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 Aggressive Growth
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.
Growth 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 of Growth Fund and
Aggressive Growth 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). Growth Fund and Aggressive Growth Fund 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
17
130
securities, commonly known as "junk bonds" and (iv) U.S. Government securities,
including U.S. Government Agency mortgage-backed securities.
Income Fund will 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
18
131
the Fund's expenses can be spread and possibly reducing the Fund's rate of
return. Prices 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 "Investment Strategies and Risks - 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. Dollar roll transactions are considered to be borrowings under
the 1940 Act.
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
19
132
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.
NON-DIVERSIFIED PORTFOLIO. Income Fund is a non-diversified portfolio,
which means that it may invest a greater proportion of its assets in the
securities of a smaller number of issuers and therefore may be subject to
greater market and credit risk than a more broadly diversified portfolio. The
Fund is subject to the issuer diversification requirements of the Internal
Revenue Code of 1986, as amended, that are applicable to regulated investment
companies. To qualify as a regulated investment company, the Fund must diversify
its holdings so that, at the end of each fiscal quarter: (i) at least 50% of the
market value of the Fund's assets is represented by cash and cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities, with such other securities limited, with respect to any one
issuer, to an amount not greater than 5% of the Fund's total assets and not more
than 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the Fund's total assets is invested in the securities (other than
U.S. Government securities or securities of other regulated investment
companies) of any one issuer, or of two or more issuers which the Fund controls
and which are determined to be engaged in the same, similar or related trades or
businesses.
EQUITY FUND
The investment objective of the Equity Fund is to provide long-term
growth of capital. 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 foreign securities
exchange or traded in a foreign over-the-counter-market. 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 foreign securities exchange or traded in a foreign over-the-counter
market. The Equity Fund may satisfy the foregoing requirements 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.
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,
20
133
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.
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
21
134
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 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. Each of the Funds may enter into reverse repurchase
agreements in amounts not exceeding 33-1/3% of the value of its total assets.
Reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund in lieu of liquidation may decline below the
repurchase price of the securities sold by the Fund which it is obligated to
repurchase. This risk, if encountered, could cause a reduction in the net asset
value of the Fund's shares. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at any
time and would be continuously secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash, letters of credit, or debt securities issued or guaranteed by the U.S.
Government or any of its agencies. The Funds would continue to receive the
income on loaned securities and would, at the same time, earn interest on the
loan collateral or on the investment of the loan collateral if it were cash. Any
cash collateral pursuant to these loans would be invested in short-term money
market instruments or affiliated money market funds. Where voting or consent
rights with respect to loaned securities pass to the borrower, the Funds will
follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit the exercise of such voting or consent rights if the
matters involved are expected to have a material effect on the Funds' investment
in the loaned securities. Lending securities entails a risk of loss to the Funds
if and to the extent that the market value of the securities loaned were to
increase and the lender did not increase the collateral accordingly.
INTERFUND LOANS
Each Fund may lend up to 33 1/3% of its total assets to another AIM
Fund, on such terms and conditions as the SEC may require in an exemptive order.
An application for exemptive relief has been filed with the SEC on behalf of the
Funds and others. Each Fund may also borrow from another AIM Fund to satisfy
redemption requests or to cover unanticipated cash shortfalls due to a delay in
the delivery of cash to the Fund's custodian or improper delivery instructions
by a broker effectuating a transaction.
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
22
135
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.
MARGIN TRANSACTIONS
None of the Funds will purchase any security on margin, except that
each Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities. The payment by a Fund
of initial or variation margin in connection with futures or related options
transactions will not be considered the purchase of a security on margin.
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
23
136
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 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.
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.
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
24
137
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 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
25
138
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 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
26
139
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.
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.
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
27
140
("QQQs"), Dow Jones Industrial Average Instruments ("DIAMONDS") and Optimised
Portfolios as Listed Securities ("OPALS"). Investments in equity-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 investments 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 advisor (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of the investing Fund.
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. While
28
141
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.
29
142
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.
30
143
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
31
144
assurance that the Fund will in fact be able to close out an 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
32
145
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.
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
33
146
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,
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
FUNDAMENTAL 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 (1). Fundamental
restrictions may be changed only by a vote of the lesser of (i) 67% of more of
the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares.
(1) 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
34
147
securities of other investment companies to the extent permitted by the 1940 Act
Laws, Interpretations and Exemptions. (This restriction does not apply to Income
Fund.)
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) 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 1933 Act.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
(8) 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 each of 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 each of the Funds has this flexibility, the
Board of Directors has adopted non-fundamental restrictions for each of the
Funds relating to certain of these restrictions which the advisor must follow in
managing the Funds. Any changes to these non-fundamental restrictions, which are
set forth below, require the approval of the Board of Directors.
NON-FUNDAMENTAL RESTRICTIONS
The following non-fundamental investment restrictions apply to each of
the Funds, except that Income Fund is not subject to restriction (1). They may
be changed for any Fund without approval of that Fund's voting securities. Any
investment restriction that involves a maximum or minimum percentage of
securities or assets (other than with respect to borrowing) shall not be
considered to be violated unless an excess over or a deficiency under the
percentage occurs immediately after, and is caused by, an acquisition or
disposition of securities or utilization of assets by the Fund.
35
148
(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 or an affiliate of AIM as an investment advisor (an "AIM Advised
Fund"), subject to the terms and conditions of any exemptive orders issued by
the SEC. (This restriction does not apply to Income Fund.)
(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 an AIM Advised 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 Advised 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 restrictions 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.
MANAGEMENT
The overall management of the business and affairs of the Funds and the
Company is vested in the Company's Board of Directors. The Board of Directors
approves all significant agreements between the Company on behalf of one or more
of the Funds, and persons or companies furnishing services to a Fund. The
day-to-day operations of each Fund are delegated to its officers of the Company
and to AIM, subject always to the objectives, restrictions and policies of the
applicable 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 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.
36
149
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- ----------------------------------------- ---------------------- ---------------------------------------------------
*ROBERT H. GRAHAM(54) Director, Director, President and Chief Executive Officer,
Chairman and A I M Management Group Inc.; Director and
President 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 and Vice Chairman, AMVESCAP PLC.
BRUCE L. CROCKETT(56) 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(76) Director Formerly, Director, Cortland Trust, Inc.
Six Blythewood Road (investment company), CF & I Steel Corp.,
Baltimore, MD 21210 Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the
Board of Equitable Bancorporation.
ALBERT R. DOWDEN(59) Director Chairman of the Board of Directors, Cortland
1815 Central Park Drive Trust, Inc. (investment company) and DHJ Media,
P.O. Box 774000-PMB #222 Inc.; and Director, Magellan Insurance Company.
Steamboat Springs, CO 80477 Formerly, Director, President and Chief Executive
Officer, Volvo Group North America, Inc.; Senior Vice
President, AB Volvo; and Director, The Hertz
Corporation, Genmar Corporation (boat manufacturer),
National Media Corporation and Annuity and Life Re
(Holdings), Ltd.
- ---------------
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
37
150
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- ----------------------------------------- ---------------------- ---------------------------------------------------
EDWARD K. DUNN, JR.(65) Director Formerly, Chairman of the Board of Directors,
2 Hopkins Plaza, 8th Floor, Mercantile Mortgage Corp.; Vice Chairman of the
Suite 805 Board of Directors, President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile - Safe Deposit & Trust Co.;
and President, Mercantile Bankshares.
JACK M. FIELDS(49) Director Chief Executive Officer, Twenty First Century
434 New Jersey Avenue, S.E. Group, Inc. (a governmental affairs company).
Washington, D.C. 20003 Formerly, Member of the U.S. House of
Representatives.
**CARL FRISCHLING(64) Director Partner, Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue (law firm).
New York, NY 10022
PREMA MATHAI-DAVIS(50) Director Member, Visiting Committee, Harvard University
370 East 76th Street Graduate School of Education, New School University.
New York, NY 10021 Formerly, Chief Executive Officer, YWCA of the USA;
Commissioner, New York City Department of the Aging;
LEWIS F. PENNOCK(58) Director and Commissioner, New York City Metropolitan
6363 Woodway, Suite 825 Transportation Authority.
Houston, TX 77057
LOUIS S. SKLAR(61) 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(53) 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.
- ----------
** A director who is an "interested person" of the Company as defined in the
1940 Act.
38
151
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- ----------------------------------------- ---------------------- ---------------------------------------------------
CAROL F. RELIHAN(46) 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(42) Vice President and Vice President and Fund Controller, A I M
Treasurer Advisors, Inc.; and Assistant Vice President and
Assistant Treasurer, Fund Management Company.
ROBERT G. ALLEY(52) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
MELVILLE B. COX(57) 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(60) Vice President Vice President, A I M Capital Management, Inc.
- ----------------------------------------- ---------------------- ---------------------------------------------------
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, Dowden,
Dunn (Chairman), Fields, Frischling, Pennock and 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. 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
39
152
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. Crockett, Daly,
Dowden, Dunn, Fields, Frischling, Pennock and 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, Dowden, Dunn, Fields, Pennock and 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 trustees of
some or all of the investment companies managed or advised by AIM. All of the
Company's executive officers 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 connection with
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 or her 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 or she serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued
for each director of the Company:
40
153
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED COMPENSATION
COMPENSATION BY ALL APPLICABLE FROM ALL APPLICABLE
DIRECTOR FROM COMPANY(1) AIM FUNDS(2) AIM FUNDS(3)
- ------------------- --------------- ----------------- -------------------
Charles T. Bauer(4) $ 0 $ 0 $ 0
Bruce L. Crockett 7,875 60,951 111,500
Owen Daly II 7,875 97,195 111,500
Albert R. Dowden(5) 0 0 13,435
Edward K. Dunn, Jr 7,875 22,138 111,500
Jack Fields 7,731 23,019 108,500
Carl Frischling(6) 7,875 107,507 111,500
Robert H. Graham 0 0 0
Prema Mathai-Davis 7,723 22,606 111,500
Lewis F. Pennock 7,875 67,995 111,500
Louis S. Sklar 7,685 87,538 111,000
(1) The total amount of compensation deferred by all directors of the
Company during the fiscal year ended October 31, 2000, including
earnings was $59,831.
(2) During the fiscal year ended October 31, 2000, the total amount of
expenses allocated to the Company in respect of such retirement
benefits was $30,382. Data reflect compensation earned for the calendar
year ended December 31, 2000.
(3) Each director serves as director or trustee of at least 12 registered
investment companies advised by AIM. Data reflects total compensation
earned during the calendar year ended December 31, 2000.
(4) Mr. Bauer was a director and officer until September 30, 2000, when he
retired.
(5) Mr. Dowden was elected to serve as a Director on December 14, 2000.
(6) The Company paid the law firm of Kramer Levin Naftalis & Frankel LLP
$35,567 in legal fees for services provided to the Funds during the
fiscal year ended October 31, 2000. Mr. Frischling, a director of the
Company, is a partner in such firm.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not 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 the
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
41
154
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 or her 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 director's 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, Dowden, Dunn, Fields, Frischling, Pennock,
and Sklar and Dr. Mathai-Davis are 13, 13, 0, 2, 3, 23, 19, 11 and 2 years,
respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
Number of Years of
Service with the
Applicable AIM Estimated Annual Benefits Upon
Funds Retirement
- ------------------ -------------------------------
10 $75,000
9 $67,500
8 $60,000
7 $52,500
6 $45,000
5 $37,500
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(the "Deferring Directors") have each executed a Deferred Compensation Agreement
(collectively, the "Compensation Agreements"). Pursuant to the Compensation
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, generally in equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Compensation 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 Compensation 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.
42
155
INVESTMENT ADVISORY AND OTHER SERVICES
AIM serves as the investment advisor to each Fund pursuant to a Master
Investment Advisory Agreement dated June 21, 2000 (the "Investment Advisory
Agreement"). AIM was organized in 1976, and together with its subsidiaries,
advises or manages approximately 130 investment portfolios encompassing a broad
range of investment objectives. AIM is a direct wholly owned subsidiary of AIM
Management, a holding company that has been engaged in the financial services
business since 1976. The address of AIM is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, England. 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 to (a) pre-clear all personal
securities transactions subject to the Code of Ethics; (b) file reports
regarding such transactions; (c) 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 (subject to a
de minimis exception), and (iii) transactions involving securities being
considered for investment by an AIM Fund (subject to the de minimis exception);
and (d) abide by certain other provisions of the Code of Ethics. The de minimis
exception under the Code of Ethics covers situations where there is no material
conflict of interest because of the large market capitalization of a security
and the relatively small number of shares involved in a personal transaction.
The Code of Ethics also generally prohibits AIM employees from purchasing
securities in initial public offerings. Personal trading reports are
periodically reviewed by AIM, and the Board of Directors reviews quarterly and
annual reports (which summarize any significant violations of the Code of
Ethics). Sanctions for violating the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
The Company, on behalf of the Funds, has entered into the Investment
Advisory Agreement and a Master Administrative Services Agreement dated June 21,
2000 ("Administrative Services Agreement"), with AIM. A prior investment
advisory agreement with substantially similar terms to the Investment Advisory
Agreement and a prior administrative services agreement with substantially
similar terms to the Administrative Services Agreement, were in effect prior to
June 21, 2000.
Under the terms of the Investment Advisory Agreement, AIM supervises
aspects of the Funds' operations and provides investment advisory services to
the Funds.
The Investment Advisory Agreement provides that each Fund will pay or
cause to be paid all expenses of the Fund not assumed by AIM, 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 each Fund in connection with
membership in investment company organizations; and the cost of printing copies
of prospectuses and statements of additional information distributed to each
Fund's shareholders.
The Investment Advisory Agreement will continue in effect from year to
year only if such continuance is specifically approved at least annually (i) (a)
by the Company's Board of Directors or (b) by the vote of a majority of the
outstanding voting securities of each Fund and (ii) by the affirmative vote of a
majority of the directors who are not parties to the Investment Advisory
Agreement or "interested persons" of any such party (the "Non-Interested
Directors") by votes cast in person at a meeting called for such purpose. Each
Fund or AIM may terminate the Investment Advisory Agreement with respect to that
Fund on sixty (60) days' written
43
156
notice without penalty. The Investment Advisory Agreement automatically
terminates 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
Net Assets Annual Rate
---------- -----------
First $500 million.................................................. 0.95%
Over $500 million................................................... 0.90%
AIM GLOBAL AGGRESSIVE GROWTH FUND
Net Assets Annual Rate
---------- -----------
First $1 billion.................................................... 0.90%
Over $1 billion..................................................... 0.85%
AIM GLOBAL GROWTH FUND
Net Assets Annual Rate
---------- -----------
First $1 billion.................................................... 0.85%
Over $1 billion..................................................... 0.80%
AIM GLOBAL INCOME FUND
Net Assets Annual Rate
---------- -----------
First $1 billion.................................................... 0.70%
Over $1 billion..................................................... 0.65%
AIM INTERNATIONAL EQUITY FUND
Net Assets Annual Rate
---------- -----------
First $1 billion.................................................... 0.95%
Over $1 billion..................................................... 0.90%
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 contractually agreed to waive advisory fees under the
Investment Advisory Agreement in order to achieve the following annual fee
structure for Equity Fund: 0.95% of the first $500 million of Equity Fund's
average daily net assets; 0.90% of the next $500 million of Equity Fund's
average daily net assets; and 0.85% of Equity Fund's average daily net assets
exceeding $1 billion. AIM has also voluntarily agreed,
44
157
when net assets of a Fund exceed $5 billion, to waive advisory fees for such
Fund of 0.025% for each $5 billion increment in net assets, up to a maximum
waiver of 0.175% on assets in excess of $35 billion.
With respect to Aggressive Growth Fund, Equity Fund, Growth Fund and
Income Fund for the fiscal years ended October 31, 2000, 1999 and 1998, and with
respect to Asian Fund and European Fund for the fiscal year ended October 31,
2000, 1999 and the period November 3, 1997 (inception date) through October 31,
1998, AIM received advisory fees, net of advisory fee waivers, from each Fund
pursuant to the prior investment advisory agreement then in effect as follows:
2000 1999 1998
----------- ----------- -----------
Aggressive Growth Fund $22,245,857 $15,416,368 $20,126,609
Asian Fund $ 893,672 $ 39,283 $ 11,388
Equity Fund $33,855,808 $24,083,233 $21,628,803
European Fund $ 4,248,118 $ 1,607,698 $ 410,537
Growth Fund $11,306,836 $ 5,898,665 $ 4,042,472
Income Fund $ 286,749 $ 280,344 $ 152,633
Under a former Master Sub-Advisory Agreement terminated effective June
21, 2000, between AIM and INVESCO Global Asset Management Limited ("IGAM") with
respect to Asian Fund and European Fund, IGAM was 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:
Net Assets Annual Rate
---------- -----------
First $500 million.................................................. 0.20%
Over $500 million................................................... 0.175%
Under former Sub-Sub-Advisory Agreements terminated effective June 21,
2000, between (i) IGAM and INVESCO Asian Limited ("IAL"), with respect to Asian
Fund, and (ii) IGAM and INVESCO Asset Management Limited ("IAML"), with respect
to European Fund, were each entitled to receive from IGAM an annual fee equal to
100% of the fee received by IGAM with respect to the applicable Fund.
With respect to Aggressive Growth Fund, Equity Fund, Growth Fund and
Income Fund for the fiscal years ended October 31, 2000, 1999 and 1998, and with
respect to Asian Fund and European Fund for the fiscal year ended October 31,
2000, 1999 and the period November 3, 1997 (inception date) through October 31,
1998, AIM waived advisory fees for each Fund as follows:
2000 1999 1998
---------- ---------- ----------
Aggressive Growth Fund $ 0 $ -0- $ -0-
Asian Fund $ 92,285 $ 207,130 $ 51,040
Equity Fund $1,697,400 $1,122,543 $ 978,165
European Fund $ 0 $ -0- $ 114,120
Growth Fund $ 125,000 $ -0- $ -0-
Income Fund $ 531,491 $ 423,180 $ 365,730
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.
45
158
For the fiscal year ended October 31, 2000, AIM waived advisory fees
for Asian Fund, Equity Fund, Growth Fund and Income Fund which represented
0.09%, 0.04%, 0.01% and 0.45% of such Fund's average daily net assets.
In addition, if a Fund engages in securities lending, AIM will provide
the Fund investment advisory services and related administrative services. The
Master Investment Advisory Agreement describes the administrative services to be
rendered by AIM if a Fund engages in securities lending activities, as well as
the compensation AIM may receive for such administrative services. Services to
be provided include: (a) overseeing participation in the securities lending
program to ensure compliance with all applicable regulatory and investment
guidelines; (b) assisting the securities lending agent or principal (the agent)
in determining which specific securities are available for loan; (c) monitoring
the agent to ensure that securities loans are effected in accordance with AIM's
instructions and with procedures adopted by the Board; (d) preparing appropriate
periodic reports for, and seeking appropriate approvals from, the Board with
respect to securities lending activities; (e) responding to agent inquiries; and
(f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities. AIM currently intends to waive such fees,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
For the fiscal year ended October 31, 2000, each Fund paid AIM for
administrative services in the following amounts pursuant to the prior
administrative services agreement then in effect, stated as a percentage of the
Fund's average daily net assets:
Payments
--------
Aggressive Growth Fund......................... 0.01%
Asian Fund..................................... 0.05%
Equity Fund.................................... 0.01%
European Fund.................................. 0.02%
Growth Fund.................................... 0.01%
Income Fund.................................... 0.04%
Under the terms of the Administrative Services Agreement, AIM is
entitled to receive from each Fund reimbursement of its costs or such reasonable
compensation as may be approved by the Board of Directors. Currently, AIM is
paid for the services of the Funds' principal financial officer and her staff,
and any expenses related to fund accounting services.
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. For such services, AIM is entitled to
receive from each Fund payment for 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 (i)(a) by the
Company's Board of Directors or (b) by the vote of a majority of the outstanding
voting securities of each Fund and (ii) by the affirmative vote of the
Non-Interested Directors, by votes cast in person at a meeting called for such
purpose.
With respect to Aggressive Growth Fund, Equity Fund, Growth Fund and
Income Fund for the fiscal years ended October 31, 2000, 1999 and 1998, and with
respect to Asian Fund and European Fund for the fiscal year ended October 31,
2000, 1999 and the period November 3, 1997 (inception date) through
46
159
October 31, 1998, AIM received payment of administrative service costs from each
Fund pursuant to the prior administrative services agreement then in effect as
follows:
2000 1999 1998
-------- -------- --------
Aggressive Growth Fund $182,264 $127,117 $116,964
Asian Fund $ 50,000 $ 74,007 $ 74,604
Equity Fund $222,616 $150,312 $115,146
European Fund $109,571 $ 75,332 $ 69,060
Growth Fund $145,994 $ 97,142 $ 80,267
Income Fund $ 50,000 $ 66,799 $ 81,456
In addition, the Transfer Agency and Service Agreement for the Funds
provides that A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"), 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 receive a per account fee plus out-of-pocket expenses to
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. Such plan
provides that the Class C shares pay compensation to AIM Distributors at an
annual rate of 1.00% per annum of the average daily net assets attributable to
Class C shares for the purpose of financing any activity which is primarily
intended to result in the sale of 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. Activities appropriate
for financing under the Class A and C Plan include, but are not limited to, the
following: printing of prospectuses and statements of additional information and
reports for other than existing shareholders; overhead; preparation and
distribution of advertising material and sales literature; expenses of
organizing and conducting sales seminars; supplemental payments to dealers and
other institutions such as asset-based sales charges or as payments of service
fees under shareholder service arrangements; and costs of administering the
Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions including AIM Distributors, acting
as principal, for providing 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
47
160
characterized as a service fee, and payments to dealers and other financial
institutions including AIM Distributors, acting as principal, in excess of such
amount 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 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.
48
161
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 Funds 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 Funds, in
making dealer incentive and shareholder servicing payments to dealers and other
financial institutions under the Plans. These payments are an obligation of the
Fund and not of AIM Distributors.
For the fiscal year ended October 31, 2000, the Funds paid the
following amounts under the Class A and C Plan and the Class B Plan adopted by
the Company:
% of Class
Average Daily
Net Assets
-------------------------------
Class A Class B Class C Class A Class B Class C
----------- ----------- ----------- -------- ------- -------
Aggressive Growth Fund $ 6,067,804 $13,029,893 $ 417,860 0.50% 1.00% 1.00%
Asian Fund $ 230,776 $ 307,199 $ 71,664 0.35% 1.00% 1.00%
Equity Fund $ 7,664,862 $11,204,523 $ 2,193,948 0.30% 1.00% 1.00%
European Fund $ 868,732 $ 1,566,725 $ 422,886 0.35% 1.00% 1.00%
Growth Fund $ 3,100,225 $ 6,788,675 $ 675,670 0.50% 1.00% 1.00%
Income Fund $ 356,923 $ 437,547 $ 17,521 0.50% 1.00% 1.00%
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, 2000 follows:
49
162
ASIAN EUROPEAN AGGRESSIVE GROWTH INCOME EQUITY
FUND FUND GROWTH FUND FUND FUND FUND
---------- ---------- ----------- ---------- ---------- ----------
CLASS A
Advertising ...................... $ 22,855 $ 64,643 $ 47,235 $ 37,108 $ 2,475 $ 382,816
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) .................... $ 2,260 $ 7,012 $ 5,077 $ 4,143 $ 259 $ 41,393
Seminars ......................... $ 5,287 $ 18,088 $ 12,921 $ 10,422 $ 719 $ 105,219
Compensation to Underwriters to
partially offset other marketing
costs ............................ $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Compensation to Dealers .......... $ 200,374 $ 778,989 $6,002,571 $3,048,552 $ 353,470 $7,135,433
(includes Finder's Fees)
Compensation to Sales Personnel .. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Report Total .............. $ 230,776 $ 868,732 $6,067,804 $3,100,225 $ 356,923 $7,664,861
An estimate by category of actual fees paid by the Funds under the
Class B Plan during the year ended October 31, 2000 as follows:
ASIAN EUROPEAN AGGRESSIVE GROWTH INCOME EQUITY
FUND FUND GROWTH FUND FUND FUND FUND
----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Advertising ...................... $ 11,433 $ 47,624 $ 106,840 $ 115,661 $ 9,784 $ 167,577
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) .................... $ 1,270 $ 5,851 $ 12,136 $ 12,834 $ 776 $ 18,311
Seminars ......................... $ 4,234 $ 16,777 $ 33,313 $ 32,907 $ 646 $ 47,570
Compensation to Underwriters to
partially offset other marketing
costs ............................ $ 230,399 $ 1,175,044 $ 9,772,420 $ 5,091,506 $ 328,160 $ 8,403,392
Compensation to Dealers .......... $ 59,863 $ 321,429 $ 3,105,184 $ 1,535,767 $ 98,181 $ 2,567,673
Compensation to Sales Personnel .. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Report Total .............. $ 307,199 $ 1,566,725 $13,029,893 $ 6,788,675 $ 437,547 $11,204,523
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, 2000 as follows:
50
163
ASIAN EUROPEAN AGGRESSIVE GROWTH INCOME EQUITY
FUND FUND GROWTH FUND FUND FUND FUND
---------- ---------- ----------- ---------- ---------- ----------
CLASS C
Advertising ...................... $ 4,322 $ 30,130 $ 20,428 $ 33,558 $ 1,420 $ 115,147
Printing and mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) .................... $ 427 $ 3,129 $ 2,514 $ 3,319 $ 0 $ 13,051
Seminars ......................... $ 0 $ 6,803 $ 6,982 $ 11,734 $ 0 $ 35,728
Compensation to Underwriters to
partially offset other marketing
costs ............................ $ 34,921 $ 202,008 $ 163,638 $ 247,706 $ 4,262 $ 799,373
Compensation to Dealers .......... $ 31,994 $ 180,816 $ 224,298 $ 379,353 $ 11,839 $1,230,649
Compensation to Sales Personnel .. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Report Total .............. $ 71,664 $ 422,886 $ 417,860 $ 675,670 $ 17,521 $2,193,948
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
51
164
Funds unless the Class B shares, voting separately, approve such amendment. If
the Class B shareholders do not approve such amendment, the Board of Directors
will (i) create a new class of shares of the Funds which is identical in all
material respects to the Class A shares as they existed prior to the
implementation of the amendment and (ii) ensure that the existing Class B shares
of the Funds will be exchanged or converted into such new class of shares no
later than the date the Class B shares were scheduled to convert into Class A
shares.
The principal differences between the Class A and C Plan, on the one
hand, and the Class B Plan, on the other hand, are: (i) the Class A and C Plan
allows payment to AIM Distributors or to dealers or financial institutions of up
to 0.50% of average daily net assets of the Class A shares of Aggressive Growth
Fund, Income Fund, and Growth Fund, of up to 0.35% of average daily net assets
of the Class A shares of Asian Fund and European Fund, and of up to 0.30% of
average daily net assets of the Class A shares of Equity Fund, as compared to
1.00% of such assets of each Fund's Class B shares; (ii) the Class B Plan
obligates the Class B shares to continue to make payments to AIM Distributors
following termination of the Class B shares Distribution Agreement with respect
to Class B shares sold by or attributable to the distribution efforts of AIM
Distributors unless there has been a complete termination of the Class B Plan
(as defined in such Plan) and (iii) the Class B Plan expressly authorizes AIM
Distributors to assign, transfer or pledge its rights to payments pursuant to
the Class B Plan.
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 February 3, 2000. 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 February 3, 2000. 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.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Funds' shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of the
Funds at the time of such sales. Payments with respect to Class B shares will
equal 4.0% of the purchase price of the Class B shares sold by the dealer or
institution,
52
165
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, 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
Sales Amount Sales Amount Sales Amount
Charges Retained Charges Retained Charges Retained
---------- ---------- ---------- ---------- ---------- ----------
Aggressive Growth Fund $3,762,517 $ 667,333 $1,335,400 $ 267,534 $3,546,968 $ 622,054
Asian Fund* $ 403,908 $ 64,327 $ 251,652 $ 43,007 $ 180,148 $ 27,913
Equity Fund $5,026,625 $ 735,919 $2,227,910 $ 446,482 $3,608,107 $ 592,247
European Fund* $2,672,361 $ 432,931 $ 870,792 $ 143,067 $1,357,500 $ 207,603
Growth Fund $3,448,542 $ 619,969 $1,035,250 $ 195,571 $1,200,898 $ 208,115
Income Fund $ 141,875 $ 26,727 $ 159,748 $ 28,250 $ 285,983 $ 50,768
- ----------
* Asian Fund and European Fund commenced operations November 3, 1997.
53
166
The following chart reflects the contingent deferred sales charges paid
by Class A, Class B and Class C shareholders and retained by AIM Distributors
for the fiscal years ended October 31, 2000, 1999 and 1998 for Class A,
Class B and Class C shares:
2000 1999 1998
-------- -------- --------
Aggressive Growth Fund $ 72,714 $101,594 $200,802
Asian Fund* $ 10,620 $240,319 $ 496
Equity Fund $263,758 $157,129 $208,603
European Fund* $117,258 $ 50,219 $ 7,299
Growth Fund $ 44,181 $ 24,812 $ 29,133
Income Fund $ 6,061 $ 3,743 $ 9,510
* 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 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 Emerging Growth Fund, AIM Euroland Growth Fund, AIM European
Development Fund, AIM European Small Company Fund, AIM Global Utilities Fund,
AIM International Emerging Growth 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 Technology Fund, AIM Select Growth Fund,
AIM Small Cap Equity Fund, AIM Small Cap Growth Fund, AIM Small Cap
Opportunities Fund, AIM Value Fund, AIM Value II Fund, AIM Weingarten Fund and
AIM Worldwide Spectrum Fund.
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
--------------------- ------------- ---------- ----------
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
* 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 shares of each of AIM Advisor Real
Estate Fund, AIM Balanced Fund, AIM Developing Markets Fund, AIM Global
54
167
Aggressive Growth Fund, AIM Global Consumer Products and Services Fund, AIM
Global Financial Services 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.
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
----------------------- -------------- ----------- ----------
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
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.
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
----------------------- ------------- ---------- ----------
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
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, or instead of, amounts paid to dealers as a sales
commission, 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. 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 or of average daily
net assets of the AIM Fund attributable to that particular dealer. At the option
of the dealer,
55
168
such incentives may take the form of payment for travel expenses, including
lodging, incurred in connection with trips taken by qualifying registered
representatives and their families to places within or outside the United
States. 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 of AIM
56
169
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.
57
170
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)
58
171
at the time of the proposed purchase. Rights of Accumulation are also available
to holders of the Connecticut General Guaranteed Account, established for
tax-qualified group annuities, for contracts purchased on or before June 30,
1992. To determine whether or not a reduced initial sales charge applies to a
proposed purchase, AIM Distributors takes into account not only the money which
is invested upon such proposed purchase, but also the value of all shares of the
AIM Funds (except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM
Cash Reserve Shares of AIM Money Market Fund, (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 Charter
59
172
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;
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;
o Qualified State Tuition Programs created and maintained in
accordance with Section 529 of the U.S. Internal Revenue Code
of 1986, as amended; or
o Participants in select brokerage programs for defined
contribution plans and rollover IRAs who purchase shares
through an electronic brokerage platform offered by entities
with which AIM Distributors has entered into a written
agreement.
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
60
173
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 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 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
61
174
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;
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
62
175
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." You may also be charged a transaction or other fee by the
financial institution managing your account.
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.
63
176
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:
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.
64
177
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.
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 trading on 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 of 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 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 NYSE. Occasionally, events affecting the
values of such securities and such exchange rates may
65
178
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 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
66
179
options. It has been suggested that the issuer in each case may be the foreign
central bank or foreign government backing the particular currency.
Consequently, a Fund may find it necessary to seek a ruling from the Internal
Revenue Service on this issue or to curtail its trading in forward foreign
currency exchange contracts in order to stay within the limits of the Asset
Diversification Test.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and
such distributions will be taxable as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions will be
eligible for the dividends received deduction in the case of corporate
shareholders.
FUND DISTRIBUTIONS
Under the Code, each Fund is exempt from U.S. federal income tax on its
net investment income and realized capital gains which it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (net investment income, 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.
Legislation enacted in 1997 lowers the maximum capital gain tax rate
from 20% to 18% with respect to certain assets (including readily tradable
stock) which are held for five years and for which the holding period begins
after December 31, 2000. In connection with this new legislation, a Fund may
make an election to treat any readily tradable stock it holds on January 1, 2001
as being sold on January 2, 2001 at its closing market price on that date and
reacquired on that date for the same amount. If a Fund makes this election, it
will recognize any gain, but not loss, on the deemed sale, which may cause a
Fund to increase the amount of distributions that the Fund would make for its
taxable year that includes January 2, 2001. The Funds have not yet determined
whether they will make this election with respect to any shares in their
respective portfolios.
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
67
180
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 gain. Additionally, if Code
Section 988 losses exceed other investment company taxable income during a
taxable year, the Fund would not be able to pay any ordinary income dividends,
and any such dividends paid before the losses were realized, but in the same
taxable year, would be recharacterized as a return of capital to shareholders,
thereby reducing the tax basis of Fund shares.
HEDGING TRANSACTIONS
Some of the forward foreign currency exchange contracts, options and
futures contracts that the Funds may enter into will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts that are held at
year end 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
68
181
gains or losses from the affected straddle positions will be determined under
rules that vary according to the election(s) made. The rules applicable under
certain of the elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of any of the foregoing rules governing Section
1256 contracts, constructive sales, straddle and conversion transactions may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected investment or straddle
positions, the amount which must be distributed to shareholders and which will
be taxed to shareholders as ordinary income or long-term capital gain may be
increased or decreased as compared to a fund that did not engage in such
transactions.
PFIC INVESTMENTS
Each Fund may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign company is classified as a PFIC if at least one-half of its
assets constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
Each Fund may 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. Alternatively,
each Fund may 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. Any loss
in excess of previously recognized income will be treated as a short term loss.
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.
69
182
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 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,
70
183
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 Fund or who, to the Fund'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, if the initial sales charge
is not 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.
71
184
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in any of
the Funds.
MISCELLANEOUS CONSIDERATIONS; EFFECT OF FUTURE LEGISLATION
The foregoing general discussion of federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on March 1,
2001. 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."
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. The Company will issue share certificates upon
written request to AFS. Otherwise, shares are held on the shareholder's behalf
and recorded on the Fund's books. The Company 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.
72
185
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 the close of the customary trading
session of the NYSE. 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. 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.
73
186
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.
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
74
187
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. Due to an investment in another AIM Fund,
which KPMG LLP represented to the AIM Fund was inadvertent, and new SEC rules
regarding auditor independence, KPMG LLP resigned as independent public
accountants for the Company. The Board of Directors of the Company has selected
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110 as
the independent public accountants to audit the financial statements of the
Funds.
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 5, 2001, and the amount of outstanding
shares held by such holders, are set forth below:
75
188
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ -------------
AIM International
Equity Fund -
Class A shares Merrill Lynch, Pierce, 36.13%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 31.71%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 51.13%** -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
AIM Global Aggressive
Growth Fund -
Class A shares Merrill Lynch, Pierce 10.78% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
- ----------
* 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.
76
189
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ -------------
Class B shares Merrill Lynch, Pierce, 21.02% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch, Pierce, 27.44% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
AIM Global Growth
Fund -
Class A shares Merrill Lynch, Pierce, 8.11% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
Class B shares Merrill Lynch, Pierce, 11.97% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
- ----------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
77
190
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ ------------
Class C shares Merrill Lynch, Pierce 28.19% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
AIM Global Income Fund -
Class A shares Charles Schwab Co. Inc. 12.06% -0-
Reinvestment Account
101 Montgomery St.
San Francisco, CA 94104
Class C shares First Clearing Corporation 6.06% -0-
J. Stuart Johnson IRA
3000 Pennsylvania Avenue West
Warren, PA 16365
AIM European
Development Fund -
Class A shares Merrill Lynch, Pierce, 7.16% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
Charles Schwab Co. Inc. 5.36% -0-
Reinvestment Account
101 Montgomery St.
San Francisco, CA 94104
Class B shares Merrill Lynch Pierce 9.59% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
- ----------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
78
191
Percent Percent Owned
Name and Address Owned of of Record and
Fund of Record Owner Record Only* Beneficially
- ---- --------------- ------------ -------------
Class C shares Merrill Lynch, Pierce, 21.69% -0-
Fenner & Smith
FBO The Sole Benefit
of Customers
Fund Administration
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246
AIM Asian Growth Fund -
Class B shares Merrill Lynch, Pierce, 5.72% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
Class C shares Merrill Lynch Pierce 12.21% -0-
Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
As of February 5, 2001, the directors and officers of the Company as a
group owned less than 1% of the outstanding shares of each class of the Funds.
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.
79
192
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
193
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
194
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
195
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
196
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
197
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
198
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.
B-5
199
C
Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D
Bonds are in default on interest and/or principal payments. Such bonds
are extremely speculative and should be valued on the basis of their ultimate
recovery value in liquidation or reorganization of the obligor. 'DDD' represents
the highest potential for recovery on these bonds, and 'D' represents the lowest
potential for recovery.
PLUS (+) MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the 'AAA', 'DDD', 'DD', or 'D' categories.
B-6
200
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, an 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 OR "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.
C-1
201
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 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
C-2
202
maturity of the mortgages in the pool. Foreclosures impose little risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely,
it is not possible to accurately predict the average life 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
203
FINANCIAL STATEMENTS
FS
204
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, 2000, 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 periods in the two-year period 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 auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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 periods
in the two-year period then ended and the period November
3, 1997 (date operations commenced) through October 31,
1998, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
December 6, 2000
Houston, Texas
FS-1
205
SCHEDULE OF INVESTMENTS
October 31, 2000
MARKET
SHARES VALUE
STOCKS & OTHER EQUITY
INTERESTS-88.22%
AUSTRALIA-11.25%
Brambles Industries Ltd. (Air
Freight) 102,500 $ 2,657,553
- ---------------------------------------------------------------
BRL Hardy Ltd. (Beverages-Alcoholic) 502,000 1,969,803
- ---------------------------------------------------------------
Computershare Ltd.
(Computers-Software & Services) 850,800 3,682,452
- ---------------------------------------------------------------
CSL Ltd. (Health Care-Drugs-Generic
& Other) 75,000 1,334,155
- ---------------------------------------------------------------
ERG Ltd. (Electrical Equipment) 825,000 4,041,186
- ---------------------------------------------------------------
Foster's Brewing Group Ltd.
(Beverages-Alcoholic) 934,000 2,115,687
===============================================================
15,800,836
===============================================================
CAYMAN ISLANDS-1.02%
ASAT Holdings Ltd.-ADR
(Electronics-Semiconductor)(a) 217,000 1,437,625
===============================================================
CHINA-0.96%
AsiaInfo Holdings, Inc.
(Computers-Software & Services)(a) 111,200 1,348,300
===============================================================
HONG KONG-34.13%
Asia Satellite Telecommunications
Holdings Ltd.
(Telecommunications-Cellular/Wireless) 860,000 1,742,275
- ---------------------------------------------------------------
China Mobile Ltd.
(Telecommunications-Cellular/
Wireless)(a) 544,000 3,487,627
- ---------------------------------------------------------------
Dah Sing Financial Group
(Banks-Regional) 1,017,600 4,371,022
- ---------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banks-Regional) 707,500 3,574,240
- ---------------------------------------------------------------
Denway Motors Ltd. (Auto Parts &
Equipment)(a) 11,450,000 1,849,853
- ---------------------------------------------------------------
Esprit Holdings Ltd.
(Retail-Specialty Apparel) 4,028,000 3,460,392
- ---------------------------------------------------------------
Giordano International Ltd.
(Retail-Specialty Apparel) 7,207,000 4,227,725
- ---------------------------------------------------------------
HKR International Ltd. (Land
Development) 1,372,600 571,990
- ---------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail-Food
Chains) 360,800 4,487,447
- ---------------------------------------------------------------
Johnson Electric Holdings Ltd.
(Electrical Equipment) 1,558,000 3,136,376
- ---------------------------------------------------------------
Legend Holdings Ltd.
(Computers-Hardware) 4,254,000 3,600,000
- ---------------------------------------------------------------
Li & Fung Ltd. (Distributors-Food &
Health) 2,752,000 5,116,553
- ---------------------------------------------------------------
Shangri-La Asia Ltd.
(Lodging-Hotels) 2,856,000 2,819,746
- ---------------------------------------------------------------
SINA.com (Computers-Software &
Services)(a) 154,000 1,073,188
- ---------------------------------------------------------------
Sunevision Holdings Ltd.
(Computers-Software & Services)(a) 851,787 415,026
- ---------------------------------------------------------------
Television Broadcasts Ltd.
(Broadcasting-Television, Radio &
Cable) 311,000 1,702,744
- ---------------------------------------------------------------
Wing Hang Bank Ltd. (Banks-Major
Regional) 746,500 2,278,074
===============================================================
47,914,278
===============================================================
MARKET
SHARES VALUE
INDIA-4.28%
Infosys Technologies Ltd.
(Computers-Software & Services)(b) 15,100 $ 2,319,991
- ---------------------------------------------------------------
ITC Ltd. (Tobacco) 90,000 1,468,670
- ---------------------------------------------------------------
ITC Ltd.-GDR (Tobacco) 19,600 355,740
- ---------------------------------------------------------------
Satyam Computer Services Ltd.
(Computers-Software & Services) 284,000 1,870,823
===============================================================
6,015,224
===============================================================
INDONESIA-1.18%
Gulf Indonesia Resources Ltd.
(Oil-International Integrated)(a) 152,700 1,660,613
===============================================================
NEW ZEALAND-0.80%
Sky Network Television Ltd.
(Broadcasting-Television, Radio &
Cable)(a) 855,000 1,051,188
- ---------------------------------------------------------------
Sky Network Television Ltd.-ADR
(Broadcasting-Television, Radio &
Cable)(a) 5,400 66,434
===============================================================
1,117,622
===============================================================
PHILIPPINES-1.54%
Bank of the Philippine Islands
(Banks-Major Regional) 1,146,388 1,164,127
- ---------------------------------------------------------------
SM Prime Holdings, Inc. (Land
Development) 12,824,900 992,255
===============================================================
2,156,382
===============================================================
SINGAPORE-13.74%
Chartered Semiconductor
Manufacturing Ltd.-ADR
(Electronics-Semiconductors)(a) 43,000 1,999,500
- ---------------------------------------------------------------
Datacraft Asia Ltd. (Communications
Equipment) 488,384 3,345,430
- ---------------------------------------------------------------
DBS Group Holdings Ltd. (Banks-Money
Center) 376,137 4,433,204
- ---------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 854,000 1,701,873
- ---------------------------------------------------------------
Keppel Land Ltd. (Land Development) 2,006,000 2,992,496
- ---------------------------------------------------------------
NatSteel Broadway Ltd.
(Electronics-Component
Distributors) 928,000 1,077,902
- ---------------------------------------------------------------
Singapore Airlines Ltd. (Airlines) 253,000 2,535,330
- ---------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing-Newspapers) 84,000 1,200,478
===============================================================
19,286,213
===============================================================
SOUTH KOREA-5.04%
Hyundai Motor Co. Ltd. (Automobiles) 122,000 1,394,286
- ---------------------------------------------------------------
Korea Telecom Corp. (Telephone)(a) 12,620 743,332
- ---------------------------------------------------------------
Korea Telecom Corp.-ADR (Telephone) 70,284 2,591,723
- ---------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 72,100 1,140,081
- ---------------------------------------------------------------
Samsung Electronics N.V.
(Electronics-Component
Distributors) 9,614 1,204,391
===============================================================
7,073,813
===============================================================
FS-2
206
MARKET
SHARES VALUE
TAIWAN-11.49%
Advantech Co., Ltd.
(Computers-Hardware) 448,500 $ 1,678,840
- ---------------------------------------------------------------
Ambit Microsystems Corp.
(Electronics-Component
Distributors) 342,600 1,589,791
- ---------------------------------------------------------------
Compal Electronics Inc.
(Computers-Hardware) 1,501,115 2,289,404
- ---------------------------------------------------------------
Far Eastern Textile Ltd.
(Textiles-Apparel) 185,051 152,277
- ---------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.
(Electronics-Component
Distributors) 585,000 3,058,469
- ---------------------------------------------------------------
Macronix International Co., Ltd.
(Electronics-Component
Distributors)(a) 1,181,540 1,681,387
- ---------------------------------------------------------------
Taiwan Semiconductor Manufacturing
Co. Ltd.
(Electronics-Semiconductors)(a) 983,760 2,982,474
- ---------------------------------------------------------------
United Microelectronics Corp. Ltd.
(Electronics-Component
Distributors)(a) 1,000,400 1,764,046
- ---------------------------------------------------------------
VIA Technologies Inc.
(Electronics-Semiconductors)(a) 130,000 933,024
===============================================================
16,129,712
===============================================================
THAILAND-1.66%
Advanced Info Service Public Co.
Ltd. (Telephone)(a) 284,000 2,336,015
===============================================================
MARKET
SHARES VALUE
UNITED STATES OF AMERICA-1.13%
UTStarcom, Inc. (Communications
Equipment)(a) 79,400 $ 1,588,000
===============================================================
Total Stocks & Other Equity
Interests (Cost $134,055,048) 123,864,633
===============================================================
PRINCIPAL
AMOUNT
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES-0.77%
COMPUTERS (HARDWARE)-0.77%
Compal Electronics Inc. (Taiwan),
Conv. Unsec. Bonds, 0.00%,
10/19/05 (Acquired 10/12/00; Cost
$1,000,000)(c)(d) $1,000,000 1,077,500
===============================================================
SHARES
MONEY MARKET FUNDS-7.06%
STIC Liquid Assets Portfolio(e) 4,959,611 4,959,611
- -------------------------------------------------------------
STIC Prime Portfolio(e) 4,959,610 4,959,610
=============================================================
Total Money Market Funds (Cost
$9,919,221) 9,919,221
=============================================================
TOTAL INVESTMENTS-96.05% (Cost
$144,974,269) 134,861,354
=============================================================
OTHER ASSETS LESS LIABILITIES-3.95% 5,543,188
=============================================================
NET ASSETS-100.00% $140,404,542
_____________________________________________________________
=============================================================
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
GDR - Global Depositary Receipt
Ltd. - Limited
Unsec. - Unsecured
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the
Board of Directors.
(c) 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 market value at 10/31/00 represented 0.77% of the
Fund's net assets.
(d) Zero coupon bond issued at a discount. The interest rate represents the
coupon rate at which the bond will accrue at a specified future date.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-3
207
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments, at market value (cost
$144,974,269) $134,861,354
- ------------------------------------------------------------
Foreign currencies, at value (cost $440,069) 433,251
- ------------------------------------------------------------
Receivables for:
Investments sold 348,460
- ------------------------------------------------------------
Capital stock sold 5,888,884
- ------------------------------------------------------------
Dividends 104,999
- ------------------------------------------------------------
Investment for deferred compensation plan 13,351
============================================================
Total assets $141,650,299
============================================================
LIABILITIES:
Payables for:
Capital stock reacquired 975,349
- ------------------------------------------------------------
Deferred compensation plan 13,351
- ------------------------------------------------------------
Accrued advisory fees 19,655
- ------------------------------------------------------------
Accrued administrative services fees 4,235
- ------------------------------------------------------------
Accrued distribution fees 62,740
- ------------------------------------------------------------
Accrued directors' fees 395
- ------------------------------------------------------------
Accrued transfer agent fees 66,447
- ------------------------------------------------------------
Accrued operating expenses 103,585
============================================================
Total liabilities 1,245,757
============================================================
Net assets applicable to shares outstanding $140,404,542
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 93,755,440
____________________________________________________________
============================================================
Class B $ 39,851,704
____________________________________________________________
============================================================
Class C $ 6,797,398
____________________________________________________________
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 8,765,621
____________________________________________________________
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 3,796,542
____________________________________________________________
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 647,845
____________________________________________________________
============================================================
Class A:
Net asset value and redemption price per
share $ 10.70
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $10.70 divided by
94.50%) $ 11.32
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 10.50
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 10.49
____________________________________________________________
============================================================
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$187,425) $ 961,627
- ------------------------------------------------------------
Dividends from affiliated money market funds 423,834
- ------------------------------------------------------------
Interest 12,271
- ------------------------------------------------------------
Security lending income 7,105
============================================================
Total investment income 1,404,837
============================================================
EXPENSES:
Advisory fees 985,957
- ------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------
Custodian fees 189,767
- ------------------------------------------------------------
Distribution fees -- Class A 230,776
- ------------------------------------------------------------
Distribution fees -- Class B 307,199
- ------------------------------------------------------------
Distribution fees -- Class C 71,664
- ------------------------------------------------------------
Transfer agent fees -- Class A 260,996
- ------------------------------------------------------------
Transfer agent fees -- Class B 134,172
- ------------------------------------------------------------
Transfer agent fees -- Class C 31,300
- ------------------------------------------------------------
Directors' fees 6,620
- ------------------------------------------------------------
Other 136,314
============================================================
Total expenses 2,404,765
============================================================
Less: Fees waived (126,985)
- ------------------------------------------------------------
Expenses paid indirectly (1,867)
============================================================
Net expenses 2,275,913
============================================================
Net investment income (loss) (871,076)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 1,135,311
- ------------------------------------------------------------
Foreign currencies (254,607)
============================================================
880,704
============================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (29,166,419)
- ------------------------------------------------------------
Foreign currencies (9,626)
============================================================
(29,176,045)
============================================================
Net gain (loss) on investment securities and
foreign currencies (28,295,341)
============================================================
Net increase (decrease) in net assets
resulting from operations $(29,166,417)
____________________________________________________________
============================================================
See Notes to Financial Statements.
FS-4
208
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
2000 1999
------------ -----------
OPERATIONS:
Net investment income (loss) $ (871,076) $ (202,477)
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 880,704 926,182
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (29,176,045) 6,896,839
=========================================================================================
Net increase (decrease) in net assets resulting from
operations (29,166,417) 7,620,544
=========================================================================================
Distributions to shareholders from net investment income:
Class A -- (43,024)
- -----------------------------------------------------------------------------------------
Class B -- (3,910)
- -----------------------------------------------------------------------------------------
Class C -- (898)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 87,843,677 12,107,278
- -----------------------------------------------------------------------------------------
Class B 36,793,037 7,604,535
- -----------------------------------------------------------------------------------------
Class C 2,437,146 3,780,454
=========================================================================================
Net increase in net assets 97,907,443 31,064,979
=========================================================================================
NET ASSETS:
Beginning of year 42,497,099 11,432,120
=========================================================================================
End of year $140,404,542 $42,497,099
_________________________________________________________________________________________
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $205,259,013 $36,066,914
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (27,256) (7,889)
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (54,706,288) (747,438)
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (10,120,927) 7,185,512
=========================================================================================
$140,404,542 $42,497,099
_________________________________________________________________________________________
=========================================================================================
See Notes to Financial Statements.
FS-5
209
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 accounting
principles generally accepted in the United States of America 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 -- Securities, including restricted
securities, are valued according to the following policy. A security listed
or traded on an exchange (except convertible bonds) is valued at its last
sales price as of the close of the customary trading session 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 as of the close of the customary trading session 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 option contracts generally will be valued 15 minutes after
the close of the customary trading session 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 customary
trading session 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 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 on the accrual basis from
settlement date. Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$851,709, undistributed net realized gains decreased by $54,839,554 and paid
in capital increased by $53,987,845 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications. Net assets of the Fund were unaffected by the
reclassification discussed above.
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 from
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 $54,943,768 as of October 31,
2000 which may be carried forward to offset future taxable gains, if any,
which expires, if not previously utilized, in the year 2005.
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
FS-6
210
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 the 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 and certain transfer agency
expenses directly attributable to a class of shares are charged to those
classes' 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. AIM has contractually agreed
to waive fees and reimburse expenses (excluding interest, taxes, dividend
expense on short sales, extraordinary items and increases in expenses due to
offset arrangements, if any) for Class A, Class B and Class C shares to the
extent necessary to limit total operating expenses of Class A shares to 1.92%
(e.g. if AIM waives 0.10% of Class A expenses, AIM will also waive 0.10% of
Class B and Class C expenses). During the year ended October 31, 2000, AIM
waived fees of $92,285.
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. For the year ended October 31, 2000, AIM was
paid $50,000 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 October 31, 2000, AFS was
paid $249,956 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 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. During the year ended October 31,
2000, the Class A, Class B and Class C shares paid AIM Distributors $196,076,
$307,199 and $71,664, respectively, as compensation under the Plans and AIM
Distributors waived fees of $34,700.
AIM Distributors received commissions of $64,327 from sales of the Class A
shares of the Fund during the year ended October 31, 2000. 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, 2000,
AIM Distributors received $10,620 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, 2000, the Fund paid legal fees of $4,062 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
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $1,503 and reductions in custodian
fees of $364 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $1,867.
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 Citibank, N.A. 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,
2000, the Fund did not borrow under the line of credit agreement. The
FS-7
211
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.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities.
At October 31, 2000, there were no securities on loan to brokers. For the year
ended October 31, 2000, the Fund received fees of $7,105 for securities lending.
NOTE 7-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, 2000 was
$70,839,981 and $59,912,761, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 2000 is as follows:
Aggregate unrealized appreciation of
investment securities $ 13,529,198
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (23,851,018)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $(10,321,820)
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $145,183,174.
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years October 31, 2000 and 1999
were as follows:
2000 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sold:
Class A 8,636,312 $109,857,994 7,418,728 $ 73,010,343
- ----------------------------------------------------------------------------------------------------------------------
Class B 1,506,797 19,210,223 1,590,485 15,858,499
- ----------------------------------------------------------------------------------------------------------------------
Class C 844,431 10,972,106 1,155,486 11,034,900
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 5,228 39,837
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 494 3,756
- ----------------------------------------------------------------------------------------------------------------------
Class C -- -- 118 897
======================================================================================================================
Issued in connection with acquisitions:*
Class A 5,417,888 76,520,172 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class B 2,222,098 30,887,919 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class C 35,470 492,438 -- --
======================================================================================================================
Reacquired:
Class A (7,649,919) (98,534,489) (6,066,544) (60,942,902)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,065,606) (13,305,105) (854,740) (8,257,720)
- ----------------------------------------------------------------------------------------------------------------------
Class C (703,160) (9,027,398) (774,549) (7,255,343)
======================================================================================================================
9,244,311 $127,073,860 2,474,706 $ 23,492,267
______________________________________________________________________________________________________________________
======================================================================================================================
* As of the close of business on June 9, 2000, the Fund acquired all the net
assets of New Pacific Growth Fund pursuant to a plan of reorganization
approved by New Pacific Growth Fund's shareholders on May 31, 2000. The
acquisition was accomplished by a tax-free exchange of 7,675,456 shares of the
Fund for 16,613,124 shares of New Pacific Growth Fund outstanding as of the
close of business on June 9, 2000. New Pacific Growth Fund's net assets at
that date were $107,900,529, including $11,869,606 of unrealized appreciation,
were combined with those of the Fund. The aggregate net assets of the Fund
immediately before the acquisition were $77,097,622.
FS-8
212
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
--------------------------------------
NOVEMBER 3, 1997
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
------------------ OCTOBER 31,
2000(a) 1999(a) 1998
------- ------- ----------------
Net asset value, beginning of period $ 10.76 $ 7.69 $ 10.00
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.03) 0.05
- ----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.01 3.14 (2.36)
====================================================================================================
Total from investment operations (0.06) 3.11 (2.31)
====================================================================================================
Less distributions of dividends from net investment income -- (0.04) --
====================================================================================================
Net asset value, end of period $ 10.70 $ 10.76 $ 7.69
____________________________________________________________________________________________________
====================================================================================================
Total return(b) (0.56)% 40.66% (23.10)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $93,755 $25,420 $ 7,716
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.92%(c) 1.92% 1.92%(d)
- ----------------------------------------------------------------------------------------------------
Without fee waivers 2.06%(c) 2.72% 4.88%(d)
====================================================================================================
Ratio of net investment income (loss) to average net assets (0.57)%(c) (0.50)% 0.70%(d)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate 64% 142% 79%
____________________________________________________________________________________________________
====================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average daily net assets of $65,936,105.
(d) Annualized.
CLASS B
--------------------------------------
NOVEMBER 3, 1997
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
------------------- OCTOBER 31,
2000(a) 1999(a) 1998
------- ------- ----------------
Net asset value, beginning of period $ 10.65 $ 7.63 $ 10.00
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17) (0.13) (0.01)
- ----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.02 3.16 (2.36)
====================================================================================================
Total from investment operations (0.15) 3.03 (2.37)
====================================================================================================
Less distributions of dividends from net investment income -- (0.01) --
====================================================================================================
Net asset value, end of period $ 10.50 $ 10.65 $ 7.63
____________________________________________________________________________________________________
====================================================================================================
Total return(b) (1.41)% 39.76% (23.70)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $39,852 $12,070 $ 3,030
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.67%(c) 2.79% 2.80%(d)
- ----------------------------------------------------------------------------------------------------
Without fee waivers 2.76%(c) 3.59% 5.75%(d)
====================================================================================================
Ratio of net investment income (loss) to average net assets (1.32)%(c) (1.37)% (0.18)%(d)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate 64% 142% 79%
____________________________________________________________________________________________________
====================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $30,719,909.
(d) Annualized.
FS-9
213
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
--------------------------------------
NOVEMBER 3, 1997
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
------------------ OCTOBER 31,
2000(a) 1999(a) 1998
------- ------- ----------------
Net asset value, beginning of period $10.63 $ 7.61 $ 10.00
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17) (0.13) (0.01)
- ----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.03 3.16 (2.38)
====================================================================================================
Total from investment operations (0.14) 3.03 (2.39)
====================================================================================================
Less distributions of dividends from net investment income -- (0.01) --
====================================================================================================
Net asset value, end of period $10.49 $10.63 $ 7.61
____________________________________________________________________________________________________
====================================================================================================
Total return(b) (1.32)% 39.86% (23.90)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,797 $5,008 $ 686
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.67%(c) 2.79% 2.80%(d)
- ----------------------------------------------------------------------------------------------------
Without fee waivers 2.76%(c) 3.59% 5.75%(d)
====================================================================================================
Ratio of net investment income (loss) to average net assets (1.32)%(c) (1.37)% (0.18)%(d)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate 64% 142% 79%
____________________________________________________________________________________________________
====================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $7,166,373.
(d) Annualized.
FS-10
214
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, 2000, 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 periods in the two-year period
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 auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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 periods in the two-year period then ended and
the period November 3, 1997 (date operations commenced)
through October 31, 1998, in conformity with accounting
principles generally accepted in the United States of
America.
/s/ KPMG LLP
December 6, 2000
Houston, Texas
FS-11
215
SCHEDULE OF INVESTMENTS
October 31, 2000
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-91.91%
DENMARK-5.57%
GN Store Nord A.S. (Communications
Equipment) 222,500 $ 4,313,294
- --------------------------------------------------------------
Novo Nordisk A.S.-Class B (Health
Care-Drugs-Generic & Other)(a) 44,800 9,502,132
- --------------------------------------------------------------
Vestas Wind Systems A.S.
(Manufacturing-Specialized) 190,900 10,340,217
- --------------------------------------------------------------
William Demant A.S. (Electronics-
Instrumentation) 74,200 3,553,721
==============================================================
27,709,364
==============================================================
FINLAND-3.31%
Elcoteq Network-Class A
(Manufacturing-Specialized) 258,400 8,815,505
- --------------------------------------------------------------
Nokia Oyj (Communications
Equipment) 186,000 7,654,093
==============================================================
16,469,598
==============================================================
FRANCE-20.72%
Alcatel S.A. (Communications
Equipment) 103,300 6,303,201
- --------------------------------------------------------------
Altran Technologies S.A. (Services-
Commercial & Consumer) 21,900 4,477,231
- --------------------------------------------------------------
Assurances Generales de France
(Insurance-Multi-Line) 70,600 3,864,496
- --------------------------------------------------------------
Aventis S.A.
(Chemicals-Diversified)(a) 72,700 5,244,233
- --------------------------------------------------------------
BNP Paribas (Banks-Major Regional) 89,700 7,734,189
- --------------------------------------------------------------
Egide S.A. (Electronics-Component
Distribution)(a) 8,300 4,508,029
- --------------------------------------------------------------
Galeries Lafayette
(Retail-Department Stores) 29,300 4,726,921
- --------------------------------------------------------------
Havas Advertising S.A.
(Services-Advertising/ Marketing) 292,000 4,705,832
- --------------------------------------------------------------
M6 Metropole Television
(Broadcasting- Television, Radio
& Cable) 94,000 4,148,201
- --------------------------------------------------------------
Metrologic Group
(Computers-Software & Services) 40,000 3,309,735
- --------------------------------------------------------------
NRJ Group (Broadcasting-Television,
Radio Cable)(a) 116,526 3,856,702
- --------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 21,800 3,890,670
- --------------------------------------------------------------
PSA Peugeot Citroen (Automobiles) 20,600 3,793,635
- --------------------------------------------------------------
Renault S.A. (Automobiles) 6,100 301,285
- --------------------------------------------------------------
Riber S.A. (Electrical
Equipment)(a) 387,900 8,289,038
- --------------------------------------------------------------
Royal Canin S.A. (Foods) 52,200 4,717,900
- --------------------------------------------------------------
Sanofi-Synthelabo S.A. (Health
Care-Drugs-Generic & Other) 80,300 4,225,089
- --------------------------------------------------------------
Schneider Electric S.A.
(Housewares)(a) 19,700 1,283,138
- --------------------------------------------------------------
Silicon-On-Insulator Technologies
(SOITEC) (Electronics-Component
Distribution)(a) 239,000 5,415,490
- --------------------------------------------------------------
Societe Generale-Class A
(Banks-Major Regional) 64,500 3,661,967
- --------------------------------------------------------------
Societe Television Francaise 1
(Broadcasting-Television, Radio
& Cable) 46,100 2,515,594
- --------------------------------------------------------------
MARKET
SHARES VALUE
FRANCE-(CONTINUED)
STMicroelectronics N.V.
(Electronics-Semiconductors) 102,000 $ 5,146,129
- --------------------------------------------------------------
Total Fina Elf S.A.
(Oil-International Integrated) 48,637 6,959,098
==============================================================
103,077,803
==============================================================
GERMANY-8.09%
ADVA A.G. Optical Networking
(Communications Equipment)(a) 83,400 6,122,246
- --------------------------------------------------------------
Altana A.G. (Health
Care-Drugs-Generic & Other) 29,200 3,543,623
- --------------------------------------------------------------
Comroad A.G. (Communications
Equipment)(a) 59,200 2,861,173
- --------------------------------------------------------------
ELMOS Semiconductor A.G.
(Electronics-Semiconductors)(a) 74,100 2,452,514
- --------------------------------------------------------------
Gfk A.G. (Services-Commercial &
Consumer) 65,719 2,498,605
- --------------------------------------------------------------
Heidelberger Druckmaschinen A.G.
(Machinery-Diversified) 53,700 2,836,888
- --------------------------------------------------------------
Medion A.G. (Electronics-Component
Distributors) 42,500 4,328,115
- --------------------------------------------------------------
MLP A.G.-Pfd. (Services-Commercial
& Consumer) 43,000 5,802,220
- --------------------------------------------------------------
Parsytec A.G. (Computers-Software &
Service)(a) 48,000 2,097,863
- --------------------------------------------------------------
Siemens A.G.
(Manufacturing-Diversified) 28,900 3,678,898
- --------------------------------------------------------------
Tecis Holding A.G.
(Computers-Software & Services) 55,700 4,027,387
==============================================================
40,249,532
==============================================================
IRELAND-0.94%
Ryanair Holdings PLC-ADR
(Airlines)(a) 116,200 4,684,312
==============================================================
ITALY-2.45%
Gruppo Editoriale L'Espresso
(Publishing) 248,816 2,721,823
- --------------------------------------------------------------
Riunione Adriatica di Sicurta
S.P.A. (Insurance Brokers) 721,200 9,468,357
==============================================================
12,190,180
==============================================================
LUXEMBOURG-1.95%
Thiel Logistik A.G.
(Services-Commercial &
Consumer)(a) 62,800 9,699,730
==============================================================
NETHERLANDS-2.74%
Koninklijke (Royal) Philips
Electronics N.V. (Electrical
Equipment) 159,000 6,248,856
- --------------------------------------------------------------
Koninklijke Numico N.V. (Foods) 103,800 4,853,752
- --------------------------------------------------------------
Nutreco Holding N.V. (Agricultural
Products) 58,400 2,517,707
==============================================================
13,620,315
==============================================================
NORWAY-1.50%
TGS Nopec Geophysical Co. A.S.A.
(Oil & Gas-Exploration &
Production)(a) 206,100 2,621,261
- --------------------------------------------------------------
Tomra Systems A.S.A.
(Manufacturing-Specialized) 119,850 4,818,336
==============================================================
7,439,597
==============================================================
FS-12
216
MARKET
SHARES VALUE
SPAIN-2.84%
NH Hoteles, S.A. (Investment
Management) 695,700 $ 7,852,397
- --------------------------------------------------------------
Promotoba de Informaciones S.A.
(Prisa) (Publishing)(a) 108,200 2,084,403
- --------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 218,900 4,174,240
==============================================================
14,111,040
==============================================================
SWEDEN-7.05%
Assa Abloy A.B.-Class B (Metal
Fabricators) 59,150 1,089,256
- --------------------------------------------------------------
Biacore International A.B.
(Electronics-Instrumentation)(a) 232,900 9,883,163
- --------------------------------------------------------------
HiQ International A.B.
(Services-Data Processing) 355,700 2,883,563
- --------------------------------------------------------------
Micronic Laser Systems A.B.
(Electronics-Semiconductors)(a) 219,200 6,537,586
- --------------------------------------------------------------
OM Grupppen A.B. (Investment
Banking/ Brokerage) 12,650 451,980
- --------------------------------------------------------------
PartnerTech A.B. (Communications
Equipment) 108,800 1,655,134
- --------------------------------------------------------------
POOLIA A.B.-B Shares
(Services-Employment) 56,600 2,379,175
- --------------------------------------------------------------
Proffice A.B.-B Shares
(Services-Employment) 153,000 5,053,194
- --------------------------------------------------------------
Q-Med A.B. (Healthcare-Medical
Products)(a) 294,000 5,149,274
==============================================================
35,082,325
==============================================================
SWITZERLAND-16.16%
Adecco S.A. (Services-Commercial &
Consumer) 3,830 2,648,801
- --------------------------------------------------------------
Charles Voegele Holding A.G.
(Retail-Department Stores) 31,300 5,886,274
- --------------------------------------------------------------
Compagnie Financiere Richemont
A.G.-Units Tobacco)(b) 2,575 7,163,523
- --------------------------------------------------------------
ESEC Holding A.G. (Equipment-
Semiconductor)(a) 12,500 4,312,024
- --------------------------------------------------------------
Huber & Suhner A.G. (Metal
Fabricators) 4,300 3,768,152
- --------------------------------------------------------------
Julius Baer Holding A.G.-Class B
(Banks-Major Regional) 245 1,213,209
- --------------------------------------------------------------
Kudelski S.A.
(Electronics-Component
Distributors)(a) 4,900 6,597,674
- --------------------------------------------------------------
Micronas Semiconductor Holding A.G.
(Electronics-Semiconductors)(a) 11,500 4,990,820
- --------------------------------------------------------------
Nestle S.A. (Foods)(a) 2,500 5,181,383
- --------------------------------------------------------------
Serono S.A.-Class B (Health
Care-Drugs-Generic & Other) 5,520 4,966,249
- --------------------------------------------------------------
Straumann A.G. (Health
Care-Specialized Services) 7,110 15,368,803
- --------------------------------------------------------------
Swatch Group A.G. (The)-Class B
(Consumer-Jewelry, Novelties &
Gifts) 2,900 3,840,205
- --------------------------------------------------------------
Synthes Stratec, Inc. (Health
Care-Medical Products &
Supplies)(c) 7,000 4,459,467
- --------------------------------------------------------------
Tecan A.G. (Health Care-Medical
Products & Supplies) 9,300 9,986,647
==============================================================
80,383,231
==============================================================
MARKET
SHARES VALUE
UNITED KINGDOM-18.59%
ARC International PLC (Electronics-
Semiconductors)(a) 735,400 $ 3,629,023
- --------------------------------------------------------------
ARM Holdings PLC (Electronics-
Semiconductor)(a) 454,250 4,483,229
- --------------------------------------------------------------
Bookham Technology PLC
(Communications Equipment)(a) 77,600 2,555,544
- --------------------------------------------------------------
BP Amoco PLC (Oil-International
Integrated) 621,400 5,271,605
- --------------------------------------------------------------
Capita Group PLC
(Services-Commercial & Consumer) 714,000 5,440,573
- --------------------------------------------------------------
Chloride Group PLC (Electrical
Equipment) 2,050,000 6,099,508
- --------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 128,400 2,141,195
- --------------------------------------------------------------
J.D. Wetherspoon PLC (Leisure
Time-Products) 223,350 1,008,169
- --------------------------------------------------------------
Logica PLC (Computers-Software &
Services) 135,600 4,012,953
- --------------------------------------------------------------
Marconi PLC (Communications
Equipment) 498,600 6,295,931
- --------------------------------------------------------------
Matalan PLC (Retail-Discounters) 785,000 7,405,768
- --------------------------------------------------------------
NDS Group PLC-ADR
(Broadcasting-Television Radio &
Cable)(a) 64,700 4,852,500
- --------------------------------------------------------------
Pace Micro Technology PLC
(Communications Equipment) 524,000 3,741,825
- --------------------------------------------------------------
Royal Bank of Scotland Group PLC
(Banks-Major Regional) 302,400 6,789,835
- --------------------------------------------------------------
Shell Transport & Trading Co. (Oil-
International Integrated) 877,700 7,063,741
- --------------------------------------------------------------
Shire Pharmaceuticals Group PLC
(Health Care Drugs-Generic &
Other)(a) 173,100 3,517,323
- --------------------------------------------------------------
Spirent PLC (Communications
Equipment) 1,042,900 9,672,320
- --------------------------------------------------------------
Vodafone Group PLC
(Telecommunications-
Cellular/Wireless) 1,280,186 5,327,993
- --------------------------------------------------------------
Volex Group PLC (Electrical
Equipment) 100,000 3,142,281
==============================================================
92,451,316
==============================================================
Total Foreign Stocks & Other
Equity Interests (Cost
$382,818,074) 457,168,343
==============================================================
MONEY MARKET FUNDS-7.12%
STIC Liquid Assets Portfolio(d) 17,695,135 17,695,135
- --------------------------------------------------------------
STIC Prime Portfolio(d) 17,695,135 17,695,135
==============================================================
Total Money Market Funds (Cost
$35,390,270) 35,390,270
==============================================================
TOTAL INVESTMENTS-99.03% (Cost
$418,208,344) 492,558,613
==============================================================
OTHER ASSETS LESS LIABILITIES-0.97% 4,824,712
==============================================================
NET ASSETS-100.00% $497,383,325
______________________________________________________________
==============================================================
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes common or preferred
shares of the issuer.
(c)Security fair valued in accordance with the procedures established by the
Board of Directors.
(d)The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-13
217
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments, at market value (cost
$418,208,344) $492,558,613
- ------------------------------------------------------------
Foreign currencies, at value (cost $9,705,467) 9,796,033
- ------------------------------------------------------------
Receivables for:
Investments sold 6,518,004
- ------------------------------------------------------------
Capital stock sold 3,062,183
- ------------------------------------------------------------
Dividends and interest 436,863
- ------------------------------------------------------------
Collateral for securities loaned 18,355,666
- ------------------------------------------------------------
Investment for deferred compensation plan 14,444
- ------------------------------------------------------------
Other assets 95,312
============================================================
Total assets $530,837,118
============================================================
LIABILITIES:
Payables for:
Investments purchased 11,926,794
- ------------------------------------------------------------
Collateral upon return of securities loaned 18,355,666
- ------------------------------------------------------------
Capital stock reacquired 2,111,996
- ------------------------------------------------------------
Deferred compensation plan 14,444
- ------------------------------------------------------------
Accrued advisory fees 409,851
- ------------------------------------------------------------
Accrued administrative services fees 10,515
- ------------------------------------------------------------
Accrued distribution fees 301,124
- ------------------------------------------------------------
Accrued directors' fees 1,999
- ------------------------------------------------------------
Accrued transfer agent fees 150,926
- ------------------------------------------------------------
Accrued operating expenses 170,478
============================================================
Total liabilities 33,453,793
============================================================
Net assets applicable to shares outstanding $497,383,325
____________________________________________________________
============================================================
NET ASSETS:
Class A $273,604,785
____________________________________________________________
============================================================
Class B $169,614,261
____________________________________________________________
============================================================
Class C $ 54,164,279
____________________________________________________________
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 11,596,194
____________________________________________________________
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 7,337,967
____________________________________________________________
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 2,341,714
____________________________________________________________
============================================================
Class A:
Net asset value and redemption price per
share $ 23.59
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $23.59 divided by
94.50%) $ 24.96
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 23.11
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 23.13
____________________________________________________________
============================================================
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$392,530) $ 2,183,664
- ------------------------------------------------------------
Dividends from affiliated money market funds 1,521,653
- ------------------------------------------------------------
Interest 22,487
- ------------------------------------------------------------
Security lending income 144,534
============================================================
Total investment income 3,872,338
============================================================
EXPENSES:
Advisory fees 4,248,118
- ------------------------------------------------------------
Administrative services fees 109,571
- ------------------------------------------------------------
Custodian fees 428,055
- ------------------------------------------------------------
Distribution fees -- Class A 868,732
- ------------------------------------------------------------
Distribution fees -- Class B 1,566,725
- ------------------------------------------------------------
Distribution fees -- Class C 422,886
- ------------------------------------------------------------
Transfer agent fees -- Class A 480,324
- ------------------------------------------------------------
Transfer agent fees -- Class B 376,924
- ------------------------------------------------------------
Transfer agent fees -- Class C 101,738
- ------------------------------------------------------------
Directors' fees 6,941
- ------------------------------------------------------------
Other 354,098
============================================================
Total expenses 8,964,112
============================================================
Less: Expenses paid indirectly (11,899)
============================================================
Net expenses 8,952,213
============================================================
Net investment income (loss) (5,079,875)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment securities 10,775,266
- ------------------------------------------------------------
Foreign currencies (3,009,052)
============================================================
7,766,214
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 36,293,246
- ------------------------------------------------------------
Foreign currencies (49,489)
============================================================
36,243,757
============================================================
Net gain on investment securities and foreign
currencies 44,009,971
============================================================
Net increase in net assets resulting from
operations $38,930,096
____________________________________________________________
============================================================
See Notes to Financial Statements.
FS-14
218
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
2000 1999
------------ ------------
OPERATIONS:
Net investment income (loss) $ (5,079,875) $ (1,719,011)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 7,766,214 (5,794,428)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 36,243,757 43,126,751
==========================================================================================
Net increase in net assets resulting from operations 38,930,096 35,613,312
==========================================================================================
Distributions to shareholders from net investment income:
Class A -- (80,229)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 149,580,238 2,449,615
- ------------------------------------------------------------------------------------------
Class B 88,697,953 3,977,973
- ------------------------------------------------------------------------------------------
Class C 42,014,471 (246,455)
==========================================================================================
Net increase in net assets 319,222,758 41,714,216
==========================================================================================
NET ASSETS:
Beginning of year 178,160,567 136,446,351
==========================================================================================
End of year $497,383,325 $178,160,567
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $424,964,898 $152,753,815
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (17,336) (9,989)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (1,854,528) (12,629,793)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 74,290,291 38,046,534
==========================================================================================
$497,383,325 $178,160,567
__________________________________________________________________________________________
==========================================================================================
See Notes to Financial Statements.
FS-15
219
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 accounting
principles generally accepted in the United States of America 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 as of the close of the
customary trading session 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 as of the close of
the customary trading session 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 option
contracts generally will be valued 15 minutes after the close of the
customary trading session 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 customary
trading session 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 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$5,072,528, undistributed net realized gains increased by $3,009,051 and paid
in capital decreased by $8,081,579 as a result of differing book/tax
treatment of foreign currency transactions, net operating loss and other
reclassifications. Net assets of the Fund were unaffected by the
reclassification discussed above.
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 from 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 $1,620,590 as of October 31,
2000 which may be carried forward to offset future taxable gains, if any,
which expires, if not previously utilized, in the year 2007.
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 the portion of the
FS-16
220
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 and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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. For the year ended October 31, 2000, AIM was
paid $109,571 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 October 31, 2000, AFS was
paid $539,265 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 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. During the year ended October 31,
2000, the Class A, Class B and Class C shares paid AIM Distributors $868,732,
$1,566,725, and $422,886, respectively, as compensation under the Plans.
AIM Distributors received commissions of $432,931 from sales of the Class A
shares of the Fund during the year ended October 31, 2000. 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, 2000,
AIM Distributors received $117,258 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, 2000, the Fund paid legal fees of $4,602 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
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $6,088 and reductions in custodian
fees of $5,811 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $11,899.
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 Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to not less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or
FS-17
221
guaranteed by the U.S. Government or any of its agencies. Cash collateral
pursuant to these loans is invested in short-term money market instruments or
affiliated money market funds. Lending securities entails a risk of loss to the
Fund if and to the extent that the market value of the securities loaned were to
increase and the borrower did not increase the collateral accordingly and failed
to return the securities.
At October 31, 2000, securities with an aggregate value of $17,428,717 were on
loan to brokers. The loans were secured by cash collateral of $18,355,666. For
the year ended October 31, 2000, the Fund received fees of $144,534 for
securities lending.
NOTE 7-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, 2000 was
$697,671,504 and $453,712,085, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2000 is as follows:
Aggregate unrealized appreciation of
investment securities $ 89,996,432
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities $(15,880,101)
=========================================================
Net unrealized appreciation of investment
securities $ 74,116,331
_________________________________________________________
=========================================================
Cost of investments for tax purposes is
$418,442,282.
FS-18
222
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years October 31, 2000 and 1999
were as follows:
2000 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sold:
Class A 14,973,472 $398,349,739 7,243,646 $103,416,688
- ----------------------------------------------------------------------------------------------------------------------
Class B 5,164,473 138,279,616 3,045,028 43,081,822
- ----------------------------------------------------------------------------------------------------------------------
Class C 2,755,179 71,725,762 2,148,542 29,835,245
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 5,672 76,739
======================================================================================================================
Reacquired:
Class A (9,417,238) (248,769,501) (7,125,444) (101,043,812)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,967,360) (49,581,663) (2,797,703) (39,103,849)
- ----------------------------------------------------------------------------------------------------------------------
Class C (1,150,167) (29,711,291) (2,160,106) (30,081,700)
======================================================================================================================
10,358,359 $280,292,662 359,635 $ 6,181,133
______________________________________________________________________________________________________________________
======================================================================================================================
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
----------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED YEAR ENDED COMMENCED)
OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
2000(a) 1999 1998(a)
----------- ----------- ----------------
Net asset value, beginning of period $ 16.42 $ 12.96 $ 10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.21) (0.11) (0.08)
- --------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 7.38 3.58 3.04
==============================================================================================================
Total from investment operations 7.17 3.47 2.96
==============================================================================================================
Less distributions from net investment income -- (0.01) --
==============================================================================================================
Net asset value, end of period $ 23.59 $ 16.42 $ 12.96
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 43.67% 26.81% 29.60%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $273,605 $99,148 $76,686
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets: 1.69%(c) 1.88% 1.98%(d)(e)
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.69)% (0.58)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate 112% 122% 93%
______________________________________________________________________________________________________________
==============================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average daily net assets of $248,209,210.
(d) Ratios of expenses to average net assets excluding waivers was 2.15%.
(e) Annualized.
FS-19
223
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
2000(a) 1999 1998(a)
----------- ----------- ----------------
Net asset value, beginning of period $ 16.20 $ 12.87 $ 10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.38) (0.22) (0.18)
- --------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 7.29 3.55 3.05
==============================================================================================================
Total from investment operations 6.91 3.33 2.87
==============================================================================================================
Net asset value, end of period $ 23.11 $ 16.20 $ 12.87
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 42.65% 25.87% 28.70%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $169,614 $67,074 $50,121
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets: 2.39%(c) 2.63% 2.72%(d)(e)
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (1.52)%(c) (1.44)% (1.32)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate 112% 122% 93%
______________________________________________________________________________________________________________
==============================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $156,672,483.
(d) Ratios of expenses to average net assets excluding waivers was 2.89%.
(e) Annualized.
CLASS C
----------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
2000(a) 1999 1998(a)
----------- ----------- ----------------
Net asset value, beginning of period $ 16.21 $ 12.88 $10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.38) (0.23) (0.18)
- --------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 7.30 3.56 3.06
==============================================================================================================
Total from investment operations 6.92 3.33 2.88
==============================================================================================================
Net asset value, end of period $ 23.13 $ 16.21 $12.88
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 42.69% 25.85% 28.80%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $54,164 $11,938 $9,639
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets: 2.39%(c) 2.63% 2.72%(d)(e)
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (1.52)%(c) (1.44)% (1.32)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate 112% 122% 93%
______________________________________________________________________________________________________________
==============================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $42,288,606.
(d) Ratios of expenses to average net assets excluding waivers was 2.89%.
(e) Annualized.
FS-20
224
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, 2000, 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 periods in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these
financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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
periods in the five-year period then ended in conformity
with accounting principles generally accepted in the United
States of America.
/s/ KPMG LLP
December 6, 2000
Houston, Texas
FS-21
225
SCHEDULE OF INVESTMENTS
October 31, 2000
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS-34.04%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.66%
Hispanic Broadcasting Corp.(a) 490,400 $ 15,325,000
===============================================================
COMMUNICATIONS EQUIPMENT-6.85%
CommScope, Inc.(a) 379,700 9,611,156
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 255,800 28,585,650
- ---------------------------------------------------------------
Dycom Industries, Inc.(a) 316,200 11,897,025
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 1,090,776 88,761,897
- ---------------------------------------------------------------
Polycom, Inc.(a) 300,000 19,500,000
===============================================================
158,355,728
===============================================================
COMPUTERS (HARDWARE)-0.61%
National Instruments Corp.(a) 300,000 14,006,250
===============================================================
COMPUTERS (PERIPHERALS)-2.63%
Actel Corp.(a) 500,000 18,312,500
- ---------------------------------------------------------------
QLogic Corp.(a) 368,700 35,671,725
- ---------------------------------------------------------------
Silicon Storage Technology,
Inc.(a) 300,000 6,825,000
===============================================================
60,809,225
===============================================================
COMPUTERS (SOFTWARE &
SERVICES)-0.09%
Starmedia Network, Inc.(a) 325,100 1,991,237
===============================================================
ELECTRICAL EQUIPMENT-2.67%
Cree, Inc.(a) 125,000 12,406,250
- ---------------------------------------------------------------
Sanmina Corp.(a) 273,400 31,253,037
- ---------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 600,000 18,000,000
===============================================================
61,659,287
===============================================================
ELECTRONICS (COMPONENT
DISTRIBUTORS)-3.06%
Power-One, Inc.(a) 900,000 63,843,750
- ---------------------------------------------------------------
Sawtek Inc.(a) 138,000 7,020,750
===============================================================
70,864,500
===============================================================
ELECTRONICS
(INSTRUMENTATION)-0.86%
Alpha Industries, Inc.(a) 500,000 19,937,500
===============================================================
ELECTRONICS
(SEMICONDUCTORS)-6.05%
Dallas Semiconductor Corp. 300,000 11,887,500
- ---------------------------------------------------------------
Integrated Device Technology,
Inc.(a) 675,000 38,010,937
- ---------------------------------------------------------------
Intersil Holding Corp.(a) 150,000 7,190,625
- ---------------------------------------------------------------
Micrel, Inc.(a) 391,600 17,719,900
- ---------------------------------------------------------------
Microchip Technology Inc.(a) 1,500,000 47,437,500
- ---------------------------------------------------------------
Semtech Corp.(a) 550,000 17,737,500
===============================================================
139,983,962
===============================================================
EQUIPMENT (SEMICONDUCTOR)-0.12%
Credence Systems Corp.(a) 150,000 2,812,500
===============================================================
MARKET
SHARES VALUE
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.93%
Alpharma Inc.-Class A 250,000 $ 9,703,125
- ---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 160,100 11,787,363
===============================================================
21,490,488
===============================================================
HEALTH CARE (HOSPITAL MANAGEMENT)-1.71%
Health Management Associates,
Inc.-Class A(a) 400,000 7,925,000
- ---------------------------------------------------------------
Province Healthcare Co.(a) 752,700 31,707,488
===============================================================
39,632,488
===============================================================
OIL & GAS (DRILLING & EQUIPMENT)-1.39%
Cooper Cameron Corp.(a) 100,000 5,450,000
- ---------------------------------------------------------------
National-Oilwell, Inc.(a) 700,000 20,475,000
- ---------------------------------------------------------------
Patterson Energy, Inc.(a) 225,000 6,328,125
===============================================================
32,253,125
===============================================================
RESTAURANTS-0.62%
CEC Entertainment Inc.(a) 450,000 14,343,750
===============================================================
RETAIL (BUILDING SUPPLIES)-0.31%
Fastenal Co. 125,000 7,179,688
===============================================================
RETAIL (SPECIALTY)-0.27%
Linens 'n Things, Inc.(a) 200,000 6,150,000
===============================================================
RETAIL (SPECIALTY-APPAREL)-1.84%
Abercrombie & Fitch Co.-Class
A(a) 500,000 11,781,250
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 660,000 19,305,000
- ---------------------------------------------------------------
Too Inc.(a) 500,000 11,468,750
===============================================================
42,555,000
===============================================================
SERVICES (DATA PROCESSING)-0.86%
Concord EFS, Inc.(a) 483,807 19,987,277
===============================================================
SERVICES (EMPLOYMENT)-1.32%
Robert Half International Inc.(a) 1,000,000 30,500,000
===============================================================
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-0.78%
Powerwave Technologies, Inc.(a) 375,000 18,046,875
===============================================================
TEXTILES (APPAREL)-0.41%
Quicksilver, Inc.(a) 500,000 9,562,500
===============================================================
Total Domestic Common Stocks
(Cost $486,833,062) 787,446,380
===============================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-54.99%
AUSTRALIA-0.92%
Brambles Industries Ltd. (Air
Freight) 235,000 6,092,927
- ---------------------------------------------------------------
FS-22
226
MARKET
SHARES VALUE
AUSTRALIA-(CONTINUED)
ERG Ltd. (Electrical Equipment) 3,098,000 $ 15,175,266
===============================================================
21,268,193
===============================================================
BRAZIL-3.98%
Brasil Telecom Participacoes
S.A.-ADR (Telephone) 60,400 3,272,925
- ---------------------------------------------------------------
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar-ADR (Retail-Food Chains) 277,419 9,883,052
- ---------------------------------------------------------------
Companhia de Bebidas das
Americas-ADR
(Beverages-Alcoholic) 721,100 16,269,819
- ---------------------------------------------------------------
Embratel Participacoes S.A.-ADR
(Telephone) 285,200 4,616,675
- ---------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 762,000 20,196,292
- ---------------------------------------------------------------
Tele Celular Sul Participacoes
S.A.-ADR
(Telecommunications-Cellular/
Wireless) 114,200 2,876,412
- ---------------------------------------------------------------
Tele Centro Oeste Celular
Participacoes S.A.-ADR
(Telecommunication-Cellular/
Wireless) 696,000 7,047,000
- ---------------------------------------------------------------
Tele Nordeste Celular
Participacoes S.A.-ADR
(Telecommunications-Cellular/
Wireless) 115,000 4,743,750
- ---------------------------------------------------------------
Tele Norte Leste Participacoes
S.A.-ADR (Telephone) 843,181 18,655,380
- ---------------------------------------------------------------
Telemig Celular S.A.-ADR
(Telecommunications-Cellular/
Wireless) 84,200 4,420,500
===============================================================
91,981,805
===============================================================
CANADA-7.42%
ATS Automation Tooling Systems,
Inc. (Machinery-Diversified)(a) 324,000 5,748,969
- ---------------------------------------------------------------
Celestica Inc.
(Electronics-Semiconductors)(a) 268,000 19,262,500
- ---------------------------------------------------------------
Certicom Corp.
(Computers-Software &
Services)(a) 306,400 10,131,081
- ---------------------------------------------------------------
C-MAC Industries, Inc.
(Electronics-Component
Distributors)(a) 407,300 22,934,460
- ---------------------------------------------------------------
Cognos, Inc. (Computers-Software
& Services)(a) 442,600 18,367,900
- ---------------------------------------------------------------
Descartes Systems Group Inc,
(The) (Computers-Software &
Services)(a) 260,000 10,537,550
- ---------------------------------------------------------------
Exfo Electro-Optical Engineering
Inc. (Communications
Equipment)(a) 160,300 6,111,437
- ---------------------------------------------------------------
Four Seasons Hotels, Inc.
(Lodging-Hotels) 338,300 24,695,900
- ---------------------------------------------------------------
Onex Corp. (Investments) 1,033,100 16,369,423
- ---------------------------------------------------------------
Pivotal Corp. (Computers-Software
& Services)(a) 122,000 7,457,250
- ---------------------------------------------------------------
Research in Motion Ltd.
(Telecommunications-Cellular/
Wireless)(a) 151,000 15,100,000
- ---------------------------------------------------------------
Sears Canada, Inc.
(Retail-Department Stores) 192,400 3,369,803
- ---------------------------------------------------------------
Shaw Communications Inc.-Class B
(Broadcasting-Television, Radio
& Cable) 312,300 6,389,953
- ---------------------------------------------------------------
MARKET
SHARES VALUE
CANADA-(CONTINUED)
Tundra Semiconductor Corp.
(Electronics-Semiconductors) 146,000 $ 5,257,644
===============================================================
171,733,870
===============================================================
DENMARK-2.61%
Vestas Wind Systems A.S.
(Manufacturing-Specialized) 925,000 50,103,200
- ---------------------------------------------------------------
William Demant A.S.
(Electronics-Instrumentation) 214,900 10,292,380
===============================================================
60,395,580
===============================================================
FINLAND-0.28%
Elcoteq Network-Class A
(Manufacturing-Specialized) 192,000 6,550,220
===============================================================
FRANCE-5.06%
Altran Technologies S.A.
(Services-Commercial &
Consumer) 164,700 33,671,233
- ---------------------------------------------------------------
Business Objects S.A.-ADR
(Computers-Software &
Services)(a) 200,000 15,759,375
- ---------------------------------------------------------------
Galeries Lafayette
(Retail-Department Stores) 70,000 11,292,986
- ---------------------------------------------------------------
Havas Advertising S.A.
(Services-Advertising/
Marketing) 880,000 14,181,960
- ---------------------------------------------------------------
M6 Metropole Television
(Broadcasting-Television, Radio
& Cable) 343,000 15,136,521
- ---------------------------------------------------------------
NRJ Group
(Broadcasting-Television, Radio
& Cable)(a) 290,800 9,624,709
- ---------------------------------------------------------------
Silicon-On-Insulator Technologies
(SOITEC) (Electronics-Component
Distributors)(a) 250,000 5,664,739
- ---------------------------------------------------------------
Societe Television Francaise 1
(Broadcasting-Television, Radio
& Cable) 216,000 11,786,730
===============================================================
117,118,253
===============================================================
GERMANY-3.50%
ADVA A.G. Optical Networking
(Communications Equipment)(a) 172,800 12,684,941
- ---------------------------------------------------------------
Heidelberger Druckmaschinen A.G.
(Machinery-Diversified) 182,500 9,641,194
- ---------------------------------------------------------------
Medion A.G.
(Electronics-Component
Distributors) 85,500 8,707,149
- ---------------------------------------------------------------
MLP A.G.-Pfd.
(Services-Commercial &
Consumer) 120,000 16,192,242
- ---------------------------------------------------------------
Porsche A.G.-Pfd. (Automobiles) 6,270 21,018,090
- ---------------------------------------------------------------
Tecis Holding A.G.
(Computers-Software & Services) 175,200 12,667,832
===============================================================
80,911,448
===============================================================
HONG KONG-2.70%
China Mobile Ltd.
(Telecommunications-Cellular/
Wireless)(a) 3,428,000 21,977,177
- ---------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banks-Regional) 3,047,000 15,393,230
- ---------------------------------------------------------------
Esprit Holdings Ltd.
(Retail-Specialty Apparel) 3,506,000 3,011,950
- ---------------------------------------------------------------
FS-23
227
MARKET
SHARES VALUE
HONG KONG-(CONTINUED)
Hutchison Whampoa Ltd.
(Retail-Food Chains) 1,776,500 $ 22,095,205
===============================================================
62,477,562
===============================================================
INDIA-0.48%
Infosys Technologies Ltd.
(Computers-Software &
Services)(b) 45,000 6,913,882
- ---------------------------------------------------------------
Satyam Computer Services Ltd.
(Computers-Software & Services) 645,000 4,248,875
===============================================================
11,162,757
===============================================================
ISRAEL-1.51%
NICE Systems Ltd.-ADR
(Communications Equipment)(a) 259,000 12,108,250
- ---------------------------------------------------------------
Orbotech, Ltd.
(Computers-Software &
Services)(a) 430,650 22,797,534
===============================================================
34,905,784
===============================================================
ITALY-0.98%
Gruppo Editoriale L'Espresso
(Publishing) 2,080,000 22,753,325
===============================================================
JAPAN-3.59%
Bellsystem 24, Inc. (Services-
Commercial & Consumer) 42,000 15,088,668
- ---------------------------------------------------------------
Circle K Japan Co. Ltd.
(Retail-Food Chains) 244,200 7,877,780
- ---------------------------------------------------------------
Crayfish Co. Ltd.-ADR (Computers-
Software & Services)(a) 373,900 584,219
- ---------------------------------------------------------------
Hokuto Corp. (Agricultural
Products) 288,850 9,159,336
- ---------------------------------------------------------------
Sanix Inc. (Services-Commercial &
Consumer) 155,250 7,953,512
- ---------------------------------------------------------------
Softbank Corp.
(Computers-Software & Services) 204,000 12,245,796
- ---------------------------------------------------------------
Trend Micro Inc.
(Computers-Software &
Services)(a) 115,550 10,907,437
- ---------------------------------------------------------------
Yahoo Japan Corp.
(Computers-Software &
Services)(a) 224 19,297,072
===============================================================
83,113,820
===============================================================
MEXICO-5.93%
Cemex S.A. de C.V.-ADR
(Construction-Cement &
Aggregates) 259,400 5,479,825
- ---------------------------------------------------------------
Cemex S.A. de C.V. Wts.-ADR
(Construction-Cement &
Aggregates) expiring
12/13/02 (c) 16,212 32,424
- ---------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR
(Beverages-Non-Alcoholic) 566,300 10,865,881
- ---------------------------------------------------------------
Controladora Comercial Mexicana
S.A. de C.V.-ADR-Units
(Retail-General Merchandise)(d) 2,579,000 2,858,963
- ---------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento S.A. Class B
(Entertainment)(a) 3,288,144 14,855,451
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-ADR
(Beverages-Alcoholic) 446,880 17,065,230
- ---------------------------------------------------------------
MARKET
SHARES VALUE
MEXICO-(CONTINUED)
Grupo Financiero Banamex Accival,
S.A. de C.V. (Banacci)
(Financial-Diversified)(a) 7,104,000 $ 11,040,100
- ---------------------------------------------------------------
Grupo Financiero Bancomer, S.A.
de C.V.-Class O
(Banks-Regional)(a) 11,940,000 7,392,261
- ---------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series
C (Beverages-Alcoholic) 3,161,000 8,429,774
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 323,000 17,482,375
- ---------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de
C.V.-Class A (Paper & Forest
Products) 2,014,000 5,149,791
- ---------------------------------------------------------------
Organizacion Soriana S.A. de
C.V.-Class B (Retail-Department
Stores) 1,776,000 5,572,056
- ---------------------------------------------------------------
Telefonos de Mexico S.A. de C.V.-
Class L-ADR (Telephone) 198,600 10,711,987
- ---------------------------------------------------------------
Tubos de Acero de Mexico S.A.-ADR
(Oil & Gas-Drilling &
Equipment) 541,800 8,240,778
- ---------------------------------------------------------------
Wal-Mart de Mexico S.A. de
C.V.-Series C (Retail-General
Merchandise)(a) 5,300,000 12,083,246
===============================================================
137,260,142
===============================================================
NETHERLANDS-0.36%
Nutreco Holding N.V.
(Agricultural Products) 194,900 8,402,416
===============================================================
NORWAY-0.40%
Tomra Systems A.S.A.
(Manufacturing-Specialized) 231,700 9,315,050
===============================================================
PHILIPPINES-0.11%
SM Prime Holdings, Inc. (Land
Development) 32,000,000 2,475,822
===============================================================
SINGAPORE-1.47%
Chartered Semiconductor
Manufacturing Ltd.-ADR
(Electronics-
Semiconductors)(a) 172,600 8,025,900
- ---------------------------------------------------------------
Datacraft Asia Ltd.
(Communications Equipment) 867,880 5,944,978
- ---------------------------------------------------------------
DBS Group Holdings Ltd.
(Banks-Money Center) 640,813 7,552,713
- ---------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 1,939,000 3,864,089
- ---------------------------------------------------------------
Keppel Land Ltd. (Land
Development) 3,413,000 5,091,419
- ---------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing-Newspapers) 240,000 3,429,938
===============================================================
33,909,037
===============================================================
SOUTH KOREA-1.12%
Hyundai Motor Co. Ltd.
(Automobiles) 475,124 5,429,989
- ---------------------------------------------------------------
Korea Telecom Corp.-ADR
(Telephone) 274,500 10,122,188
- ---------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 265,700 4,201,381
- ---------------------------------------------------------------
Samsung Electronics N.V.
(Electronics-Component
Distributors) 48,200 6,038,242
===============================================================
25,791,800
===============================================================
FS-24
228
MARKET
SHARES VALUE
SPAIN-1.06%
NH Hoteles, S.A. (Investment
Management) 1,667,800 $ 18,824,534
- ---------------------------------------------------------------
Promotoba de Informaciones S.A.
(Prisa) (Publishing)(a) 289,800 5,582,810
===============================================================
24,407,344
===============================================================
SWEDEN-1.14%
Assa Abloy A.B.-Class B (Metal
Fabricators) 920,000 16,942,062
- ---------------------------------------------------------------
Biacore International A.B.
(Electronics-
Instrumentation)(a) 167,800 7,120,630
- ---------------------------------------------------------------
OM Grupppen A.B. (Investment
Banking/Brokerage) 61,000 2,179,509
===============================================================
26,242,201
===============================================================
SWITZERLAND-4.16%
Charles Voegele Holding A.G.
(Retail-Department Stores) 104,900 19,727,480
- ---------------------------------------------------------------
ESEC Holding A.G. (Equipment-
Semiconductors)(a) 17,000 5,864,352
- ---------------------------------------------------------------
Kudelski S.A.
(Electronics-Component
Distributors)(a) 12,200 16,426,863
- ---------------------------------------------------------------
Micronas Semiconductor Holding
A.G.
(Electronics-Semiconductors)(a) 26,700 11,587,381
- ---------------------------------------------------------------
Straumann A.G. (Health
Care-Specialized Services) 8,100 17,508,763
- ---------------------------------------------------------------
Synthes Stratec, Inc. (Health
Care-Medical Products &
Supplies)(b) 14,000 8,918,934
- ---------------------------------------------------------------
Tecan A.G. (Health Care-Medical
Products & Supplies) 15,100 16,214,878
===============================================================
96,248,651
===============================================================
TAIWAN-1.15%
Compal Electronics Inc.
(Computers-Hardware) 3,641,300 5,553,475
- ---------------------------------------------------------------
Far Eastern Textile Ltd.
(Textiles-Apparel) 676,965 557,069
- ---------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd.
(Electronics-
Semiconductors)(a) 3,713,280 11,257,585
- ---------------------------------------------------------------
United Microelectronics Corp.
Ltd. (Electronics-Component
Distributors)(a) 5,284,400 9,318,200
===============================================================
26,686,329
===============================================================
MARKET
SHARES VALUE
THAILAND-0.20%
Advanced Info Service Public Co.
Ltd. (Telephone)(a) 569,000 $ 4,680,254
===============================================================
UNITED KINGDOM-4.86%
ARM Holdings PLC (Electronics-
Semiconductors)(a) 1,393,450 13,752,683
- ---------------------------------------------------------------
Bookham Technology PLC
(Communications Equipment)(a) 171,300 5,641,297
- ---------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 612,000 10,205,695
- ---------------------------------------------------------------
Dimension Data Holdings PLC
(Computers-Software &
Services)(a) 1,536,126 13,466,381
- ---------------------------------------------------------------
J.D. Wetherspoon PLC (Leisure
Time-Products) 469,600 2,119,706
- ---------------------------------------------------------------
Logica PLC (Computers-Software &
Services) 559,200 16,548,991
- ---------------------------------------------------------------
Matalan PLC (Retail-Discounters) 1,600,000 15,094,560
- ---------------------------------------------------------------
NDS Group PLC-ADR (Broadcasting-
Television, Radio & Cable)(a) 100,000 7,500,000
- ---------------------------------------------------------------
Pace Micro Technology PLC
(Communications Equipment) 1,360,000 9,711,608
- ---------------------------------------------------------------
Shire Pharmaceuticals Group PLC
(Health Care-Drugs-Generic &
Other)(a) 908,400 18,458,325
===============================================================
112,499,246
===============================================================
Total Foreign Stocks & Other
Equity Interests (Cost
$905,093,017) 1,272,290,909
===============================================================
MONEY MARKET FUNDS-9.60%
STIC Liquid Assets Portfolio(e) 111,077,016 111,077,016
- ---------------------------------------------------------------
STIC Prime Portfolio(e) 111,077,016 111,077,016
===============================================================
Total Money Market Funds
(Cost $222,154,032) 222,154,032
===============================================================
TOTAL INVESTMENTS-98.63%
(Cost $1,614,080,111) 2,281,891,321
===============================================================
OTHER ASSETS LESS
LIABILITIES-1.37% 31,735,771
===============================================================
NET ASSETS-100.00% $2,313,627,092
_______________________________________________________________
===============================================================
Investment Abbreviations
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Pfd. - Preferred
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the
Board of Directors.
(c) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(d) Each unit represents three B shares and one C share.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-25
229
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments, at market value (cost
$1,614,080,111) $2,281,891,321
- -------------------------------------------------------------
Foreign currencies, at value (cost
$36,401,071) 36,604,081
- -------------------------------------------------------------
Receivables for:
Investments sold 8,384,239
- -------------------------------------------------------------
Capital stock sold 4,132,695
- -------------------------------------------------------------
Dividends and interest 2,560,804
- -------------------------------------------------------------
Collateral for securities loaned 277,475,346
- -------------------------------------------------------------
Investment for deferred compensation plan 48,943
- -------------------------------------------------------------
Other assets 322,202
=============================================================
Total assets 2,611,419,631
=============================================================
LIABILITIES:
Payables for:
Investments purchased 12,052,502
- -------------------------------------------------------------
Capital stock reacquired 3,655,996
- -------------------------------------------------------------
Collateral upon return of securities loaned 277,475,346
- -------------------------------------------------------------
Deferred compensation plan 48,943
- -------------------------------------------------------------
Accrued advisory fees 1,691,908
- -------------------------------------------------------------
Accrued administrative services fees 15,096
- -------------------------------------------------------------
Accrued distribution fees 1,853,706
- -------------------------------------------------------------
Accrued directors' fees 867
- -------------------------------------------------------------
Accrued transfer agent fees 563,326
- -------------------------------------------------------------
Accrued operating expenses 434,849
=============================================================
Total liabilities 297,792,539
=============================================================
Net assets applicable to shares outstanding $2,313,627,092
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $1,103,740,292
_____________________________________________________________
=============================================================
Class B $1,158,978,687
_____________________________________________________________
=============================================================
Class C $ 50,908,113
_____________________________________________________________
=============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 42,670,252
_____________________________________________________________
=============================================================
Class B:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 46,400,165
_____________________________________________________________
=============================================================
Class C:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 2,037,273
_____________________________________________________________
=============================================================
Class A:
Net asset value and redemption price per
share $ 25.87
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $25.87 divided by
95.25%) $ 27.16
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 24.98
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 24.99
_____________________________________________________________
=============================================================
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$1,196,779) $ 8,064,739
- ------------------------------------------------------------
Dividends from affiliated money market funds 9,148,451
- ------------------------------------------------------------
Interest 103,328
- ------------------------------------------------------------
Security lending income 367,900
============================================================
Total investment income 17,684,418
============================================================
EXPENSES:
Advisory fees 22,245,857
- ------------------------------------------------------------
Administrative services fees 182,264
- ------------------------------------------------------------
Custodian fees 1,520,123
- ------------------------------------------------------------
Distribution fees -- Class A 6,067,804
- ------------------------------------------------------------
Distribution fees -- Class B 13,029,893
- ------------------------------------------------------------
Distribution fees -- Class C 417,860
- ------------------------------------------------------------
Transfer agent fees -- Class A 2,130,793
- ------------------------------------------------------------
Transfer agent fees -- Class B 2,783,318
- ------------------------------------------------------------
Transfer agent fees -- Class C 89,259
- ------------------------------------------------------------
Directors' fees 9,264
- ------------------------------------------------------------
Other 1,091,832
============================================================
Total expenses 49,568,267
============================================================
Less: Expenses paid indirectly (55,407)
============================================================
Net expenses 49,512,860
============================================================
Net investment income (loss) (31,828,442)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 470,167,710
- ------------------------------------------------------------
Foreign currencies (6,488,869)
============================================================
463,678,841
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (36,865,762)
- ------------------------------------------------------------
Foreign currencies (18,069)
============================================================
(36,883,831)
============================================================
Net gain from investment securities and
foreign currencies 426,795,010
============================================================
Net increase in net assets resulting from
operations $394,966,568
____________________________________________________________
============================================================
See Notes to Financial Statements.
FS-26
230
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
2000 1999
-------------- --------------
OPERATIONS:
Net investment income (loss) $ (31,828,442) $ (21,800,341)
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 463,678,841 195,571,025
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (36,883,831) 394,291,022
==============================================================================================
Net increase in net assets resulting from operations 394,966,568 568,061,706
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (51,990,426) --
- ----------------------------------------------------------------------------------------------
Class B (58,426,813) --
- ----------------------------------------------------------------------------------------------
Class C (1,135,421) --
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 112,191,153 (361,902,444)
- ----------------------------------------------------------------------------------------------
Class B 84,244,285 (307,272,112)
- ----------------------------------------------------------------------------------------------
Class C 38,282,689 (1,457,883)
==============================================================================================
Net increase (decrease) in net assets 518,132,035 (102,570,733)
==============================================================================================
NET ASSETS:
Beginning of year 1,795,495,057 1,898,065,790
==============================================================================================
End of year $2,313,627,092 $1,795,495,057
______________________________________________________________________________________________
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,218,746,808 $ 992,683,210
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (108,263) (13,357,764)
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and foreign currencies 427,253,871 111,551,104
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 667,734,676 704,618,507
==============================================================================================
$2,313,627,092 $1,795,495,057
______________________________________________________________________________________________
==============================================================================================
See Notes to Financial Statements.
FS-27
231
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 accounting
principles generally accepted in the United States of America 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 as of the close of the
customary trading session 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 as of the close of
the customary trading session 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 option
contracts generally will be valued 15 minutes after the close of the
customary trading session 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 customary
trading session 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 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$45,077,943, undistributed net realized gains decreased by $36,423,414 and
paid-in capital decreased by $8,654,529 as a result of book/tax differences
due to utilization of a portion of the proceeds from redemptions as
distributions for federal income tax purposes, foreign currency transactions
and net operating loss reclassifications. Net assets of the Fund were
unaffected by the reclassification discussed above.
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 from 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.
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 the portion of the results of operations resulting
from changes in foreign exchange rates on investments and the fluctuations
FS-28
232
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. Bond Premiums -- It has been the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes. In November 2000, a
revised AICPA Audit and Accounting Guide, Audits of Investment Companies, was
issued and is effective for fiscal years beginning after December 15, 2000.
The revised Guide will require the Fund to amortize premium and discount on
all fixed-income securities. Upon initial adoption, the Fund will be required
to adjust the cost of its fixed-income securities by the cumulative amount of
amortization that would have been recognized had amortization been in effect
from the purchase date of each holding. Adopting this accounting principle
will not effect the Fund's net asset value, but will change the
classification of certain amounts between interest income and realized and
unrealized gain/loss in the Statement of Operations. The Fund expects that
the impact of the adoption of this principle will not be material to the
financial statements.
H. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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. For the year ended October 31, 2000, AIM was
paid $182,264 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 October 31, 2000, AFS was
paid $3,024,696 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 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
0.50% 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,
2000, the Class A, Class B and Class C shares paid AIM Distributors $6,067,804,
$13,029,893 and $417,860, respectively, as compensation under the Plans.
AIM Distributors received commissions of $667,333 from sales of the Class A
shares of the Fund during the year ended October 31, 2000. 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, 2000,
AIM Distributors received $72,714 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, 2000, the Fund paid legal fees of $7,964 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
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $34,299 and reductions in
custodian fees of $21,108 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $55,407.
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 Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
FS-29
233
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly and failed to return the securities.
At October 31, 2000, securities with an aggregate value of $268,671,196 were
on loan to brokers. The loans were secured by cash collateral of $277,475,346.
For the year ended October 31, 2000, the Fund received fees of $367,900 for
securities lending.
NOTE 7-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, 2000 was
$1,456,299,617 and $1,558,928,652, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2000 is as follows:
Aggregate unrealized appreciation of
investment securities $ 781,574,831
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (115,619,284)
=========================================================
Net unrealized appreciation of investment
securities $ 665,955,547
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $1,615,935,774.
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years October 31, 2000 and 1999
were as follows:
2000 1999
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ---------------
Sold:
Class A 18,396,903 $ 547,555,973 44,392,973 $ 788,784,876
- ----------------------------------------------------------------------------------------------------------------------------
Class B 6,080,280 181,657,597 2,884,425 50,807,802
- ----------------------------------------------------------------------------------------------------------------------------
Class C 1,805,060 53,447,289 812,924 14,207,396
============================================================================================================================
Issued as reinvestment of dividends:
Class A 1,995,404 49,763,525 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Class B 2,238,791 54,178,748 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Class C 42,452 1,027,748 -- --
============================================================================================================================
Reacquired:
Class A (16,549,844) (485,128,345) (64,640,003) (1,150,687,320)
- ----------------------------------------------------------------------------------------------------------------------------
Class B (5,346,711) (151,592,060) (20,494,580) (358,079,914)
- ----------------------------------------------------------------------------------------------------------------------------
Class C (574,953) (16,192,348) (897,630) (15,665,279)
============================================================================================================================
8,087,382 $ 234,718,127 (37,941,891) $ (670,632,439)
____________________________________________________________________________________________________________________________
============================================================================================================================
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a) 1996(a)
---------- -------- -------- ---------- --------
Net asset value, beginning of period $ 21.95 $ 15.87 $ 17.28 $ 15.76 $ 13.09
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.28) (0.17) (0.10) (0.15) (0.09)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 5.56 6.25 (1.31) 1.67 2.81
==========================================================================================================================
Total from investment operations 5.28 6.08 (1.41) 1.52 2.72
==========================================================================================================================
Less distributions:
Distributions from net realized gains (1.36) -- -- -- (0.05)
==========================================================================================================================
Net asset value, end of period $ 25.87 $ 21.95 $ 15.87 $ 17.28 $ 15.76
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 24.27% 38.31% 8.16% 9.65% 20.83%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,103,740 $852,198 $937,587 $1,242,505 $919,319
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 1.65%(c) 1.80% 1.75% 1.75% 1.83%
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.96)%(c) (0.95)% (0.55)% (0.88)% (0.62)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 62% 60% 50% 57% 44%
__________________________________________________________________________________________________________________________
==========================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $1,213,560,798.
FS-30
234
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a) 1996(a)
---------- -------- -------- ---------- --------
Net asset value, beginning of period $ 21.35 $ 15.52 $ 17.00 $ 15.58 $ 13.02
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.42) (0.27) (0.19) (0.24) (0.17)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 5.41 6.10 (1.29) 1.66 2.78
==========================================================================================================================
Total from investment operations 4.99 5.83 (1.48) 1.42 2.61
==========================================================================================================================
Less distributions:
Distributions from net realized gains (1.36) -- -- -- (0.05)
==========================================================================================================================
Net asset value, end of period $ 24.98 $ 21.35 $ 15.52 $ 17.00 $ 15.58
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 23.56% 37.56% 8.71% 9.11% 20.09%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,158,979 $926,972 $947,293 $1,241,999 $807,215
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 2.19%(c) 2.37% 2.32% 2.30% 2.37%
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.50)%(c) (1.52)% (1.11)% (1.44)% (1.16)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 62% 60% 50% 57% 44%
__________________________________________________________________________________________________________________________
==========================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $1,302,989,286.
CLASS C
-------------------------------------------------------
AUGUST 4, 1997
YEAR ENDED OCTOBER 31, (DATE SALES COMMENCED)
----------------------------- TO OCTOBER 31,
2000(a) 1999(a) 1998(a) 1997(a)
------- ------- ------- ----------------------
Net asset value, beginning of period $21.35 $15.52 $17.00 $18.39
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.42) (0.27) (0.19) (0.04)
- ---------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 5.42 6.10 (1.29) (1.35)
=====================================================================================================================
Total from investment operations 5.00 5.83 (1.48) (1.39)
=====================================================================================================================
Less distributions:
Distributions from net realized gains (1.36) -- -- --
=====================================================================================================================
Net asset value, end of period $24.99 $21.35 $15.52 $17.00
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 23.61% 37.56% 8.71% 7.56%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $50,908 $16,325 $13,186 $4,676
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets 2.19%(c) 2.37% 2.34% 2.36%(d)
=====================================================================================================================
Ratio of net investment income (loss) to average net assets (1.50)%(c) (1.52)% (1.13)% (1.50)%(d)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate 62% 60% 50% 57%
_____________________________________________________________________________________________________________________
=====================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $41,785,990.
(d) Annualized.
FS-31
235
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, 2000, 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 periods in the five-year
period then ended. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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
periods in the five-year period then ended in conformity
with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
December 6, 2000
Houston, Texas
FS-32
236
SCHEDULE OF INVESTMENTS
October 31, 2000
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS-47.74%
BANKS (MONEY CENTER)-1.18%
Chase Manhattan Corp. (The) 440,000 $ 20,020,000
===============================================================
BIOTECHNOLOGY-1.75%
Amgen Inc.(a) 303,000 17,555,062
- ---------------------------------------------------------------
Protein Design Labs, Inc.(a) 89,500 12,089,492
===============================================================
29,644,554
===============================================================
COMMUNICATIONS EQUIPMENT-5.53%
ADC Telecommunications, Inc.(a) 612,000 13,081,500
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 255,000 28,496,250
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 188,768 15,360,996
- ---------------------------------------------------------------
Redback Networks Inc.(a) 221,000 23,522,687
- ---------------------------------------------------------------
Scientific-Atlanta, Inc. 190,700 13,051,031
===============================================================
93,512,464
===============================================================
COMPUTERS (HARDWARE)-2.22%
McDATA Corp.-Class B(a) 37,600 3,134,312
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 311,000 34,482,125
===============================================================
37,616,437
===============================================================
COMPUTERS (NETWORKING)-2.61%
Cisco Systems, Inc.(a) 392,500 21,145,937
- ---------------------------------------------------------------
Juniper Networks, Inc.(a) 118,000 23,010,000
===============================================================
44,155,937
===============================================================
COMPUTERS (PERIPHERALS)-4.09%
Brocade Communications Systems,
Inc.(a) 99,000 22,510,125
- ---------------------------------------------------------------
EMC Corp.(a) 525,000 46,757,813
===============================================================
69,267,938
===============================================================
COMPUTERS (SOFTWARE &
SERVICES)-10.17%
America Online, Inc.(a) 128,000 6,455,040
- ---------------------------------------------------------------
Ariba, Inc.(a) 127,000 16,049,625
- ---------------------------------------------------------------
BEA Systems, Inc.(a) 225,000 16,143,750
- ---------------------------------------------------------------
Mercury Interactive Corp.(a) 203,000 22,533,000
- ---------------------------------------------------------------
Rational Software Corp.(a) 446,000 26,620,625
- ---------------------------------------------------------------
Siebel Systems, Inc.(a) 285,000 29,907,188
- ---------------------------------------------------------------
TIBCO Software Inc.(a) 141,700 8,927,100
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 267,000 37,651,172
- ---------------------------------------------------------------
Vitria Technology, Inc.(a) 290,000 7,793,750
===============================================================
172,081,250
===============================================================
ELECTRICAL EQUIPMENT-0.49%
Sanmina Corp.(a) 72,500 8,287,656
===============================================================
MARKET
SHARES VALUE
ELECTRONICS
(INSTRUMENTATION)-1.41%
Waters Corp.(a) 328,500 $ 23,836,781
===============================================================
ELECTRONICS (SEMICONDUCTORS)-2.38%
Analog Devices, Inc.(a) 130,000 8,450,000
- ---------------------------------------------------------------
Applied Micro Circuits Corp.(a) 166,000 12,688,625
- ---------------------------------------------------------------
SDL, Inc.(a) 43,000 11,147,750
- ---------------------------------------------------------------
Xilinx, Inc.(a) 110,000 7,968,125
===============================================================
40,254,500
===============================================================
ENTERTAINMENT-0.52%
Time Warner Inc. 115,000 8,729,650
===============================================================
FINANCIAL (DIVERSIFIED)-0.53%
American Express Co. 150,000 9,000,000
===============================================================
HEALTH CARE (DRUGS-GENERIC &
OTHER)-3.64%
Andrx Group(a) 42,800 3,081,600
- ---------------------------------------------------------------
Forest Laboratories, Inc.(a) 236,000 31,270,000
- ---------------------------------------------------------------
Genentech, Inc.(a) 330,000 27,225,000
===============================================================
61,576,600
===============================================================
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.81%
Allergan, Inc. 160,000 13,450,000
- ---------------------------------------------------------------
Pfizer Inc. 400,000 17,275,000
===============================================================
30,725,000
===============================================================
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.48%
Medtronic, Inc. 185,000 10,047,813
- ---------------------------------------------------------------
PE Corp-PE Biosystems Group 273,000 31,941,000
===============================================================
41,988,813
===============================================================
HEALTH CARE (SPECIALIZED
SERVICES)-0.48%
Alza Corp.(a) 100,000 8,093,750
===============================================================
INSURANCE (MULTI-LINE)-1.55%
American International Group, Inc. 268,000 26,264,000
===============================================================
INVESTMENT BANKING/BROKERAGE-1.98%
Goldman Sachs Group, Inc. (The) 80,000 7,985,000
- ---------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 317,500 25,499,219
===============================================================
33,484,219
===============================================================
LEISURE TIME (PRODUCTS)-0.53%
Harley-Davidson, Inc. 185,000 8,914,688
===============================================================
NATURAL GAS-0.52%
Dynegy Inc.-Class A 191,000 8,845,688
===============================================================
FS-33
237
MARKET
SHARES VALUE
POWER PRODUCERS
(INDEPENDENT)-0.47%
Calpine Corp.(a) 100,000 $ 7,893,750
===============================================================
SERVICES (DATA PROCESSING)-0.46%
Ceridian Corp.(a) 310,000 7,750,000
===============================================================
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.94%
Powerwave Technologies, Inc.(a) 330,000 15,881,250
===============================================================
Total Domestic Common Stocks
(Cost $596,805,209) 807,824,925
===============================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-39.92%
AUSTRALIA-1.29%
AMP Ltd. (Insurance-Life/Health) 448,840 4,045,892
- ---------------------------------------------------------------
Brambles Industries Ltd. (Air
Freight) 335,000 8,685,662
- ---------------------------------------------------------------
Computershare Ltd.-Wts., expiring
07/26/01 (Computers-Software &
Services) 100,000 55,982
- ---------------------------------------------------------------
Foster's Brewing Group Ltd.
(Beverages-Alcoholic) 3,998,000 9,056,228
===============================================================
21,843,764
===============================================================
BRAZIL-0.96%
Companhia de Bebidas das
Americas-ADR
(Beverages-Alcoholic) 408,600 9,219,037
- ---------------------------------------------------------------
Tele Norte Leste Participacoes
S.A.-ADR (Telephone) 314,800 6,964,950
===============================================================
16,183,987
===============================================================
CANADA-3.32%
Bombardier Inc.-Class B
(Aerospace/Defense) 1,296,320 20,327,941
- ---------------------------------------------------------------
C-MAC Industries, Inc.
(Electronics-Component
Distributors)(a) 184,400 10,383,291
- ---------------------------------------------------------------
Celestica Inc.
(Electronics-Semiconductors)(a) 205,000 14,603,549
- ---------------------------------------------------------------
Nortel Networks Corp.
(Communications Equipment) 239,184 10,882,872
===============================================================
56,197,653
===============================================================
DENMARK-1.35%
Novo Nordisk A.S.-Class B (Health
Care- Drugs-Generic & Other)(a) 108,050 22,917,531
===============================================================
FINLAND-1.27%
Nokia Oyj (Communications
Equipment) 521,000 21,439,691
===============================================================
FRANCE-7.02%
Alcatel S.A. (Communications
Equipment) 330,000 20,135,919
- ---------------------------------------------------------------
Aventis S.A.
(Chemicals-Diversified)(a) 290,600 20,962,504
- ---------------------------------------------------------------
BNP Paribas (Banks-Major Regional) 238,000 20,521,036
- ---------------------------------------------------------------
Havas Advertising S.A.
(Services-Advertising/
Marketing) 647,900 10,441,468
- ---------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 43,020 7,677,827
- ---------------------------------------------------------------
Schneider Electric S.A.
(Housewares)(a) 82,200 5,354,006
- ---------------------------------------------------------------
MARKET
SHARES VALUE
FRANCE-(CONTINUED)
Societe Television Francaise 1
(Broadcasting-Television, Radio
& Cable) 151,500 $ 8,267,082
- ---------------------------------------------------------------
STMicroelectronics N.V.
(Electronics-Semiconductors) 274,000 13,823,914
- ---------------------------------------------------------------
Total Fina Elf S.A.
(Oil-International Integrated) 81,459 11,655,348
===============================================================
118,839,104
===============================================================
GERMANY-0.49%
Siemens A.G.
(Manufacturing-Diversified) 64,900 8,261,608
===============================================================
HONG KONG-1.59%
China Mobile Ltd.
(Telecommunications-
Cellular/Wireless)(a) 1,496,000 9,590,973
- ---------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banks-Regional) 828,000 4,182,998
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Retail-Food Chains) 781,000 9,713,681
- ---------------------------------------------------------------
Shangri-La Asia Ltd.
(Lodging-Hotels) 3,478,000 3,433,850
===============================================================
26,921,502
===============================================================
ISRAEL-1.99%
Check Point Software Technologies
Ltd. (Computers-Software &
Services)(a) 213,000 33,733,875
===============================================================
JAPAN-5.72%
Advantest Corp.
(Electronics-Instrumentation) 43,200 5,633,836
- ---------------------------------------------------------------
Crayfish Co. Ltd.-ADR
(Computers-Software &
Services)(a) 152,200 237,812
- ---------------------------------------------------------------
Hirose Electric Co. Ltd.
(Electronics-Component
Distributors) 44,000 5,080,878
- ---------------------------------------------------------------
Hoya Corp.
(Manufacturing-Specialized) 50,000 4,133,254
- ---------------------------------------------------------------
Matsushita Communication
Industrial Co., Ltd. (Telephone) 46,000 6,028,502
- ---------------------------------------------------------------
Murata Manufacturing Co., Ltd.
(Electronics-Component
Distributors) 49,000 5,864,822
- ---------------------------------------------------------------
NEC Corp. (Computers-Hardware) 358,000 6,824,360
- ---------------------------------------------------------------
Nippon Telegraph & Telephone Corp.
(Telecommunications-Long
Distance) 478 4,350,034
- ---------------------------------------------------------------
NTT Data Corp. (Computers-Software
& Services)(a) 318 2,477,203
- ---------------------------------------------------------------
NTT DoCoMo, Inc.
(Telecommunications-
Cellular/Wireless) 266 6,557,669
- ---------------------------------------------------------------
Ricoh Co., Ltd. (Office Equipment
& Supplies) 230,000 3,541,218
- ---------------------------------------------------------------
Rohm Co. Ltd.
(Electronics-Component
Distributors) 17,000 4,286,028
- ---------------------------------------------------------------
Sanix Inc. (Services-Commercial &
Consumer) 72,900 3,734,693
- ---------------------------------------------------------------
Sanyo Electric Co., Ltd.
(Electronics-Component
Distributors) 1,332,000 10,132,063
- ---------------------------------------------------------------
Sharp Corp. (Electrical Equipment) 185,000 2,356,688
- ---------------------------------------------------------------
Sony Corp. (Electrical Equipment) 113,400 9,062,439
- ---------------------------------------------------------------
FS-34
238
MARKET
SHARES VALUE
JAPAN-(CONTINUED)
Takeda Chemical Industries Ltd.
(Health Care-Drugs-Generic &
Other) 94,000 $ 6,194,015
- ---------------------------------------------------------------
Tokyo Electron Ltd. (Electronics-
Semiconductors) 67,000 5,243,825
- ---------------------------------------------------------------
Trend Micro Inc.
(Computers-Software &
Services)(a) 52,550 4,960,500
===============================================================
96,699,839
===============================================================
MEXICO-1.51%
Coca-Cola Femsa S.A.-ADR
(Beverages-Non-Alcoholic) 376,100 7,216,419
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 105,200 5,693,950
- ---------------------------------------------------------------
Telefonos de Mexico S.A. de C.V.-
Class L-ADR (Telephone) 137,300 7,405,619
- ---------------------------------------------------------------
Wal-Mart de Mexico S.A. de
C.V.-Series C (Retail-General
Merchandise)(a) 2,327,000 5,305,229
===============================================================
25,621,217
===============================================================
NETHERLANDS-2.99%
Koninklijke (Royal) Philips
Electronics N.V. (Electrical
Equipment) 537,000 21,104,627
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.
(Oil-International Integrated) 291,840 17,309,657
- ---------------------------------------------------------------
VNU N.V. (Publishing) 257,930 12,148,522
===============================================================
50,562,806
===============================================================
SINGAPORE-0.50%
DBS Group Holdings Ltd.
(Banks-Money Center) 459,283 5,413,174
- ---------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 782,600 1,559,585
- ---------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing-Newspapers) 106,000 1,514,889
===============================================================
8,487,648
===============================================================
SOUTH KOREA-0.57%
Korea Telecom Corp.-ADR
(Telephone) 178,000 6,563,750
- ---------------------------------------------------------------
Samsung Electronics N.V.
(Electronics-Component
Distributors) 24,000 3,006,593
===============================================================
9,570,343
===============================================================
SPAIN-1.10%
Telefonica S.A. (Telephone)(a) 868,380 16,559,282
- ---------------------------------------------------------------
MARKET
SHARES VALUE
SPAIN-(CONTINUED)
Telefonica S.A.-ADR (Telephone)(a) 34,248 $ 1,984,243
===============================================================
18,543,525
===============================================================
SWITZERLAND-3.34%
Adecco S.A. (Services-Commercial &
Consumer) 12,958 8,961,661
- ---------------------------------------------------------------
Compagnie Financiere Richemont
A.G.-Units (Tobacco)(b) 5,000 13,909,754
- ---------------------------------------------------------------
Julius Baer Holding A.G.-Class B
(Banks-Major Regional) 875 4,332,888
- ---------------------------------------------------------------
Nestle S.A. (Foods)(a) 8,300 17,202,192
- ---------------------------------------------------------------
Serono S.A.-Class B (Health
Care-Drugs-Generic & Other) 13,520 12,163,712
===============================================================
56,570,207
===============================================================
UNITED KINGDOM-4.91%
ARM Holdings PLC (Electronics-
Semiconductors)(a) 720,400 7,110,002
- ---------------------------------------------------------------
BP Amoco PLC (Oil-International
Integrated) 1,389,100 11,784,337
- ---------------------------------------------------------------
Marconi PLC (Communications
Equipment) 1,098,000 13,864,644
- ---------------------------------------------------------------
Shell Transport & Trading Co.
(Oil-International Integrated) 1,491,000 11,999,587
- ---------------------------------------------------------------
Spirent PLC (Communications
Equipment) 1,706,000 15,822,205
- ---------------------------------------------------------------
Vodafone Group PLC
(Telecommunications-
Cellular/Wireless) 3,501,234 14,571,749
- ---------------------------------------------------------------
WPP Group PLC
(Services-Advertising/
Marketing) 594,600 7,982,773
===============================================================
83,135,297
===============================================================
Total Foreign Stocks & Other
Equity Interests (Cost
$555,989,403) 675,529,597
===============================================================
MONEY MARKET FUNDS-10.25%
STIC Liquid Assets Portfolio(c) 86,744,451 86,744,451
- ---------------------------------------------------------------
STIC Prime Portfolio(c) 86,744,451 86,744,451
===============================================================
Total Money Market Funds (Cost
$173,488,902) 173,488,902
===============================================================
TOTAL INVESTMENTS-97.91% (Cost
$1,326,283,514) 1,656,843,424
===============================================================
OTHER ASSETS LESS
LIABILITIES-2.09% 35,366,989
===============================================================
NET ASSETS-100.00% $1,692,210,413
_______________________________________________________________
===============================================================
Investment Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Ltd. - Limited
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes common or preferred
shares of the issuer.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-35
239
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments, at market value (cost
$1,326,283,514) $1,656,843,424
- -------------------------------------------------------------
Foreign currencies, at market value (cost
$10,044,949) 10,056,555
- -------------------------------------------------------------
Receivables for:
Investments sold 4,412,018
- -------------------------------------------------------------
Capital stock sold 52,492,656
- -------------------------------------------------------------
Dividends and interest 2,226,247
- -------------------------------------------------------------
Investment for deferred compensation plan 32,356
- -------------------------------------------------------------
Other assets 332,147
=============================================================
Total assets $1,726,395,403
=============================================================
LIABILITIES:
Payables for:
Investments purchased 28,300,956
- -------------------------------------------------------------
Capital stock reacquired 2,719,689
- -------------------------------------------------------------
Deferred compensation plan 32,356
- -------------------------------------------------------------
Accrued advisory fees 1,035,837
- -------------------------------------------------------------
Accrued administrative services fees 13,262
- -------------------------------------------------------------
Accrued distribution fees 1,232,429
- -------------------------------------------------------------
Accrued directors' fees 825
- -------------------------------------------------------------
Accrued transfer agent fees 412,954
- -------------------------------------------------------------
Accrued operating expenses 436,682
=============================================================
Total liabilities 34,184,990
=============================================================
Net assets applicable to shares outstanding $1,692,210,413
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $ 796,991,823
_____________________________________________________________
=============================================================
Class B $ 806,408,561
_____________________________________________________________
=============================================================
Class C $ 88,810,029
_____________________________________________________________
=============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 32,093,243
_____________________________________________________________
=============================================================
Class B:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 33,631,933
_____________________________________________________________
=============================================================
Class C:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 3,702,778
_____________________________________________________________
=============================================================
Class A:
Net asset value and redemption price per
share $ 24.83
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $24.83 divided by
95.25%) $ 26.07
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 23.98
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 23.98
_____________________________________________________________
=============================================================
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$634,651) $14,918,005
- ------------------------------------------------------------
Dividends from affiliated money market funds 5,318,415
- ------------------------------------------------------------
Interest 448,848
============================================================
Total investment income 20,685,268
============================================================
EXPENSES:
Advisory fees 11,431,836
- ------------------------------------------------------------
Administrative services fees 145,994
- ------------------------------------------------------------
Custodian fees 707,290
- ------------------------------------------------------------
Distribution fees -- Class A 3,100,225
- ------------------------------------------------------------
Distribution fees -- Class B 6,788,675
- ------------------------------------------------------------
Distribution fees -- Class C 675,670
- ------------------------------------------------------------
Transfer agent fees -- Class A 1,120,848
- ------------------------------------------------------------
Transfer agent fees -- Class B 1,474,643
- ------------------------------------------------------------
Transfer agent fees -- Class C 146,770
- ------------------------------------------------------------
Directors' fees 8,853
- ------------------------------------------------------------
Other 665,411
============================================================
Total expenses 26,266,215
============================================================
Less: Fees waived by advisor (125,000)
- ------------------------------------------------------------
Expenses paid indirectly (26,785)
============================================================
Net expenses 26,114,430
============================================================
Net investment income (loss) (5,429,162)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES AND
OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (1,494,323)
- ------------------------------------------------------------
Foreign currencies (2,234,055)
- ------------------------------------------------------------
Option contracts written 152,919
============================================================
(3,575,459)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 22,263,986
- ------------------------------------------------------------
Foreign currencies (341,656)
- ------------------------------------------------------------
Option contracts written 921,195
============================================================
22,843,525
============================================================
Net gain on investment securities, foreign
currencies and option contracts 19,268,066
============================================================
Net increase in net assets resulting from
operations $13,838,904
____________________________________________________________
============================================================
See Notes to Financial Statements.
FS-36
240
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
2000 1999
-------------- ------------
OPERATIONS:
Net investment income (loss) $ (5,429,162) $ (6,059,211)
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (3,575,459) 63,983,622
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and option contracts 22,843,525 140,454,322
============================================================================================
Net increase in net assets resulting from operations 13,838,904 198,378,733
============================================================================================
Distributions to shareholders from net realized gains:
Class A (22,377,539) (6,185,053)
- --------------------------------------------------------------------------------------------
Class B (25,278,124) (7,892,012)
- --------------------------------------------------------------------------------------------
Class C (1,981,428) (358,333)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 420,853,851 84,486,765
- --------------------------------------------------------------------------------------------
Class B 399,786,433 49,407,333
- --------------------------------------------------------------------------------------------
Class C 62,117,243 14,141,472
============================================================================================
Net increase in net assets 846,959,340 331,978,905
============================================================================================
NET ASSETS:
Beginning of year 845,251,073 513,272,168
============================================================================================
End of year $1,692,210,413 $845,251,073
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,364,256,905 $568,723,576
- --------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (47,437) (806,662)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and option contracts (2,127,865) 55,673,261
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 330,128,810 221,660,898
============================================================================================
$1,692,210,413 $845,251,073
____________________________________________________________________________________________
============================================================================================
See Notes to Financial Statements.
FS-37
241
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 long-term growth of capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 as of the close of the
customary trading session 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 as of the close of
the customary trading session 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 option
contracts generally will be valued 15 minutes after the close of the
customary trading session 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 customary
trading session 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 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$6,188,387, undistributed net realized gains decreased by $4,588,576 and paid
in capital decreased by $1,599,811 as a result of book/tax differences due to
utilization of a portion of the proceeds from redemptions as distributions
for federal income tax purposes, foreign currency transactions and net
operating loss reclassifications. Net assets of the Fund were unaffected by
the reclassification discussed above.
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 from 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.
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 the portion of the results of operations resulting
from changes in
FS-38
242
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, 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 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. Bond
Premiums -- It has been the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes. In November 2000, a
revised AICPA Audit and Accounting Guide, Audits of Investment Companies, was
issued and is effective for fiscal years beginning after December 15, 2000.
The revised Guide will require the Fund to amortize premium and discount on
all fixed-income securities. Upon initial adoption, the Fund will be required
to adjust the cost of its fixed-income securities by the cumulative amount of
amortization that would have been recognized had amortization been in effect
from the purchase date of each holding. Adopting this accounting principle
will not effect the Fund's net asset value, but will change the
classification of certain amounts between interest income and realized and
unrealized gain/loss in the Statement of Operations. The Fund expects that
the impact of the adoption of this principle will not be material to the
financial statements. I. Expenses -- Distribution expenses and certain
transfer agency expenses directly attributable to a class of shares are
charged to those classes' 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. AIM has contractually agreed to waive
fees and reimburse expenses (excluding interest, taxes, dividend expense on
short sales, extraordinary items and increases in expenses due to offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit total operating expenses of Class A shares to 1.60% (e.g. if
AIM waives 0.07% of Class A expenses, AIM will also waive 0.07% of Class B and
Class C expenses). During the year ended October 31, 2000, AIM waived fees of
$125,000.
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. For the year ended October 31, 2000, AIM was
paid $145,994 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 October 31, 2000, AFS was
paid $1,505,470 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 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
0.50% of the Fund's average daily net assets of Class A shares
FS-39
243
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, 2000, the Class A, Class B and Class C shares
paid AIM Distributors $3,100,225, $6,788,675 and $675,670, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $619,969 from sales of the Class A
shares of the Fund during the year ended October 31, 2000. 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, 2000,
AIM Distributors received $44,181 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, 2000, the Fund paid legal fees of $5,756 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
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $18,741 and reductions in
custodian fees of $8,044 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $26,785.
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 Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. During
the year ended October 31, 2000, there were no securities on loan.
NOTE 7-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, 2000 was
$1,624,906,363 and $1,387,676,119, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2000 is as follows:
Aggregate unrealized appreciation of
investment securities $363,980,808
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (38,626,309)
=========================================================
Net unrealized appreciation of investment
securities $325,354,499
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $1,331,488,925.
NOTE 8-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 2000 are
summarized as follows:
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
Beginning of year 1,444 $1,753,505
- ---------------------------------------------------------
Closed (640) (1,214,039)
- ---------------------------------------------------------
Exercised (804) (539,466)
=========================================================
End of year -- $ 0
_________________________________________________________
=========================================================
FS-40
244
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years October 31, 2000 and 1999
were as follows:
2000 1999
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
Sold:
Class A 15,127,777 $ 406,628,704 10,512,070 $ 211,966,029
- -------------------------------------------------------------------------------------------------------------------------
Class B 6,900,851 184,168,116 4,204,829 83,820,436
- -------------------------------------------------------------------------------------------------------------------------
Class C 2,828,982 75,283,012 944,252 18,989,474
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 806,611 20,568,517 314,736 5,777,296
- -------------------------------------------------------------------------------------------------------------------------
Class B 942,086 23,307,209 411,104 7,371,231
- -------------------------------------------------------------------------------------------------------------------------
Class C 77,109 1,907,682 37,653 676,846
=========================================================================================================================
Issued in connection with acquisitions:
Class A 7,688,264 213,107,428* 3,763,754 74,083,124**
- -------------------------------------------------------------------------------------------------------------------------
Class B 10,539,727 282,469,092* 1,833,252 35,223,535**
- -------------------------------------------------------------------------------------------------------------------------
Class C 91,163 2,444,182* -- --**
=========================================================================================================================
Reacquired:
Class A (8,110,012) (219,450,798) (10,242,303) (207,339,684)
- -------------------------------------------------------------------------------------------------------------------------
Class B (3,420,141) (90,157,984) (3,903,318) (77,007,869)
- -------------------------------------------------------------------------------------------------------------------------
Class C (670,330) (17,517,633) (277,476) (5,524,848)
=========================================================================================================================
32,802,087 $ 882,757,527 7,598,553 $ 148,035,570
_________________________________________________________________________________________________________________________
=========================================================================================================================
* As of the close of business on June 9, 2000, the Fund acquired all the net
assets of AIM Global Growth & Income Fund pursuant to a plan of
reorganization approved by AIM Global Growth & Income Fund's shareholders on
May 31, 2000. The acquisition was accomplished by a tax-free exchange of
18,319,154 shares of the Fund for 74,783,315 shares of AIM Global Growth &
Income Fund outstanding as of the close of business on June 9, 2000. AIM
Global Growth & Income Fund's net assets at that date were $498,020,702,
including $85,624,387 of unrealized appreciation, were combined with those of
the Fund. The aggregate net assets of the Fund immediately before the
acquisition were $1,254,996,609.
** 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.
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2000(a) 1999 1998 1997 1996
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 23.43 $ 17.91 $ 16.65 $ 14.20 $ 12.32
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.03) (0.10) (0.05) (0.04) (0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.77 6.12 1.74 2.49 2.11
======================================================================================================================
Total from investment operations 2.74 6.02 1.69 2.45 2.10
======================================================================================================================
Less distributions from net realized gains (1.34) (0.50) (0.43) -- (0.22)
======================================================================================================================
Net asset value, end of period $ 24.83 $ 23.43 $ 17.91 $ 16.65 $ 14.20
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 11.52% 34.43% 10.43% 17.25% 17.26%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $796,992 $388,549 $219,050 $178,917 $114,971
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.62%(c) 1.67% 1.70% 1.76% 1.94%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.63%(c) 1.67% 1.70% 1.76% 1.93%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.10)%(c) (0.57)% (0.27)% (0.30)% (0.13)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 110% 93% 97% 96% 82%
______________________________________________________________________________________________________________________
======================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $620,045,047.
FS-41
245
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2000(a) 1999(a) 1998(a) 1997 1996
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 22.78 $ 17.52 $ 16.39 $ 14.05 $ 12.26
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17) (0.23) (0.15) (0.11) (0.05)
- ----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.71 5.99 1.71 2.45 2.06
======================================================================================================================
Total from investment operations 2.54 5.76 1.56 2.34 2.01
======================================================================================================================
Less distributions from net realized gains (1.34) (0.50) (0.43) -- (0.22)
======================================================================================================================
Net asset value, end of period $ 23.98 $ 22.78 $ 17.52 $ 16.39 $ 14.05
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 10.95% 33.69% 9.78% 16.65% 16.60%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $806,409 $425,345 $282,456 $224,225 $121,848
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.16%(c) 2.23% 2.26% 2.29% 2.49%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.17%(c) 2.23% 2.26% 2.29% 2.48%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.64)%(c) (1.13)% (0.83)% (0.83)% (0.69)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 110% 93% 97% 96% 82%
______________________________________________________________________________________________________________________
======================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $678,867,468.
CLASS C
-------------------------------------------------
AUGUST 4, 1997
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------- OCTOBER 31,
2000(a) 1999(a) 1998(a) 1997
------- ------- ------- ----------------
Net asset value, beginning of period $ 22.79 $ 17.52 $ 16.39 $17.39
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17) (0.23) (0.15) (0.03)
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.70 6.00 1.71 (0.97)
===============================================================================================================
Total from investment operations 2.53 5.77 1.56 (1.00)
===============================================================================================================
Less distributions from net realized gains (1.34) (0.50) (0.43) --
===============================================================================================================
Net asset value, end of period $ 23.98 $ 22.79 $ 17.52 $16.39
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 10.90% 33.69% 9.78% (5.75)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $88,810 $31,356 $11,765 $1,100
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.16%(c) 2.23% 2.26% 2.29%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers 2.17%(c) 2.23% 2.26% 2.29%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (0.64)%(c) (1.13)% (0.83)% (0.83)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 110% 93% 97% 96%
_______________________________________________________________________________________________________________
===============================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $67,566,969.
(d) Annualized.
FS-42
246
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, 2000, 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 periods in the five-year
period then ended. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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
periods in the five-year period then ended, in conformity
with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
December 6, 2000
Houston, Texas
FS-43
247
SCHEDULE OF INVESTMENTS
October 31, 2000
PRINCIPAL MARKET
AMOUNT VALUE
U.S. DOLLAR DENOMINATED BONDS &
NOTES-67.01%
AIR FREIGHT-0.33%
Atlas Air, Inc., Sr. Unsec. Notes,
10.75%, 08/01/05 $ 530,000 $ 551,200
==============================================================
AIRLINES-1.46%
Air 2 US-Series C, Equipment Trust
Ctfs., 10.13%, 10/01/20 (Acquired
10/28/99; Cost $450,000)(a) 450,000 463,248
- --------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 10.38%, 12/15/22 500,000 531,790
- --------------------------------------------------------------
Unsec. Notes, 7.90%, 12/15/09 1,000,000 928,400
- --------------------------------------------------------------
Dunlop Standard Aerospace Holdings
PLC (United Kingdom), Sr. Unsec.
Yankee Sub. Notes, 11.88%,
05/15/09 530,000 530,000
==============================================================
2,453,438
==============================================================
AUTOMOBILES-0.43%
DaimlerChrysler N.A. Holding Corp.,
Gtd. Notes, 8.00%, 06/15/10 700,000 721,931
==============================================================
BANKS (MAJOR REGIONAL)-1.62%
BB&T Corp., Putable Sub. Notes,
6.38%, 06/30/05 125,000 118,456
- --------------------------------------------------------------
Crestar Financial Corp., Sub.
Notes, 8.75%, 11/15/04 75,000 78,792
- --------------------------------------------------------------
Midland Bank PLC (United Kingdom),
Yankee Sub. Notes, 7.65%,
05/01/25 280,000 282,176
- --------------------------------------------------------------
Regions Financial Corp., Putable
Sub. Notes, 7.75%, 09/15/24 500,000 509,135
- --------------------------------------------------------------
Republic New York Corp.,
Sub. Deb., 9.50%, 04/15/14 370,000 414,766
- --------------------------------------------------------------
Sub. Notes, 9.70%, 02/01/09 400,000 443,140
- --------------------------------------------------------------
UBS Preferred Funding Trust I, Gtd.
Bonds, 8.62%, 10/29/49 855,000 865,715
==============================================================
2,712,180
==============================================================
BANKS (MONEY CENTER)-2.79%
BSCH Issuance Ltd. (Cayman
Islands), Gtd. Sub. Notes, 7.63%,
09/14/10 800,000 790,728
- --------------------------------------------------------------
First Union Corp., Putable Sub.
Deb.,
6.55%, 10/15/35 1,500,000 1,442,775
- --------------------------------------------------------------
7.50%, 04/15/35 1,000,000 999,890
- --------------------------------------------------------------
NCNB Corp., Sub. Notes, 9.38%,
09/15/09 1,300,000 1,444,651
==============================================================
4,678,044
==============================================================
BANKS (REGIONAL)-2.40%
Banponce Trust I-Series A, Gtd.
Notes, 8.33%, 02/01/27 360,000 323,086
- --------------------------------------------------------------
Mercantile Bancorp., Inc., Unsec.
Sub. Notes, 7.30%, 06/15/07 400,000 393,464
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
BANKS (REGIONAL)-(CONTINUED)
NBD Bank N.A. Michigan, Putable
Sub. Deb., 8.25%, 11/01/24 $1,350,000 $ 1,419,471
- --------------------------------------------------------------
Riggs Capital Trust II-Series C,
Gtd. Sec. Bonds, 8.88%, 03/15/27 570,000 410,423
- --------------------------------------------------------------
Union Planters Bank N.A., Unsec.
Sub. Notes, 6.50%, 03/15/08 155,000 138,911
- --------------------------------------------------------------
Union Planters Capital Trust, Gtd.
Bonds, 8.20%, 12/15/26 400,000 347,792
- --------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%,
06/01/26 1,000,000 997,690
==============================================================
4,030,837
==============================================================
BEVERAGES (ALCOHOLIC)-0.23%
J Seagram & Sons, Gtd. Deb., 9.65%,
08/15/18 300,000 387,036
==============================================================
BROADCASTING (TELEVISION, RADIO & CABLE)-7.88%
Adelphia Communications Corp., Sr.
Unsec. Notes, 10.88%, 10/01/10 700,000 661,500
- --------------------------------------------------------------
AT&T Corp.-Liberty Media Corp.,
Bonds, 7.88%, 07/15/09 85,000 82,170
- --------------------------------------------------------------
Sr. Unsec. Deb., 8.25%, 02/01/30 1,050,000 937,734
- --------------------------------------------------------------
British Sky Broadcasting Group PLC
(United Kingdom), Sr. Unsec. Gtd.
Yankee Notes, 8.20%, 07/15/09 665,000 615,504
- --------------------------------------------------------------
Charter Communications Holdings,
LLC/Charter Communications
Holdings Capital Corp., Sr.
Unsec. Disc. Notes, 9.92%,
04/01/11(b) 1,000,000 590,000
- --------------------------------------------------------------
Clear Channel Communications, Inc.,
Unsec. Deb., 7.25%, 10/15/27 1,300,000 1,148,654
- --------------------------------------------------------------
Comcast Cable Communications,
Unsec. Notes, 8.50%, 05/01/27 1,000,000 1,074,580
- --------------------------------------------------------------
Cox Enterprises, Inc., Notes,
8.00%, 02/15/07 (Acquired
02/16/00; Cost $297,759)(a) 300,000 301,263
- --------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Deb.,
7.63%, 07/15/18 1,000,000 893,820
- --------------------------------------------------------------
7.88%, 02/15/18 1,000,000 916,810
- --------------------------------------------------------------
Sr. Unsec. Notes, 7.88%, 12/15/07 1,875,000 1,818,487
- --------------------------------------------------------------
Series B, Sr. Notes, 8.13%,
07/15/09 1,300,000 1,273,480
- --------------------------------------------------------------
Fox Family Worldwide, Inc., Sr.
Unsec. Disc. Notes, 10.25%,
11/01/07(b) 940,000 690,900
- --------------------------------------------------------------
Knology Holdings, Inc., Sr. Disc.
Notes, 11.88%, 10/15/07(b) 700,000 316,750
- --------------------------------------------------------------
Lenfest Communications, Inc., Sr.
Unsec. Sub. Notes, 8.25%,
02/15/08 650,000 656,591
- --------------------------------------------------------------
TCI Communications, Inc., Sr. Deb.,
8.75%, 08/01/15 750,000 777,615
- --------------------------------------------------------------
FS-44
248
PRINCIPAL MARKET
AMOUNT VALUE
BROADCASTING (TELEVISION, RADIO &
CABLE)-(CONTINUED)
United Pan-Europe Communications
N.V. (Netherlands)-Series B, Sr.
Unsec. Disc. Yankee Notes,
13.75%, 02/01/10(b) $1,200,000 $ 462,000
==============================================================
13,217,858
==============================================================
BUILDING MATERIALS-0.26%
Dayton Superior Corp., Sr. Unsec.
Gtd. Sub. Notes, 13.00%, 06/15/09 450,000 429,750
==============================================================
CHEMICALS-0.20%
Agrium, Inc., Unsec. Yankee Notes,
7.00%, 02/01/04 350,000 335,559
==============================================================
COMMUNICATIONS EQUIPMENT-0.07%
ProNet Inc., Sr. Sub. Notes,
11.88%, 06/15/05 250,000 111,250
==============================================================
COMPUTERS (NETWORKING)-0.28%
Exodus Communications, Inc., Sr.
Unsec. Notes, 11.25%, 07/01/08 510,000 466,650
==============================================================
COMPUTERS (PERIPHERALS)-0.11%
Equinix Inc., Sr. Unsec. Notes,
13.00%, 12/01/07 250,000 188,125
==============================================================
CONSTRUCTION (CEMENT & AGGREGATES)-0.13%
Schuff Steel Co., Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 06/01/08 350,000 222,250
==============================================================
CONSUMER FINANCE-2.25%
American General Finance Corp., Sr.
Notes, 8.45%, 10/15/09 270,000 284,467
- --------------------------------------------------------------
Capital One Bank, Unsec. Notes,
7.25%, 05/01/06 1,450,000 1,370,757
- --------------------------------------------------------------
Capital One Financial Corp., Sr.
Notes, 8.25%, 06/15/05 550,000 554,774
- --------------------------------------------------------------
Household Finance Corp., Unsec.
Notes, 6.88%, 03/01/07 900,000 867,339
- --------------------------------------------------------------
MBNA Capital I-Series A, Gtd.
Bonds, 8.28%, 12/01/26 835,000 697,601
==============================================================
3,774,938
==============================================================
ELECTRIC COMPANIES-3.67%
CILCORP Inc., Bonds, 9.38%,
10/15/29 1,000,000 1,107,820
- --------------------------------------------------------------
Cleveland Electric Illuminating Co.
(The),
1st Mortgage, 6.86%, 10/01/08 500,000 474,930
- --------------------------------------------------------------
Series D, Sr. Sec. Notes, 7.88%,
11/01/17 1,500,000 1,474,065
- --------------------------------------------------------------
El Paso Electric Co.
Series D, Sec. First Mortgage
Bonds, 8.90%, 02/01/06 500,000 525,570
- --------------------------------------------------------------
Series E, Sec. First Mortgage
Bonds, 9.40%, 05/01/11 1,000,000 1,055,790
- --------------------------------------------------------------
Niagara Mohawk Holdings Inc.-Series
H, Sr. Unsec. Disc. Notes, 8.50%,
07/01/10(b) 1,400,000 1,133,062
- --------------------------------------------------------------
Public Service Company of New
Mexico-Series A, Sr. Unsec.
Notes, 7.10%, 08/01/05 120,000 118,354
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
ELECTRIC COMPANIES-(CONTINUED)
Texas-New Mexico Power Co., Sr.
Sec. Notes, 6.25%, 01/15/09 $ 300,000 $ 268,557
==============================================================
6,158,148
==============================================================
ELECTRICAL EQUIPMENT-1.08%
Emerson Electric Co., Unsec. Notes,
7.13%, 08/15/10 1,000,000 1,004,130
- --------------------------------------------------------------
GE Global Insurance Holdings Corp.,
Notes, 7.75%, 06/15/30 800,000 813,544
==============================================================
1,817,674
==============================================================
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.74%
Israel Electric Corp. Ltd.
(Israel),
Sr. Sec. Medium Term Yankee
Notes, 7.75%, 03/01/09 (Acquired
04/13/00-10/23/00; Cost
$949,217)(a) 1,000,000 939,350
- --------------------------------------------------------------
Yankee Deb., 7.75%, 12/15/27
(Acquired 06/09/00; Cost
$307,293)(a) 350,000 301,689
==============================================================
1,241,039
==============================================================
ENGINEERING & CONSTRUCTION-0.38%
Washington Group International,
Inc., Sr. Unsec. Gtd. Notes,
11.00%, 07/01/10 (Acquired
06/28/00; Cost $744,465)(a) 750,000 639,375
==============================================================
ENTERTAINMENT-2.30%
Callahan Nordrhein Westfalen
(Denmark), Sr. Unsec. Yankee
Notes, 14.00%, 07/15/10 (Acquired
06/29/00-08/11/00; Cost
$523,438)(a) 525,000 509,250
- --------------------------------------------------------------
Time Warner Inc.,
Deb.,
9.13%, 01/15/13 1,000,000 1,118,240
- --------------------------------------------------------------
9.15%, 02/01/23 1,600,000 1,793,632
- --------------------------------------------------------------
Gtd. Bonds, 6.95%, 01/15/28 500,000 447,950
==============================================================
3,869,072
==============================================================
FINANCIAL (DIVERSIFIED)-3.01%
AIG SunAmerica Global Financing I,
Sr. Unsec. Notes, 7.40%, 05/05/03
(Acquired 10/17/00; Cost
$335,415)(a) 330,000 335,577
- --------------------------------------------------------------
AIG SunAmerica Global Financing II,
Sr. Sec. Notes, 7.60%, 06/15/05
(Acquired 06/08/00; Cost
$700,000)(a) 700,000 718,935
- --------------------------------------------------------------
Citigroup Inc., Deb.,
Deb., 6.63%, 01/15/28 1,000,000 868,860
- --------------------------------------------------------------
Unsec. Sub. Notes, 7.25%,
10/01/10 715,000 710,302
- --------------------------------------------------------------
General Motors Acceptance Corp.,
Notes, 6.85%, 06/17/04 300,000 297,318
- --------------------------------------------------------------
Heller Financial, Inc., Sr. Unsec.
Notes,
7.38%, 11/01/09 500,000 478,050
- --------------------------------------------------------------
8.00%, 06/15/05 450,000 454,509
- --------------------------------------------------------------
Pinnacle Partners, Sr. Notes,
8.83%, 08/15/04 (Acquired
08/02/00; Cost $1,000,000)(a) 1,000,000 1,016,010
- --------------------------------------------------------------
FS-45
249
PRINCIPAL MARKET
AMOUNT VALUE
FINANCIAL (DIVERSIFIED)-(CONTINUED)
Source One Mortgage Services Corp.,
Deb., 9.00%, 06/01/12 $ 150,000 $ 165,700
==============================================================
5,045,261
==============================================================
GAMING, LOTTERY & PARIMUTUEL COMPANIES-0.54%
Hollywood Casino Corp., Sr. Sec.
Gtd. Sub. Notes, 11.25%, 05/01/07 350,000 368,375
- --------------------------------------------------------------
Park Place Entertainment Corp., Sr.
Unsec. Sub. Notes, 8.88%,
09/15/08(c) 550,000 541,750
==============================================================
910,125
==============================================================
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.15%
Warner Chilcott, Inc., Sr. Unsec.
Gtd. Sub. Notes, 12.63%,
02/15/08(c) 250,000 256,250
==============================================================
HOMEBUILDING-0.28%
K. Hovanian Enterprises Inc., Sr.
Unsec. Gtd. Notes, 10.50%,
10/01/07(c) 500,000 472,500
==============================================================
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.26%
Procter & Gamble Co. (The), Putable
Deb., 8.00%, 09/01/24 400,000 431,608
==============================================================
INSURANCE (LIFE/HEALTH)-0.09%
Torchmark Corp., Notes, 7.88%,
05/15/23 165,000 147,612
==============================================================
INSURANCE (PROPERTY-CASUALTY)-0.56%
Terra Nova Insurance PLC (United
Kingdom), Sr. Unsec. Gtd. Yankee
Notes,
7.00%, 05/15/08 500,000 469,825
- --------------------------------------------------------------
7.20%, 08/15/07 500,000 477,245
==============================================================
947,070
==============================================================
INVESTMENT BANKING/BROKERAGE-2.18%
Lehman Brothers Holdings Inc.,
Notes, 8.50%, 08/01/15 1,390,000 1,440,513
- --------------------------------------------------------------
Sr. Sub. Notes, 7.38%, 01/15/07 1,000,000 980,930
- --------------------------------------------------------------
Series E, Medium Term Notes,
9.20%, 02/10/28(d) 1,100,000 90,761
- --------------------------------------------------------------
Lehman Brothers Inc., Putable Sr.
Notes, 8.80%, 03/01/15 215,000 229,246
- --------------------------------------------------------------
Merrill Lynch & Co., Unsec. Notes,
6.88%, 11/15/18 1,000,000 910,380
==============================================================
3,651,830
==============================================================
IRON & STEEL-0.03%
Acme Metals Inc., Sr. Unsec. Gtd.
Notes, 10.88%, 12/15/07(e) 438,000 59,130
==============================================================
LEISURE TIME (PRODUCTS)-0.17%
Marvel Enterprises, Inc., Sr.
Unsec. Gtd. Sub. Notes, 12.00%,
06/15/09 440,000 282,700
==============================================================
LODGING-HOTELS-0.06%
John Q. Hammons Hotels, Inc., Sec.
First Mortgage Notes, 9.75%,
10/01/05 100,000 93,750
==============================================================
PRINCIPAL MARKET
AMOUNT VALUE
MACHINERY (DIVERSIFIED)-0.26%
Actuant Corp., Sr. Unsec. Gtd. Sub.
Notes, 13.00%, 05/01/09 (Acquired
07/21/00; Cost $444,038)(a) $ 450,000 $ 438,750
==============================================================
MANUFACTURING (DIVERSIFIED)-0.96%
Glenoit Corp., Sr. Unsec. Gtd. Sub.
Notes, 11.00%, 04/15/07(e) 380,000 64,600
- --------------------------------------------------------------
Honeywell International Inc.,
Notes, 7.50%, 03/01/10 1,500,000 1,550,100
==============================================================
1,614,700
==============================================================
MANUFACTURING (SPECIALIZED)-0.39%
First Wave Marine, Inc., Sr. Unsec.
Notes, 11.00%, 02/01/08 250,000 68,125
- --------------------------------------------------------------
MMI Products, Inc.-Series B, Sr.
Unsec. Sub. Notes, 11.25%,
04/15/07 260,000 255,450
- --------------------------------------------------------------
Tekni-Plex, Inc., Sr. Sub. Notes,
12.75%, 06/15/10(c) 365,000 333,975
==============================================================
657,550
==============================================================
METALS MINING-0.14%
Rio Algom Ltd. (Canada), Unsec.
Yankee Deb., 7.05%, 11/01/05 250,000 242,695
==============================================================
NATURAL GAS-3.65%
Coastal Corp. (The), Sr. Unsec.
Deb., 6.70%, 02/15/27 900,000 856,440
- --------------------------------------------------------------
Dynegy Inc., Sr. Unsec. Deb.,
7.13%, 05/15/18 1,100,000 989,472
- --------------------------------------------------------------
Enron Corp.-Series A, Medium Term
Notes, 8.38%, 05/23/05 1,300,000 1,353,820
- --------------------------------------------------------------
KN Capital Trust III-Series B,
Unsec. Gtd. Bonds, 8.56%,
04/15/27 1,000,000 914,080
- --------------------------------------------------------------
Northern Border Partners, L.P., Sr.
Unsec. Gtd. Notes, 8.88%,
06/15/10 (Acquired 09/07/00; Cost
$1,038,660)(a) 1,000,000 1,040,480
- --------------------------------------------------------------
Nova Gas Transmission Ltd.
(Canada), Yankee Deb., 8.50%,
12/15/12 450,000 479,781
- --------------------------------------------------------------
Sonat Inc., Unsec. Notes, 7.63%,
07/15/11 500,000 498,055
==============================================================
6,132,128
==============================================================
OIL & GAS (DRILLING &
EQUIPMENT)-1.06%
Petroleum Geo-Services A.S.A.
(Norway), Yankee Notes, 7.50%,
03/31/07 1,820,000 1,778,013
==============================================================
OIL & GAS (EXPLORATION & PRODUCTION)-3.00%
Anadarko Petroleum Corp., Deb.,
7.73%, 09/15/96 1,200,000 1,198,980
- --------------------------------------------------------------
Apache Crop., Sr. Unsec. Notes,
7.00%, 02/01/18 1,000,000 931,980
- --------------------------------------------------------------
Statoil (Norway), Yankee Unsec.
Deb., 7.38%, 05/01/16 (Acquired
06/01/00; Cost $281,547)(a) 300,000 285,852
- --------------------------------------------------------------
DevX Energy, Inc., Sr. Unsec. Gtd.
Sub. Notes, 12.50%, 07/01/08 160,000 112,800
- --------------------------------------------------------------
ONEOK, Inc., Unsec. Notes, 7.75%,
08/15/06 400,000 404,220
- --------------------------------------------------------------
FS-46
250
PRINCIPAL MARKET
AMOUNT VALUE
OIL & GAS (EXPLORATION &
PRODUCTION)-(CONTINUED)
Parker & Parsley Petroleum Co., Sr.
Unsec. Notes, 8.25%, 08/15/07 $ 620,000 $ 607,929
- --------------------------------------------------------------
Pogo Producing Co.-Series B, Sr.
Unsec. Sub. Notes, 10.38%,
02/15/09 500,000 527,500
- --------------------------------------------------------------
Talisman Energy Inc. (Canada),
Yankee Deb., 7.13%, 06/01/07 250,000 244,150
- --------------------------------------------------------------
Triton Energy Ltd. (Cayman
Islands), Sr. Yankee Notes,
8.88%, 10/01/07 (Acquired
09/27/00; Cost $325,000)(a) 325,000 325,000
- --------------------------------------------------------------
Union Pacific Resources Group Inc.,
Unsec. Deb., 7.50%, 10/15/26 400,000 389,488
==============================================================
5,027,899
==============================================================
OIL & GAS (REFINING &
MARKETING)-1.48%
Giant Industries, Inc., Sr. Unsec.
Gtd. Sub. Notes, 9.00%, 09/01/07 346,000 323,510
- --------------------------------------------------------------
Petroleos Mexicanos-Series P
(Mexico), Unsub. Yankee Notes,
9.50%, 09/15/27 800,000 813,760
- --------------------------------------------------------------
Texas Petrochemical Corp., Sr.
Unsec. Sub. Notes, 11.13%,
07/01/06 560,000 462,000
- --------------------------------------------------------------
Tosco Corp., Unsec. Deb., 7.80%,
01/01/27 900,000 877,842
==============================================================
2,477,112
==============================================================
OIL (DOMESTIC INTEGRATED)-1.37%
Amerada Hess Corp., Bonds, 7.88%,
10/01/29 900,000 920,241
- --------------------------------------------------------------
Occidental Petroleum Corp., Sr.
Unsec. Notes, 8.45%, 02/15/29 1,300,000 1,375,803
==============================================================
2,296,044
==============================================================
OIL (INTERNATIONAL
INTEGRATED)-1.09%
YPF Sociedad Anonima (Argentina),
Yankee Bonds,
8.00%, 02/15/04 1,400,000 1,380,484
- --------------------------------------------------------------
9.13%, 02/24/09 450,000 456,579
==============================================================
1,837,063
==============================================================
PAPER & FOREST PRODUCTS-0.25%
Domtar, Inc. (Canada), Unsec.
Yankee Deb., 9.50%, 08/01/16 400,000 413,500
==============================================================
PHOTOGRAPHY/IMAGING-0.32%
Polaroid Corp., Sr. Unsec. Notes,
11.50%, 02/15/06 670,000 539,350
==============================================================
POWER PRODUCERS (INDEPENDENT)-0.82%
AES Corp. (The), Sr. Unsec. Notes,
9.38%, 09/15/10 200,000 199,860
- --------------------------------------------------------------
9.50%, 06/01/09 700,000 714,000
- --------------------------------------------------------------
Kincaid Generation LLC, Sec. Bonds,
7.33%, 06/15/20 (Acquired
04/30/98; Cost $495,220)(a) 494,000 461,450
==============================================================
1,375,310
==============================================================
PRINCIPAL MARKET
AMOUNT VALUE
PUBLISHING (NEWSPAPERS)-1.98%
News America Holdings, Inc.,
Putable Notes,
Putable Notes, 8.45%, 08/01/34 $1,500,000 $ 1,496,970
- --------------------------------------------------------------
Sr. Gtd. Deb., 9.25%, 02/01/13 1,250,000 1,346,475
- --------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds,
7.43%, 10/01/26 500,000 487,205
==============================================================
3,330,650
==============================================================
RAILROADS-0.42%
CSX Corp., Sr. Unsec. Putable Deb.,
7.25%, 05/01/27 350,000 348,173
- --------------------------------------------------------------
Railamerica Transportation Corp.,
Sr. Unsec. Gtd. Sub. Notes,
12.88%, 08/15/10(c) 375,000 350,625
==============================================================
698,798
==============================================================
REAL ESTATE INVESTMENT TRUSTS-0.55%
ERP Operating L.P., Unsec. Notes,
7.13%, 10/15/17 600,000 520,848
- --------------------------------------------------------------
Health Care REIT, Inc., Sr. Unsec.
Notes, 7.63%, 03/15/08 200,000 168,208
- --------------------------------------------------------------
Spieker Properties, Inc., Unsec.
Deb., 7.35%, 12/01/17 250,000 227,532
==============================================================
916,588
==============================================================
RETAIL (SPECIALTY)-0.26%
Amazon.com, Inc., Conv. Deb.,
4.75%, 02/01/09 (Acquired
01/29/99; Cost $501,875)(a) 500,000 316,875
- --------------------------------------------------------------
CSK Auto Inc.-Series A, Sr. Gtd.
Sub. Deb, 11.00%, 11/01/06 130,000 57,850
- --------------------------------------------------------------
Neff Corp., Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 06/01/08 200,000 70,000
==============================================================
444,725
==============================================================
SAVINGS & LOAN COMPANIES-0.89%
Dime Capital Trust I-Series A, Gtd.
Bonds, 9.33%, 05/06/27 250,000 228,095
- --------------------------------------------------------------
Sovereign Bancorp, Inc., Medium
Term Sub. Notes, 8.00%, 03/15/03 600,000 581,268
- --------------------------------------------------------------
St. Paul Bancorp, Inc., Sr. Unsec.
Notes, 7.13%, 02/15/04 200,000 195,794
- --------------------------------------------------------------
Washington Mutual Cap I, Sec. Gtd.
Bonds, 8.38%, 06/01/27 200,000 180,384
- --------------------------------------------------------------
Washington Mutual, Inc., Sub.
Notes, 8.25%, 04/01/10 300,000 303,810
==============================================================
1,489,351
==============================================================
SERVICES (COMMERCIAL &
CONSUMER)-0.13%
Avis Group Holdings, Inc., Sr.
Unsec. Gtd. Sub. Notes, 11.00%,
05/01/09 200,000 215,000
==============================================================
SERVICES (EMPLOYMENT)-0.14%
MSX International, Inc., Sr. Unsec.
Gtd. Sub. Notes, 11.38%, 01/15/08 260,000 240,500
==============================================================
FS-47
251
PRINCIPAL MARKET
AMOUNT VALUE
SOVEREIGN DEBT-3.43%
Banque Cent de Tunisie (Tunisia),
Unsec. Yankee Bonds, 8.25%,
09/19/27 $1,750,000 $ 1,491,875
- --------------------------------------------------------------
Newfoundland (Province of)
(Canada), Unsec. Yankee Deb.,
9.00%, 06/01/19 500,000 570,685
- --------------------------------------------------------------
Quebec (Province of)
(Canada)-Series A, Medium Term
Putable Yankee Notes, 6.29%,
03/06/26 1,000,000 994,030
- --------------------------------------------------------------
Republica Orient (Uruguay), Unsec.
Yankee Bonds, 7.88%, 07/15/27 3,000,000 2,692,500
==============================================================
5,749,090
==============================================================
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.60%
Crown Castle International Corp.,
Sr. Unsec. Notes, 10.75%,
08/01/11 300,000 309,750
- --------------------------------------------------------------
Nextel International, Inc., Sr.
Notes, 12.75%, 08/01/10(c) 330,000 301,950
- --------------------------------------------------------------
Spectrasite Holdings, Inc., Sr.
Unsec. Disc. Notes, 11.25%,
04/15/09(b) 775,000 403,000
==============================================================
1,014,700
==============================================================
TELECOMMUNICATIONS (LONG DISTANCE)-2.31%
360networks Inc. (Canada), Sr.
Unsec. Yankee
Sr. Unsec. Yankee Notes, 12.00%,
08/01/09 230,000 182,850
- --------------------------------------------------------------
Sr. Yankee Notes, 12.50%,
12/15/05 430,000 378,400
- --------------------------------------------------------------
Call-Net Enterprises, Inc.
(Canada), Sr. Unsec. Disc. Yankee
Notes, 8.94%, 08/15/08(b) 330,000 100,650
- --------------------------------------------------------------
ECONOPHONE, Inc., Sr. Unsec. Notes,
13.50%, 07/15/07 750,000 378,750
- --------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Unsec. Yankee
Notes, 11.50%, 12/15/07 225,000 52,875
- --------------------------------------------------------------
MCI Communications Corp., Sr.
Unsec. Putable Deb., 7.13%,
06/15/27 1,500,000 1,480,140
- --------------------------------------------------------------
Primus Telecommunications Group,
Inc., Sr. Unsec. Notes, 11.25%,
01/15/09 750,000 386,250
- --------------------------------------------------------------
Sprint Corp., Putable Deb., 9.00%,
10/15/19 200,000 218,836
- --------------------------------------------------------------
Tele1 Europe B.V. (Netherlands),
Sr. Unsec. Yankee Notes, 13.00%,
05/15/09 500,000 432,500
- --------------------------------------------------------------
Versatel Telecom International N.V.
(Netherlands), Sr. Yankee Notes,
13.25%, 05/15/08 340,000 260,100
==============================================================
3,871,351
==============================================================
TELEPHONE-3.85%
AT&T Canada Inc. (Canada), Sr.
Unsec. Yankee Notes, 7.65%,
09/15/06 370,000 363,336
- --------------------------------------------------------------
CFW Communications Co., Sr. Notes,
13.00%, 08/15/10(c)(f) 535,000 473,475
- --------------------------------------------------------------
Deutsche Telekom International
Finance B.V. (Netherlands),
Unsec. Unsub. Yankee Bonds,
8.00%, 06/15/10 800,000 818,040
- --------------------------------------------------------------
ICG Services, Inc., Sr. Unsec.
Disc. Notes, 10.00%,
02/15/08(b)(e) 600,000 75,000
- --------------------------------------------------------------
Intermedia Communications,
Inc.-Series B, Sr. Disc. Notes,
11.25%, 07/15/07(b) 700,000 584,500
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
TELEPHONE-(CONTINUED)
Koninklijke (Royal) KPN N.V.
(Netherlands), Sr. Unsec. Unsub.
Yankee Notes, 7.50%, 10/01/05
(Acquired 09/27/00; Cost
$899,424)(a) $ 900,000 $ 894,654
- --------------------------------------------------------------
NTL Communications Corp.-Series B,
Sr. Unsec. Notes, 12.38%,
10/01/08(b) 825,000 482,625
- --------------------------------------------------------------
NTL Inc.-Series B, Sr. Disc. Notes,
11.50%, 02/01/06(b) 450,000 420,750
- --------------------------------------------------------------
Qwest Capital Funding, Unsec. Gtd.
Notes, 7.90%, 08/15/10 (Acquired
08/24/00; Cost $902,898)(a) 900,000 917,946
- --------------------------------------------------------------
Verizon Global Funding
Corp.,-Series REGS, Conv. Euro
Bonds, 4.25%, 09/15/05 500,000 553,703
- --------------------------------------------------------------
Williams Communications Group,
Inc., Sr. Unsec. Notes, 10.70%,
10/01/07 450,000 387,000
- --------------------------------------------------------------
XO Communications, Inc., Sr. Unsec.
Notes, 10.75%, 11/15/08 550,000 484,000
==============================================================
6,455,029
==============================================================
TRUCKERS-0.19%
Travelcenters of America, Inc., Sr.
Unsec. Gtd. Sub. Notes, 10.25%,
04/01/07 290,000 314,650
==============================================================
WASTE MANAGEMENT-1.53%
Allied Waste North America
Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 10.00%, 08/01/09 300,000 261,000
- --------------------------------------------------------------
Browning-Ferris Industries, Inc.,
Deb., 9.25%, 05/01/21 350,000 292,250
- --------------------------------------------------------------
Waste Management, Inc.,
Sr. Unsec. Notes, 7.13%, 12/15/17 90,000 77,397
- --------------------------------------------------------------
Unsec. Putable Notes, 7.10%,
08/01/26 2,000,000 1,937,120
==============================================================
2,567,767
==============================================================
Total U.S. Dollar Denominated
Bonds & Notes (Cost
$118,237,884) 112,442,503
==============================================================
PRINCIPAL
AMOUNT(g)
NON-U.S. DOLLAR DENOMINATED BONDS &
NOTES-13.36%
CANADA-6.31%
AT&T Canada Inc. (Telephone), Sr.
Unsec. Notes, 7.15%, 09/23/04 CAD 800,000 518,620
- --------------------------------------------------------------
Bell Mobility Cellular Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 CAD 750,000 470,433
- --------------------------------------------------------------
Canadian Government (Sovereign
Debt), Bonds, 6.00%, 06/01/08 CAD 7,520,000 4,970,574
- --------------------------------------------------------------
Canadian Pacific Ltd.-Series D
(Manufacturing-Diversified),
Unsec. Medium Term Notes, 5.85%,
03/30/09 (Acquired 03/24/99; Cost
$661,308)(a) CAD 1,000,000 603,817
- --------------------------------------------------------------
FS-48
252
PRINCIPAL MARKET
AMOUNT(g) VALUE
CANADA-(CONTINUED)
Clearnet Communications Inc.
(Telecommunications-
Cellular/Wireless),
Sr. Disc. Notes,
10.40%, 05/15/08(b) CAD 1,200,000 $ 661,952
- --------------------------------------------------------------
11.75%, 08/13/07(b) CAD 1,100,000 650,003
- --------------------------------------------------------------
Clearnet Communications Inc.
(Telecommunications-
Cellular/Wireless),
Sr. Unsec. Disc. Notes,
10.75%, 02/15/09(b) CAD 1,300,000 683,068
- --------------------------------------------------------------
Export Development Corp. (Sovereign
Debt), Sr. Unsec. Unsub. Notes,
6.50%, 12/21/04 NZD 415,000 159,086
- --------------------------------------------------------------
Ontario (Province of) (Sovereign
Debt), Unsec. Unsub. Notes,
6.25%, 12/03/08 NZD 1,500,000 555,287
- --------------------------------------------------------------
Poco Petroleums Ltd. (Oil &
Gas-Exploration & Production),
Medium Term Notes, 6.60%,
09/11/07 CAD 750,000 477,711
- --------------------------------------------------------------
Rogers Cablesystems
(Broadcasting-Television, Radio &
Cable), Sr. Sec. Second Priority
Deb., 9.65%, 01/15/14 CAD 300,000 209,193
- --------------------------------------------------------------
TransCanada PipeLines-Series Q
(Natural Gas), Deb., 10.63%,
10/20/09 CAD 375,000 304,555
- --------------------------------------------------------------
Westcoast Energy Inc.-Series V
(Natural Gas), Unsec. Deb.,
6.45%, 12/18/06 CAD 500,000 327,185
==============================================================
10,591,484
==============================================================
FRANCE-0.23%
Vivendi Environment (Waste
Management), Sr. Conv. Gtd.
Bonds, 1.50%, 01/01/05 EUR 150,000 385,291
==============================================================
GREECE-1.23%
Hellenic Republic (Sovereign Debt),
Bonds, 6.00%, 05/19/10 GRD 2,400,000 2,060,680
==============================================================
NETHERLANDS-1.35%
Grapes Communications N.V.
(Telecommunications-Cellular/Wireless),
Sr. Notes, 13.50%, 05/15/10
(Acquired 05/03/00; Cost
$589,420)(a)(f) EUR 650,000 300,634
- --------------------------------------------------------------
Koninklijke (Royal) KPN N.V.
(Telephone), Sr. Unsec. Unsub.
Euro Bonds, 6.25%, 10/04/05 EUR 1,000,000 842,243
- --------------------------------------------------------------
Mannesmann Finance B.V. (Machinery-
Diversified), Gtd. Unsec. Unsub.
Euro Notes, 4.75%, 05/27/09 EUR 690,000 516,342
- --------------------------------------------------------------
Tecnost International N.V.
(Telephone)- Series E, Gtd.
Medium Term Notes, 6.13%,
07/30/09 EUR 290,000 228,548
- --------------------------------------------------------------
Tele1 Europe B.V.
(Telecommunications-Long
Distance), Sr. Euro Notes,
11.88%, 12/01/09 EUR 500,000 371,183
==============================================================
2,258,950
==============================================================
PRINCIPAL MARKET
AMOUNT(g) VALUE
NEW ZEALAND-0.63%
Inter-American Development Bank
(Banks-Money Center), Unsec.
Bonds, 5.75%, 04/15/04 NZD 2,000,000 $ 755,289
- --------------------------------------------------------------
International Bank for
Reconstruction &
Development-Class E (Banks-Money
Center), Unsec. Medium Term
Notes, 5.50%, 04/15/04 NZD 800,000 300,844
==============================================================
1,056,133
==============================================================
NORWAY-0.10%
Enitel ASA (Telecommunications-Long
Distance), Sr. Unsec. Unsub. Euro
Notes, 12.50%, 04/15/10(h) EUR 300,000 165,487
==============================================================
UNITED KINGDOM-1.12%
Airtours PLC (Services-Commercial &
Consumer), Conv. Sub. Notes,
5.75%, 01/05/04 (Acquired
12/09/98; Cost $494,636)(a) GBP 299,000 357,482
- --------------------------------------------------------------
British Sky Broadcasting Group PLC
(Broadcasting-Television, Radio &
Cable), Sr. Gtd. Unsec. Unsub.
Notes, 7.75%, 07/09/09 GBP 450,000 639,689
- --------------------------------------------------------------
Jazztel PLC (Telephone), Sr. Unsec.
Notes, 13.25%, 12/15/09 EUR 285,000 176,332
- --------------------------------------------------------------
Sutton Bridge Financial Ltd.
(Electric Companies), Gtd. Euro
Bonds, 8.63%, 06/30/22 (Acquired
05/29/97; Cost $733,585)(a) GBP 450,000 701,723
==============================================================
1,875,226
==============================================================
UNITED STATES OF AMERICA-2.39%
Federal National Mortgage
Association (Sovereign Debt), Sr.
Unsub. Notes, 6.38%, 08/15/07 AUD 3,785,000 1,905,621
- --------------------------------------------------------------
John Hancock Global Fund
(Insurance-Life/ Health), Sr.
Sec. Sub Medium Term Notes,
6.75%, 02/15/06 AUD 900,000 458,652
- --------------------------------------------------------------
KFW International Finance
(Investment Banking/ Brokerage),
Gtd. Unsec. Unsub. Euro Medium
Term Notes, 7.25%, 07/16/07 AUD 3,100,000 1,653,137
==============================================================
4,017,410
==============================================================
Total Non-U.S. Dollar
Denominated Bonds & Notes
(Cost $26,030,027) 22,410,661
==============================================================
SHARES
STOCKS & OTHER EQUITY
INTERESTS-1.03%
BANKS (MAJOR REGIONAL)-0.05%
Societe Generale-Class A 1,400 79,485
==============================================================
BANKS (REGIONAL)-0.70%
First Republic Capital Corp.-Series
A-Pfd. (Acquired 05/26/99; Cost
$750,000)(a) 750 672,187
- --------------------------------------------------------------
FS-49
253
MARKET
SHARES VALUE
BANKS (REGIONAL)-(CONTINUED)
Westpac Banking Corp., STRYPES
Trust-$3.14 Conv. Pfd. 16,000 $ 495,000
==============================================================
1,167,187
==============================================================
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
Knology Holdings Inc.-Wts.,
expiring 10/22/07 (Acquired
03/12/98; Cost $0)(a)(h) 700 1,750
==============================================================
BUILDING MATERIALS-0.01%
Dayton Superior Corp.-Wts.,
expiring 06/15/09 (Acquired
08/07/00; Cost $0)(a)(h) 450 9,225
==============================================================
COMMUNICATIONS EQUIPMENT-0.00%
Loral Space & Communications
Ltd.(i) 254 1,445
==============================================================
COMPUTERS (PERIPHERALS)-0.02%
Equinix Inc.-Wts., expiring
12/01/07 (Acquired 05/30/00; Cost
$0)(a)(h) 250 27,562
==============================================================
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, Inc.-Wts.,
expiring 02/01/04(h) 290 290
==============================================================
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-0.04%
Glaxo Wellcome PLC (United Kingdom) 2,607 75,071
==============================================================
RAILROADS-0.00%
Railamerica Transportation
Corp.-Wts., expiring 08/15/10
(Acquired 10/01/00; Cost
$0)(a)(h) 375 3,844
==============================================================
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.09%
WebLink Wireless, Inc.(i) 20,100 159,544
==============================================================
TELECOMMUNICATIONS (LONG DISTANCE)-0.07%
Enitel ASA (Norway)-Wts., expiring
04/03/05 (Acquired 07/14/00; Cost
$0)(a)(h) 300 1,909
- --------------------------------------------------------------
Tele1 Europe B.V.-ADR
(Netherlands)(i) 8,806 69,347
- --------------------------------------------------------------
Versatel Telecom International
N.V.-ADR (Netherlands)(i) 2,450 49,000
==============================================================
120,256
==============================================================
TELEPHONE-0.05%
Esat Telecom Group PLC
(Ireland)-Wts., expiring 02/01/07
(Acquired 06/17/97; Cost
$0)(a)(h) 350 81,550
==============================================================
Total Stocks & Other Equity
Interests (Cost $1,982,723) 1,727,209
==============================================================
PRINCIPAL
AMOUNT
U.S. GOVERNMENT AGENCY
SECURITIES-0.44%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.44%
Pass Through Certificates
8.50%, 03/01/10 (Cost $757,293) $ 724,249 743,935
==============================================================
PRINCIPAL
AMOUNT
U.S. TREASURY SECURITIES-13.61%
U.S. TREASURY BILLS-1.78%
5.63%,02/28/01(j) $3,000,000 2,991,810
==============================================================
U.S. TREASURY BONDS-3.00%
6.13%,08/15/29 4,850,000 5,028,577
==============================================================
U.S. TREASURY NOTES-8.83%
6.50%, 02/28/02 3,000,000 3,011,760
- --------------------------------------------------------------
7.25%, 08/15/04 5,000,000 5,235,450
- --------------------------------------------------------------
5.63%, 05/15/08 5,400,000 5,328,342
- --------------------------------------------------------------
5.75%, 08/15/10 1,250,000 1,249,225
==============================================================
14,824,777
==============================================================
Total U.S. Treasury Securities
(Cost $22,749,828) 22,845,164
==============================================================
ASSET-BACKED SECURITIES-1.13%
AIRLINES-0.29%
Airplanes Pass Through Trust-Series
D, Gtd. Sub. Euro Bonds, 10.88%,
03/15/12 227,171 171,527
- --------------------------------------------------------------
United Air Lines, Inc.-Series 95A2,
Pass Through Ctfs., 9.56%,
10/19/18 300,000 321,198
==============================================================
492,725
==============================================================
FINANCIAL (DIVERSIFIED)-0.72%
Beaver Valley II Funding Corp.,
Sec. Lease Obligations Deb.,
9.00%, 06/01/17 200,000 210,804
- --------------------------------------------------------------
Citicorp Lease-Class A2, Series
1999-1, Pass Through Ctfs.,
8.04%, 12/13/19 (Acquired
06/01/00-07/14/00; Cost
$997,449)(a) 1,000,000 995,930
==============================================================
1,206,734
==============================================================
POWER PRODUCERS (INDEPENDENT)-0.12%
Panda Funding Corp., Series A-1,
Pooled Project Bonds, 11.63%,
08/20/12 197,179 194,221
==============================================================
Total Asset-Backed Securities
(Cost $1,965,123) 1,893,680
==============================================================
SHARES
MONEY MARKET FUNDS-0.69%
STIC Liquid Assets Portfolio(k) 579,213 579,213
- --------------------------------------------------------------
STIC Prime Portfolio(k) 579,213 579,213
==============================================================
Total Money Market Funds (Cost
$1,158,426) 1,158,426
==============================================================
TOTAL INVESTMENTS-97.27% (Cost
$172,881,304) 163,221,578
==============================================================
OTHER ASSETS LESS LIABILITIES-2.73% 4,585,991
==============================================================
NET ASSETS-100.00% $167,807,569
______________________________________________________________
==============================================================
FS-50
254
Notes to Schedule of Investments:
(a) 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 aggregate market value of these securities at 10/31/00
was $12,961,594, which represented 7.75% of the Fund's net assets.
(b) Discounted bond at purchase. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(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
1993, as amended.
(d) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(e) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(f) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes common or preferred
shares of the issuer.
(g) Foreign denominated security. Par value is denominated in currency
indicated.
(h) Acquired as part of a unit with or in exchange for other securities.
(i) Non-income producing security.
(j) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(k) The money market fund and the Fund are affiliated by having the same
investment advisor.
Investment Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollar
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
GBP - British Pound Sterling
GDR - Global Depositary Receipt
GRD - Greek Drachma
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
REGS - Regulation S
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
See Notes to Financial Statements.
FS-51
255
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments, at market value (cost
$172,881,304) $163,221,578
- ------------------------------------------------------------
Foreign currencies, at value (cost $304,158) 303,880
- ------------------------------------------------------------
Cash 2,061
- ------------------------------------------------------------
Receivables for:
Foreign currency contracts closed 203,267
- ------------------------------------------------------------
Investments sold 7,716,014
- ------------------------------------------------------------
Capital stock sold 99,409
- ------------------------------------------------------------
Dividends and interest 3,486,150
- ------------------------------------------------------------
Foreign currency contracts outstanding 626,792
- ------------------------------------------------------------
Investment for deferred compensation plan 26,673
- ------------------------------------------------------------
Other assets 25,431
============================================================
Total assets $175,711,255
============================================================
LIABILITIES:
Payables for:
Investments purchased 7,015,313
- ------------------------------------------------------------
Capital stock reacquired 202,651
- ------------------------------------------------------------
Dividends 282,126
- ------------------------------------------------------------
Foreign currency contracts closed 14,848
- ------------------------------------------------------------
Deferred compensation plan 26,673
- ------------------------------------------------------------
Accrued advisory fees 92,153
- ------------------------------------------------------------
Accrued administrative services fees 4,235
- ------------------------------------------------------------
Accrued distribution fees 74,082
- ------------------------------------------------------------
Accrued directors' fees 1,571
- ------------------------------------------------------------
Accrued transfer agent fees 86,707
- ------------------------------------------------------------
Accrued operating expenses 103,327
============================================================
Total liabilities 7,903,686
============================================================
Net assets applicable to shares outstanding $167,807,569
____________________________________________________________
============================================================
NET ASSETS:
Class A $105,636,419
____________________________________________________________
============================================================
Class B $ 60,391,218
____________________________________________________________
============================================================
Class C $ 1,779,932
____________________________________________________________
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 11,851,374
____________________________________________________________
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,777,381
____________________________________________________________
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 199,782
____________________________________________________________
============================================================
Class A:
Net asset value and redemption price per
share $ 8.91
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $8.91 divided by
95.25%) $ 9.35
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 8.91
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 8.91
____________________________________________________________
============================================================
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
INVESTMENT INCOME:
Interest $ 9,182,039
- ------------------------------------------------------------
Dividends (net of foreign withholding tax of
$1,117) 132,351
- ------------------------------------------------------------
Dividends from affiliated money market funds 294,558
============================================================
Total investment income 9,608,948
============================================================
EXPENSES:
Advisory fees 818,240
- ------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------
Custodian fees 55,257
- ------------------------------------------------------------
Distribution fees -- Class A 356,923
- ------------------------------------------------------------
Distribution fees -- Class B 437,547
- ------------------------------------------------------------
Distribution fees -- Class C 17,521
- ------------------------------------------------------------
Transfer agent fees -- Class A 188,159
- ------------------------------------------------------------
Transfer agent fees -- Class B 115,184
- ------------------------------------------------------------
Transfer agent fees -- Class C 4,613
- ------------------------------------------------------------
Directors' fees 8,021
- ------------------------------------------------------------
Other 174,229
============================================================
Total expenses 2,225,694
============================================================
Less: Fees waived (531,491)
- ------------------------------------------------------------
Expenses paid indirectly (2,184)
============================================================
Net expenses 1,692,019
============================================================
Net investment income 7,916,929
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FOREIGN CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (11,769,828)
- ------------------------------------------------------------
Foreign currencies 100,234
- ------------------------------------------------------------
Foreign currency contracts 1,532,812
============================================================
(10,136,782)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 572,832
- ------------------------------------------------------------
Foreign currencies (21,180)
- ------------------------------------------------------------
Foreign currency contracts 622,544
============================================================
1,174,196
============================================================
Net gain (loss) on investment securities,
foreign currencies and foreign currency
contracts (8,962,586)
============================================================
Net increase in net assets resulting from
operations $ 1,045,657
____________________________________________________________
============================================================
See Notes to Financial Statements.
FS-52
256
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
2000 1999
------------- -----------
OPERATIONS:
Net investment income $ 7,916,929 $ 6,368,021
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and foreign currency contracts (10,136,782) (4,008,006)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and foreign
currency contracts 1,174,196 (4,471,227)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations (1,045,657) (2,111,212)
==========================================================================================
Distributions to shareholders from net investment income:
Class A (697,810) (3,538,334)
- ------------------------------------------------------------------------------------------
Class B (427,241) (2,065,556)
- ------------------------------------------------------------------------------------------
Class C (22,193) (102,985)
- ------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (4,541,889) (483,962)
- ------------------------------------------------------------------------------------------
Class B (2,529,211) (310,211)
- ------------------------------------------------------------------------------------------
Class C (95,826) (15,757)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 60,321,560 (1,856,726)
- ------------------------------------------------------------------------------------------
Class B 29,421,207 1,178,036
- ------------------------------------------------------------------------------------------
Class C 41,717 263,914
==========================================================================================
Net increase (decrease) in net assets 80,424,657 (9,042,793)
==========================================================================================
NET ASSETS:
Beginning of year 87,382,912 96,425,705
==========================================================================================
End of year $ 167,807,569 $87,382,912
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 317,756,543 $95,576,239
- ------------------------------------------------------------------------------------------
Undistributed net investment income (45,909) (45,192)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and foreign currency
contracts (140,850,904) (3,069,640)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and foreign currency
contracts (9,052,161) (5,078,495)
==========================================================================================
$ 167,807,569 $87,382,912
__________________________________________________________________________________________
==========================================================================================
See Notes to Financial Statements.
FS-53
257
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 accounting
principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session 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 as of the
close of the customary trading session 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 option contracts generally will be valued 15 minutes after the close of
the customary trading session 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 customary
trading session 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 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$396,525, undistributed net realized gains decreased by $127,644,482 and paid
in capital increased by $127,247,958 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Distributions -- Distributions from income are declared and paid monthly and
are recorded on ex-dividend date. Distributions from 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 from 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 $140,223,848 as of October 31, 2000 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2008.
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 the 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
FS-54
258
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 foreign currency contracts at October 31, 2000 were as follows:
SETTLEMENT CONTRACT TO UNREALIZED
DATE DELIVER RECEIVE VALUE APPRECIATION
---------- ----------- ----------- ----------- ------------
12/29/00 AUD 6,200,000 $ 3,404,793 $ 3,215,929 $188,864
12/11/00 AUD 1,500,000 835,740 777,863 57,877
11/06/00 CAD 5,675,000 3,837,571 3,716,192 121,379
01/10/01 CAD 6,500,000 4,334,200 4,263,460 70,740
12/29/00 EUR 4,500,000 3,945,825 3,829,545 116,280
12/29/00 NZD 4,400,000 1,817,420 1,745,768 71,652
----------- ----------- ----------- --------
$28,775,000 $18,175,549 $17,548,757 $626,792
=========== =========== =========== ========
G. Bond Premiums -- It has been the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes. In November 2000, a
revised AICPA Audit and Accounting Guide, Audits of Investment Companies, was
issued and is effective for fiscal years beginning after December 15, 2000.
The revised Guide will require the Fund to amortize premium and discount on
all fixed-income securities. Upon initial adoption, the Fund will be required
to adjust the cost of its fixed-income securities by the cumulative amount of
amortization that would have been recognized had amortization been in effect
from the purchase date of each holding. Adopting this accounting principle
will not effect the Fund's net asset value, but will change the
classification of certain amounts between interest income and realized and
unrealized gain/loss in the Statement of Operations. The Fund expects that
the impact of the adoption of this principle will not be material to the
financial statements.
H. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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. AIM has contractually agreed to waive
fees and reimburse expenses (excluding interest, taxes, dividend expense on
short sales, extraordinary items and increases in expenses due to offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit total operating expenses of Class A shares to 1.25% (e.g. if
AIM waives 0.42% of Class A expenses, AIM will also waive 0.42% of Class B and
Class C expenses). During the year ended October 31, 2000, AIM waived fees of
$531,491.
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. For the year ended October 31, 2000, AIM was
paid $50,000 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 October 31, 2000, AFS was
paid $180,411 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 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
0.50% 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,
2000, the Class A, Class B and Class C shares paid AIM Distributors $356,923
$437,547 and $17,521, respectively, as compensation under the Plans.
AIM Distributors received commissions of $26,727 from sales of the Class A
shares of the Fund during the year ended October 31, 2000. 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, 2000,
AIM Distributors received $6,061 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, 2000, the Fund paid legal fees of $4,080 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
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $1,638 and reductions in custodian
fees of $546 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $2,184.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors'
FS-55
259
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 Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to not less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. During
the year ended October 31, 2000, there were no securities on loan.
NOTE 7-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, 2000 was
$218,113,120 and $207,030,385, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2000 is as follows:
Aggregate unrealized appreciation of
investment securities $ 1,448,230
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (11,108,220)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $ (9,659,990)
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $172,881,568.
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years October 31, 2000 and 1999
were as follows:
2000 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sold:
Class A 2,364,069 $ 22,041,534 2,496,536 $ 26,051,117
- ----------------------------------------------------------------------------------------------------------------------
Class B 696,358 6,483,160 1,275,307 13,306,447
- ----------------------------------------------------------------------------------------------------------------------
Class C 70,602 655,664 101,598 1,053,223
======================================================================================================================
Issued as reinvestment of dividends:
Class A 423,455 3,901,231 315,101 3,238,097
- ----------------------------------------------------------------------------------------------------------------------
Class B 225,452 2,081,717 188,786 1,938,556
- ----------------------------------------------------------------------------------------------------------------------
Class C 9,446 87,470 9,111 93,556
======================================================================================================================
Issued in connection with acquisition:*
Class A 7,153,743 65,569,432 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class B 4,551,701 41,673,944 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class C 22,050 202,039 -- --
======================================================================================================================
Reacquired:
Class A (3,345,608) (31,190,637) (3,041,035) (31,145,940)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,239,193) (20,817,614) (1,370,398) (14,066,967)
- ----------------------------------------------------------------------------------------------------------------------
Class C (96,253) (903,456) (85,444) (882,865)
======================================================================================================================
9,835,822 $ 89,784,484 (110,438) $ (414,776)
______________________________________________________________________________________________________________________
======================================================================================================================
* As of the close of business on June 16, 2000, the Fund acquired all the net
assets of AIM Global Government Income Fund pursuant to a plan of
reorganization approved by AIM Global Government Income Fund's shareholders on
May 31, 2000. The acquisition was accomplished by a tax-free exchange of
11,727,494 shares of the Fund for 13,800,813 shares of AIM Global Government
Income Fund outstanding as of the close of business on June 16, 2000. AIM
Global Government Income Fund's net assets at that date of $107,445,415,
including ($5,147,862) of unrealized (depreciation), were combined with those
of the Fund. The aggregate net assets of the Fund immediately before the
acquisition were $75,391,518.
FS-56
260
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
2000 1999 1998 1997 1996(a)
-------- ------- ------- ------- -------
Net asset value, beginning of period $ 9.72 $ 10.60 $ 10.93 $ 10.85 $ 10.74
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.66 0.67 0.71 0.72 0.79
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.79) (0.86) (0.27) 0.21 0.25
====================================================================================================================
Total from investment operations (0.13) (0.19) 0.44 0.93 1.04
====================================================================================================================
Less distributions:
Dividends from net investment income (0.13) (0.61) (0.61) (0.72) (0.81)
- --------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.07) (0.13) (0.12)
- --------------------------------------------------------------------------------------------------------------------
Returns of capital (0.55) (0.08) (0.09) -- --
====================================================================================================================
Total distributions (0.68) (0.69) (0.77) (0.85) (0.93)
====================================================================================================================
Net asset value, end of period $ 8.91 $ 9.72 $ 10.60 $ 10.93 $ 10.85
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) (1.38)% (1.94)% 3.95% 9.05% 10.22%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $105,636 $51,077 $58,115 $30,924 $21,926
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.25%(c) 1.25% 1.23% 1.25% 1.25%
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.71%(c) 1.67% 1.73% 1.86% 2.02%
====================================================================================================================
Ratio of net investment income to average net assets 6.97%(c) 6.54% 6.38% 6.54% 7.27%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 184% 93% 47% 61% 83%
____________________________________________________________________________________________________________________
====================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $71,384,527.
CLASS B
---------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------
2000 1999 1998 1997 1996(a)
------- ------- ------- ------- -------
Net asset value, beginning of period $ 9.72 $ 10.59 $ 10.92 $ 10.84 $ 10.73
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.61 0.62 0.65 0.67 0.74
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.79) (0.85) (0.27) 0.21 0.24
===================================================================================================================
Total from investment operations (0.18) (0.23) 0.38 0.88 0.98
===================================================================================================================
Less distributions:
Dividends from net investment income (0.12) (0.56) (0.55) (0.67) (0.75)
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.07) (0.13) (0.12)
- -------------------------------------------------------------------------------------------------------------------
Returns of capital (0.51) (0.08) (0.09) -- --
===================================================================================================================
Total distributions (0.63) (0.64) (0.71) (0.80) (0.87)
===================================================================================================================
Net asset value, end of period $ 8.91 $ 9.72 $ 10.59 $ 10.92 $ 10.84
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (1.94)% (2.37)% 3.38% 8.48% 9.66%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $60,391 $34,423 $36,525 $25,121 $16,787
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.75%(c) 1.75% 1.75% 1.76% 1.75%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.21%(c) 2.17% 2.25% 2.37% 2.53%
===================================================================================================================
Ratio of net investment income to average net assets 6.47%(c) 6.04% 5.87% 6.03% 6.77%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 184% 93% 47% 61% 83%
___________________________________________________________________________________________________________________
===================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $43,754,699.
FS-57
261
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------
AUGUST 4, 1997
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED)
----------------------------- TO OCTOBER 31,
2000 1999 1998 1997(a)
------- ------- ------- --------------
Net asset value, beginning of period $ 9.71 $ 10.59 $ 10.92 $10.76
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.60 0.62 0.66 0.15
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.77) (0.86) (0.28) 0.17
===============================================================================================================
Total from investment operations (0.17) (0.24) 0.38 0.32
===============================================================================================================
Less distributions:
Dividends from net investment income (0.12) (0.56) (0.55) (0.13)
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.07) (0.03)
- ---------------------------------------------------------------------------------------------------------------
Returns of capital (0.51) (0.08) (0.09) --
===============================================================================================================
Total distributions (0.63) (0.64) (0.71) (0.16)
===============================================================================================================
Net asset value, end of period $ 8.91 $ 9.71 $ 10.59 $10.92
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) (1.84)% 2.47% 3.39% 2.99%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,780 $ 1,884 $ 1,785 $ 242
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.75%(c) 1.75% 1.73% 1.76%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers 2.21%(c) 2.17% 2.22% 2.37%(d)
===============================================================================================================
Ratio of net investment income to average net assets 6.47%(c) 6.04% 5.88% 6.03%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 184% 93% 47% 61%
_______________________________________________________________________________________________________________
===============================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average daily net assets of $1,752,139.
(d) Annualized.
FS-58
262
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, 2000, 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 periods in the five-year
period then ended. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. 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, 2000, 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, 2000, 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 periods in the five-year period then
ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
December 6, 2000
Houston, Texas
FS-59
263
SCHEDULE OF INVESTMENTS
October 31, 2000
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-89.68%
AUSTRALIA-0.80%
AMP Ltd. (Insurance-Life/Health) 1,352,000 $ 12,187,072
- ---------------------------------------------------------------
Brambles Industries Ltd. (Air
Freight) 383,000 9,930,175
- ---------------------------------------------------------------
Cable & Wireless Optus Ltd.
(Telephone)(a) 3,103,700 6,573,569
===============================================================
28,690,816
===============================================================
BRAZIL-1.56%
Brasil Telecom Participacoes
S.A.-ADR (Telephone) 105,840 5,735,205
- ---------------------------------------------------------------
Companhia de Bebidas das
Americas-ADR
(Beverages-Alcoholic) 902,100 20,353,631
- ---------------------------------------------------------------
Embratel Participacoes S.A.-ADR
(Telephone) 492,800 7,977,200
- ---------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 821,314 21,768,369
- ---------------------------------------------------------------
Tele Centro Oeste Celular
Participacoes S.A.-ADR
(Telecommunication-Cellular/
Wireless) 1 10
===============================================================
55,834,415
===============================================================
CANADA-8.71%
360networks Inc.
(Telecommunications-Long
Distance)(a) 811,500 14,708,437
- ---------------------------------------------------------------
Bombardier Inc.-Class B
(Aerospace/Defense) 3,853,400 60,426,197
- ---------------------------------------------------------------
C-MAC Industries, Inc.
(Electronics-Component
Distributors)(a) 703,600 39,618,673
- ---------------------------------------------------------------
Celestica Inc.
(Electronics-Semiconductors)(a) 959,500 68,351,732
- ---------------------------------------------------------------
Cognos, Inc. (Computer Software &
Services)(a) 839,200 34,826,800
- ---------------------------------------------------------------
Mitel Corp. (Communications
Equipment)(a) 466,000 7,627,840
- ---------------------------------------------------------------
Nortel Networks Corp.
(Communications Equipment) 921,828 41,943,174
- ---------------------------------------------------------------
Rogers Communications, Inc.-Class B
(Telecommunications-Cellular/Wireless) 911,200 17,659,608
- ---------------------------------------------------------------
Shaw Communications Inc.-Class B
(Broadcasting-Television, Radio &
Cable) 1,298,700 26,572,628
===============================================================
311,735,089
===============================================================
DENMARK-4.28%
GN Store Nord A.S. (Communications
Equipment) 2,018,100 39,122,061
- ---------------------------------------------------------------
Novo Nordisk A.S.-Class B (Health
Care-Drugs-Generic & Other)(a) 333,500 70,735,740
- ---------------------------------------------------------------
Vestas Wind Systems A.S.
(Manufacturing-Specialized) 798,300 43,240,416
===============================================================
153,098,217
===============================================================
FINLAND-1.78%
Nokia Oyj (Communications
Equipment) 1,550,000 63,784,110
===============================================================
MARKET
SHARES VALUE
FRANCE-18.94%
Alcatel S.A. (Communications
Equipment) 1,011,400 $ 61,713,539
- ---------------------------------------------------------------
Altran Technologies S.A.
(Services-Commercial & Consumer) 279,600 57,161,364
- ---------------------------------------------------------------
Assurances Generales de France
(Insurance-Multi-Line) 617,700 33,811,616
- ---------------------------------------------------------------
Aventis S.A.
(Chemicals-Diversified)(a) 888,700 64,106,597
- ---------------------------------------------------------------
BNP Paribas (Banks-Major Regional) 778,250 67,102,925
- ---------------------------------------------------------------
Havas Advertising S.A.
(Services-Advertising/Marketing) 1,943,450 31,320,375
- ---------------------------------------------------------------
M6 Metropole Television
(Broadcasting-Television, Radio
& Cable) 176,000 7,766,845
- ---------------------------------------------------------------
Pinault-Printemps-Redoute S.A.
(Retail-General Merchandise) 210,300 37,532,471
- ---------------------------------------------------------------
PSA Peugeot Citroen (Automobiles) 150,900 27,789,299
- ---------------------------------------------------------------
Publicis Groupe
(Services-Advertising/
Marketing)(a) 1,075,600 35,188,746
- ---------------------------------------------------------------
Sanofi-Synthelabo S.A. (Health
Care-Drugs-Generic & Other) 577,500 30,385,913
- ---------------------------------------------------------------
Schneider Electric S.A.
(Housewares)(a) 240,100 15,638,646
- ---------------------------------------------------------------
Societe Generale-Class A
(Banks-Major Regional) 737,050 41,845,782
- ---------------------------------------------------------------
Societe Television Francaise 1
(Broadcasting-Television, Radio
& Cable) 617,650 33,704,046
- ---------------------------------------------------------------
STMicroelectronics N.V.
(Electronics-Semiconductors) 1,303,500 65,764,498
- ---------------------------------------------------------------
Total Fina Elf S.A.
(Oil-International Integrated) 466,144 66,696,998
===============================================================
677,529,660
===============================================================
GERMANY-4.19%
ADVA A.G. Optical Networking
(Communications Equipment)(a) 153,700 11,282,844
- ---------------------------------------------------------------
Altana A.G. (Health
Care-Drugs-Generic & Other) 261,540 31,739,697
- ---------------------------------------------------------------
MLP A.G.-Pfd. (Services-Commercial
& Consumer) 216,900 29,267,477
- ---------------------------------------------------------------
Porsche A.G.-Pfd. (Automobiles) 15,000 50,282,512
- ---------------------------------------------------------------
Siemens A.G.
(Manufacturing-Diversified) 213,300 27,152,557
===============================================================
149,725,087
===============================================================
HONG KONG-3.23%
China Mobile Ltd.
(Telecommunications-
Cellular/Wireless)(a) 9,104,000 58,366,457
- ---------------------------------------------------------------
Dao Heng Bank Group Ltd.
(Banks-Regional) 3,880,000 19,601,487
- ---------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail-Food
Chains) 3,018,400 37,541,326
===============================================================
115,509,270
===============================================================
ITALY-2.17%
Gruppo Editoriale L'Espresso
(Publishing) 802,600 8,779,720
- ---------------------------------------------------------------
FS-60
264
MARKET
SHARES VALUE
ITALY-(CONTINUED)
Riunione Adriatica di Sicurta S.P.A
(Insurance Brokers) 5,257,600 $ 69,025,009
===============================================================
77,804,729
===============================================================
JAPAN-11.68%
Advantest Corp.
(Electronics-Instrumentation) 168,000 21,909,362
- ---------------------------------------------------------------
Crayfish Co. Ltd.-ADR
(Computers-Software &
Services)(a) 894,300 1,397,344
- ---------------------------------------------------------------
Hirose Electric Co. Ltd.
(Electronics-Component
Distributors) 153,200 17,690,693
- ---------------------------------------------------------------
Hoya Corp.
(Manufacturing-Specialized) 270,000 22,319,571
- ---------------------------------------------------------------
Matsushita Communication Industrial
Co., Ltd. (Telephone) 199,000 26,079,824
- ---------------------------------------------------------------
Murata Manufacturing Co., Ltd.
(Electronics-Component
Distributors) 147,000 17,594,465
- ---------------------------------------------------------------
NEC Corp. (Computers-Hardware) 1,446,000 27,564,313
- ---------------------------------------------------------------
Nippon Telegraph & Telephone Corp.
(Telecommunications-Long
Distance) 2,573 23,415,562
- ---------------------------------------------------------------
NTT Data Corp. (Computers-Software
& Services)(a) 1,984 15,455,254
- ---------------------------------------------------------------
NTT DoCoMo, Inc.
(Telecommunications-
Cellular/Wireless) 903 22,261,559
- ---------------------------------------------------------------
Ricoh Co., Ltd. (Office Equipment &
Supplies) 1,141,000 17,567,521
- ---------------------------------------------------------------
Rohm Co. Ltd.
(Electronics-Component
Distributors) 63,000 15,883,517
- ---------------------------------------------------------------
Sanix Inc. (Services-Commercial &
Consumer) 265,200 13,586,290
- ---------------------------------------------------------------
Sanyo Electric Co., Ltd.
(Electronics-Component
Distributors) 7,152,000 54,402,786
- ---------------------------------------------------------------
Sharp Corp. (Electrical Equipment) 918,000 11,694,268
- ---------------------------------------------------------------
Sony Corp. (Electrical Equipment) 335,800 26,835,687
- ---------------------------------------------------------------
Takeda Chemical Industries Ltd.
(Health Care-Drugs-Generic &
Other) 642,000 42,303,808
- ---------------------------------------------------------------
Tokyo Electron Ltd. (Electronics-
Semiconductors) 272,000 21,288,365
- ---------------------------------------------------------------
Trend Micro Inc.
(Computers-Software &
Services)(a) 196,700 18,567,658
===============================================================
417,817,847
===============================================================
MEXICO-3.40%
Coca-Cola Femsa S.A.-ADR
(Beverages-Non-Alcoholic) 796,800 15,288,600
- ---------------------------------------------------------------
Fomento Economico Mexicano, S.A. de
C.V.-ADR (Beverages-Alcoholic) 669,970 25,584,479
- ---------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series C
(Beverages-Alcoholic) 4,538,900 12,104,366
- ---------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 536,200 29,021,825
- ---------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de
C.V.-Class A (Paper & Forest
Products) 1,979,000 5,060,296
- ---------------------------------------------------------------
Telefonos de Mexico S.A. de
C.V.-Class L-ADR (Telephone) 269,900 14,557,731
- ---------------------------------------------------------------
MARKET
SHARES VALUE
MEXICO-(CONTINUED)
Wal-Mart de Mexico S.A. de
C.V.-Series C (Retail-General
Merchandise)(a) 8,782,000 $ 20,021,711
===============================================================
121,639,008
===============================================================
NETHERLANDS-3.76%
Koninklijke (Royal) Philips
Electronics N.V. (Electrical
Equipment) 1,363,700 53,594,748
- ---------------------------------------------------------------
Koninklijke Numico N.V. (Foods) 743,400 34,761,841
- ---------------------------------------------------------------
VNU N.V. (Publishing) 978,600 46,092,133
===============================================================
134,448,722
===============================================================
NORWAY-0.22%
Tomra Systems A.S.A.
(Manufacturing-Specialized) 194,650 7,825,526
===============================================================
SINGAPORE-1.27%
Chartered Semiconductor
Manufacturing Ltd.-ADR
(Electronics-Semiconductors)(a) 117,900 5,482,350
- ---------------------------------------------------------------
Datacraft Asia Ltd. (Communications
Equipment) 1,475,136 10,104,682
- ---------------------------------------------------------------
DBS Group Holdings Ltd.
(Banks-Money Center) 1,393,274 16,421,324
- ---------------------------------------------------------------
Keppel Corp. Ltd. (Engineering &
Construction) 3,901,900 7,775,807
- ---------------------------------------------------------------
Singapore Press Holdings Ltd.
(Publishing-Newspapers) 386,000 5,516,484
===============================================================
45,300,647
===============================================================
SOUTH KOREA-0.91%
Korea Telecom Corp.-ADR (Telephone) 464,000 17,110,000
- ---------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 387,800 6,132,088
- ---------------------------------------------------------------
Samsung Electronics N.V.
(Electronics-Component
Distributors) 74,600 9,345,495
===============================================================
32,587,583
===============================================================
SPAIN-1.63%
Telefonica S.A. (Telephone)(a) 2,684,827 51,197,410
- ---------------------------------------------------------------
Telefonica S.A.-ADR (Telephone)(a) 123,805 7,172,952
===============================================================
58,370,362
===============================================================
SWEDEN-0.11%
Assa Abloy A.B.-Class B (Metal
Fabricators) 104,150 1,917,952
- ---------------------------------------------------------------
OM Grupppen A.B. (Investment
Banking/Brokerage) 57,050 2,038,377
===============================================================
3,956,329
===============================================================
SWITZERLAND-5.91%
Adecco S.A. (Services-Commercial &
Consumer) 28,391 19,635,015
- ---------------------------------------------------------------
Compagnie Financiere Richemont
A.G.-Units (Tobacco)(b) 20,000 55,639,014
- ---------------------------------------------------------------
Julius Baer Holding Ltd.-Class B
(Banks-Major Regional) 1,835 9,086,686
- ---------------------------------------------------------------
FS-61
265
MARKET
SHARES VALUE
SWITZERLAND-(CONTINUED)
Kudelski S.A.
(Electronics-Component
Distributors)(a) 10,000 $ 13,464,641
- ---------------------------------------------------------------
Nestle S.A. (Foods)(a) 18,000 37,305,959
- ---------------------------------------------------------------
Serono S.A.-Class B (Health
Care-Drugs-Generic & Other) 45,720 41,133,500
- ---------------------------------------------------------------
Swatch Group A.G. (The)-Class B
(Consumer-Jewelry, Novelties &
Gifts) 26,600 35,223,947
===============================================================
211,488,762
===============================================================
TAIWAN-0.51%
Far Eastern Textile Ltd.
(Textiles-Apparel) 1,120,246 921,842
- ---------------------------------------------------------------
Taiwan Semiconductor Manufacturing
Co. Ltd.
(Electronics-Semiconductors)(a) 5,706,240 17,299,660
===============================================================
18,221,502
===============================================================
UNITED KINGDOM-14.62%
ARM Holdings PLC (Electronics-
Semiconductors)(a) 4,900,850 48,369,037
- ---------------------------------------------------------------
Bookham Technology PLC
(Communications Equipment)(a) 166,300 5,476,636
- ---------------------------------------------------------------
BP Amoco PLC (Oil-International
Integrated) 5,686,300 48,239,345
- ---------------------------------------------------------------
Capita Group PLC
(Services-Commercial & Consumer) 4,869,600 37,105,622
- ---------------------------------------------------------------
CMG PLC (Computers-Software &
Services) 959,400 15,998,928
- ---------------------------------------------------------------
Logica PLC (Computers-Software &
Services) 997,900 29,531,899
- ---------------------------------------------------------------
Marconi PLC (Communications
Equipment) 4,286,300 54,123,882
- ---------------------------------------------------------------
MARKET
SHARES VALUE
UNITED KINGDOM-(CONTINUED)
Pace Micro Technology PLC
(Communications Equipment) 1,618,300 $ 11,556,099
- ---------------------------------------------------------------
Royal Bank of Scotland Group PLC
(Banks-Major Regional) 2,568,300 57,666,446
- ---------------------------------------------------------------
Shell Transport & Trading Co. (Oil-
International Integrated) 7,119,800 57,300,243
- ---------------------------------------------------------------
Spirent PLC (Communications
Equipment) 6,011,250 55,751,014
- ---------------------------------------------------------------
Vodafone Group PLC
(Telecommunications-
Cellular/Wireless) 15,651,928 65,141,595
- ---------------------------------------------------------------
WPP Group PLC
(Services-Advertising/Marketing) 2,725,550 36,591,735
===============================================================
522,852,481
===============================================================
Total Foreign Stocks & Other
Equity Interests (Cost
$2,588,322,261) 3,208,220,162
===============================================================
MONEY MARKET FUNDS-13.31%
STIC Liquid Assets Portfolio(c) 238,167,382 238,167,382
- ---------------------------------------------------------------
STIC Prime Portfolio(c) 238,167,382 238,167,382
===============================================================
Total Money Market Funds (Cost
$476,334,764) 476,334,764
===============================================================
TOTAL INVESTMENTS-102.99% (Cost
$3,064,657,025) 3,684,554,926
===============================================================
LIABILITIES LESS OTHER
ASSETS-(2.99%) (107,078,104)
===============================================================
NET ASSETS-100.00% $3,577,476,822
_______________________________________________________________
===============================================================
Investment Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Ltd. - Limited
Pfd. - Preferred
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes common or preferred
shares of the issuer.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-62
266
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments, at market value (cost
$3,064,657,025) $3,684,554,926
- -------------------------------------------------------------
Foreign currencies, at value (cost
$50,104,560) 50,273,027
- -------------------------------------------------------------
Receivables for:
Investments sold 7,861,206
- -------------------------------------------------------------
Capital stock sold 35,370,022
- -------------------------------------------------------------
Dividends and interest 6,355,882
- -------------------------------------------------------------
Collateral for securities loaned 181,195,014
- -------------------------------------------------------------
Investment for deferred compensation plan 65,629
- -------------------------------------------------------------
Other assets 428,891
=============================================================
Total assets $3,966,104,597
=============================================================
LIABILITIES:
Payables for:
Investments purchased 185,702,331
- -------------------------------------------------------------
Capital stock reacquired 14,641,659
- -------------------------------------------------------------
Collateral upon return of securities loaned 181,195,014
- -------------------------------------------------------------
Deferred compensation plan 65,629
- -------------------------------------------------------------
Accrued advisory fees 2,611,826
- -------------------------------------------------------------
Accrued administrative services fees 18,490
- -------------------------------------------------------------
Accrued distribution fees 2,562,271
- -------------------------------------------------------------
Accrued directors' fees 741
- -------------------------------------------------------------
Accrued transfer agent fees 1,024,349
- -------------------------------------------------------------
Accrued operating expenses 805,465
=============================================================
Total liabilities 388,627,775
=============================================================
Net assets applicable to shares outstanding $3,577,476,822
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $2,325,635,811
_____________________________________________________________
=============================================================
Class B $ 997,842,582
_____________________________________________________________
=============================================================
Class C $ 253,998,429
_____________________________________________________________
=============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 400,000,000
- -------------------------------------------------------------
Outstanding 107,655,983
_____________________________________________________________
=============================================================
Class B:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 47,952,089
_____________________________________________________________
=============================================================
Class C:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 12,196,926
_____________________________________________________________
=============================================================
Class A:
Net asset value and redemption price per
share $ 21.60
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $21.60 divided by
94.50%) $ 22.86
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 20.81
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 20.82
_____________________________________________________________
=============================================================
STATEMENT OF OPERATIONS
For the year ended October 31, 2000
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$3,540,954) $ 51,813,671
- ------------------------------------------------------------
Dividends from affiliated money market funds 15,111,834
- ------------------------------------------------------------
Interest 412,303
- ------------------------------------------------------------
Security lending income 391,360
============================================================
Total investment income 67,729,168
============================================================
EXPENSES:
Advisory fees 35,553,208
- ------------------------------------------------------------
Administrative services fees 222,616
- ------------------------------------------------------------
Custodian fees 2,535,839
- ------------------------------------------------------------
Distribution fees -- Class A 7,664,862
- ------------------------------------------------------------
Distribution fees -- Class B 11,204,523
- ------------------------------------------------------------
Distribution fees -- Class C 2,193,948
- ------------------------------------------------------------
Transfer agent fees -- Class A 4,136,260
- ------------------------------------------------------------
Transfer agent fees -- Class B 2,203,596
- ------------------------------------------------------------
Transfer agent fees -- Class C 431,484
- ------------------------------------------------------------
Directors' fees 13,946
- ------------------------------------------------------------
Other 1,505,292
============================================================
Total expenses 67,665,574
============================================================
Less: Fees waived (1,697,400)
- ------------------------------------------------------------
Expenses paid indirectly (57,572)
============================================================
Net expenses 65,910,602
============================================================
Net investment income 1,818,566
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 307,049,154
- ------------------------------------------------------------
Foreign currencies (16,252,477)
============================================================
290,796,677
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (272,160,867)
- ------------------------------------------------------------
Foreign currencies (2,268,302)
============================================================
(274,429,169)
============================================================
Net gain on investment securities and foreign
currencies 16,367,508
============================================================
Net increase in net assets resulting from
operations $ 18,186,074
____________________________________________________________
============================================================
See Notes to Financial Statements.
FS-63
267
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 2000 and 1999
2000 1999
-------------- --------------
OPERATIONS:
Net investment income (loss) $ 1,818,566 $ (10,949,841)
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 290,796,677 182,790,856
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (274,429,169) 474,142,542
==============================================================================================
Net increase in net assets resulting from operations 18,186,074 645,983,557
==============================================================================================
Distributions to shareholders from net investment income:
Class A -- (10,410,630)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (86,520,783) (20,381,375)
- ----------------------------------------------------------------------------------------------
Class B (38,910,409) (9,045,542)
- ----------------------------------------------------------------------------------------------
Class C (5,375,907) (756,877)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 313,494,138 (80,693,853)
- ----------------------------------------------------------------------------------------------
Class B 148,996,045 (28,456,976)
- ----------------------------------------------------------------------------------------------
Class C 163,874,554 39,293,753
==============================================================================================
Net increase in net assets 513,743,712 535,532,057
==============================================================================================
NET ASSETS:
Beginning of year 3,063,733,110 2,528,201,053
==============================================================================================
End of year $3,577,476,822 $3,063,733,110
______________________________________________________________________________________________
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $2,727,015,413 $2,002,598,882
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (137,143) (8,098,861)
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and foreign currencies 233,356,824 177,562,192
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 617,241,728 891,670,897
==============================================================================================
$3,577,476,822 $3,063,733,110
______________________________________________________________________________________________
==============================================================================================
See Notes to Financial Statements.
FS-64
268
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 as of the close of the
customary trading session 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 as of the close of
the customary trading session 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 option
contracts generally will be valued 15 minutes after the close of the
customary trading session 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 customary
trading session 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 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 on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On October 31, 2000, undistributed net investment income was increased by
$6,143,152, undistributed net realized gains decreased by $104,194,946 and
paid in capital increased by $98,051,794 as a result of book/tax differences
due to utilization of a portion of the proceeds from redemptions as
distributions for federal income tax purposes, foreign currency transactions
and net operating loss reclassifications. Net assets of the Fund were
unaffected by the reclassification discussed above.
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 from 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.
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 the portion of the results of operations resulting
from changes in
FS-65
269
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. Bond Premiums -- It has been the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes. In November 2000, a
revised AICPA Audit and Accounting Guide, Audits of Investment Companies, was
issued and is effective for fiscal years beginning after December 15, 2000.
The revised Guide will require the Fund to amortize premium and discount on
all fixed-income securities. Upon initial adoption, the Fund will be required
to adjust the cost of its fixed-income securities by the cumulative amount of
amortization that would have been recognized had amortization been in effect
from the purchase date of each holding. Adopting this accounting principle
will not effect the Fund's net asset value, but will change the
classification of certain amounts between interest income and realized and
unrealized gain/loss in the Statement of Operations. The Fund expects that
the impact of the adoption of this principle will not be material to the
financial statements.
H. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 agreed to waive advisory fees
payable by the Fund to AIM at the annual rate of 0.05% on net assets in excess
of $500 million. During the year ended October 31, 2000, AIM waived fees of
$1,697,400.
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. For the year ended October 31, 2000, AIM was
paid $222,616 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 October 31, 2000, AFS was
paid $2,661,410 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 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
0.30% 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,
2000, the Class A, Class B and Class C shares paid AIM Distributors $7,664,862,
$11,204,523 and $2,193,948, respectively, as compensation under the Plans.
AIM Distributors received commissions of $735,919 from sales of the Class A
shares of the Fund during the year ended October 31, 2000. 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, 2000,
AIM Distributors received $263,758 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, 2000, the Fund paid legal fees of $10,103
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
For the year ended October 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $52,626 and reductions in
custodian fees of $4,946 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $57,572.
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-66
270
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. 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,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly and failed to return the securities.
At October 31, 2000, securities with an aggregate value of $172,157,948 were
on loan to brokers. The loans were secured by cash collateral of $181,195,014
received by the Fund. For the year ended October 31, 2000, the Fund received
fees of $391,360 for securities lending.
NOTE 7-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, 2000 was
$3,388,830,409 and $3,103,179,568, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of October 31, 2000 is as follows:
Aggregate unrealized appreciation of
investment securities $ 773,072,876
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (165,458,341)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 607,614,535
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $3,076,940,391.
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years October 31, 2000 and 1999
were as follows:
2000 1999
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ------------ ---------------
Sold:
Class A 74,959,702 $ 1,884,430,622 144,897,083 $ 2,695,101,630
- -----------------------------------------------------------------------------------------------------------------------------
Class B 10,706,006 266,318,794 11,600,846 212,065,890
- -----------------------------------------------------------------------------------------------------------------------------
Class C 11,663,828 288,872,717 9,254,771 168,733,197
=============================================================================================================================
Issued as reinvestment of dividends:
Class A 3,304,133 80,984,287 1,596,985 28,282,611
- -----------------------------------------------------------------------------------------------------------------------------
Class B 1,485,236 35,304,035 482,230 8,356,948
- -----------------------------------------------------------------------------------------------------------------------------
Class C 214,163 5,094,930 39,786 689,883
=============================================================================================================================
Issued in connection with acquisitions:*
Class A -- -- 5,974,789 108,110,501
- -----------------------------------------------------------------------------------------------------------------------------
Class B -- -- 2,061,255 36,453,921
=============================================================================================================================
Reacquired:
Class A (65,335,468) (1,651,920,771) (155,781,747) (2,912,188,595)
- -----------------------------------------------------------------------------------------------------------------------------
Class B (6,258,901) (152,626,784) (15,614,562) (285,333,735)
- -----------------------------------------------------------------------------------------------------------------------------
Class C (5,276,103) (130,093,093) (7,117,246) (130,129,327)
=============================================================================================================================
25,462,596 $ 626,364,737 (2,605,810) $ (69,857,076)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
* The Fund acquired AIM International Growth Fund on February 12, 1999. The
acquired fund's net assets as of the closing date were $144,564,422. The net
assets of the Fund immediately prior to acquisition were $2,655,808,540.
FS-67
271
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------
2000(a) 1999 1998(a) 1997(a) 1996(a)
---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 21.73 $ 17.59 $ 16.64 $ 15.37 $ 13.65
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.08 (0.03) 0.05 0.04 0.04
- --------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.72 4.49 0.96 1.68 2.07
================================================================================================================================
Total from investment operations 0.80 4.46 1.01 1.72 2.11
================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.11) (0.06) (0.02) (0.01)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.93) (0.21) -- (0.43) (0.38)
================================================================================================================================
Total distributions (0.93) (0.32) (0.06) (0.45) (0.39)
================================================================================================================================
Net asset value, end of period $ 21.60 $ 21.73 $ 17.59 $ 16.64 $ 15.37
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 3.16% 25.73% 6.11% 11.43% 15.79%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,325,636 $2,058,419 $1,724,635 $1,577,390 $1,108,395
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.44%(c) 1.48% 1.45% 1.47% 1.58%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.48%(c) 1.52% 1.49% 1.51% 1.60%
================================================================================================================================
Ratio of net investment income to average net assets 0.30%(c) (0.14)% 0.28% 0.24% 0.25%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 87% 86% 78% 50% 66%
________________________________________________________________________________________________________________________________
================================================================================================================================
(a)Calculated using average shares outstanding.
(b)Does not include sales charges.
(c)Ratios are based on average daily net assets of $2,554,953,820.
CLASS B
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a) 1996(a)
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 21.11 $ 17.13 $ 16.27 $ 15.13 $ 13.54
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.17) (0.09) (0.09) (0.07)
- ----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.74 4.36 0.95 1.66 2.04
======================================================================================================================
Total from investment operations 0.63 4.19 0.86 1.57 1.97
======================================================================================================================
Less distributions from net realized gains (0.93) (0.21) -- (0.43) (0.38)
======================================================================================================================
Net asset value, end of period $ 20.81 $ 21.11 $ 17.13 $ 16.27 $ 15.13
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 2.42% 24.72% 5.29% 10.61% 14.88%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $997,843 $887,106 $744,987 $678,809 $368,355
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.18%(c) 2.27% 2.22% 2.25% 2.35%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.31% 2.26% 2.28% 2.37%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.44)%(c) (0.93)% (0.49)% (0.53)% (0.53)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 87% 86% 78% 50% 66%
______________________________________________________________________________________________________________________
======================================================================================================================
(a)Calculated using average shares outstanding.
(b)Does not include contingent deferred sales charges.
(c)Ratios are based on average daily net assets of $1,120,452,259.
FS-68
272
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
---------------------------------------------------
AUGUST 4,
1997
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
---------------------------------- OCTOBER 31,
2000(a) 1999(a) 1998(a) 1997(a)
------------------------------------------------
Net asset value, beginning of period $ 21.13 $ 17.14 $ 16.27 $ 17.64
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.17) (0.09) (0.02)
- --------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.73 4.37 0.96 (1.35)
==============================================================================================================
Total from investment operations 0.62 4.20 0.87 (1.37)
==============================================================================================================
Less distributions from net realized gains (0.93) (0.21) -- --
==============================================================================================================
Net asset value, end of period $ 20.82 $ 21.13 $ 17.14 $ 16.27
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 2.37% 24.76% 5.35% 7.77%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $253,998 $118,208 $ 58,579 $ 12,829
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.18%(c) 2.27% 2.22% 2.27%(d)
- --------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(c) 2.31% 2.26% 2.30%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.44)%(c) (0.93)% (0.49)% (0.55)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate 87% 86% 78% 50%
______________________________________________________________________________________________________________
==============================================================================================================
(a)Calculated using average shares outstanding.
(b)Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(c)Ratios are based on average daily net assets of $219,394,811.
(d)Annualized.
FS-69
273
APPENDIX II
ANNUAL REPORT / DECEMBER 31 2000
AIM JAPAN GROWTH FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
274
[COVER IMAGE]
-------------------------------------
THE WAVE, FROM "ONE HUNDRED FAMOUS VIEWS OF EDO"
BY ANDO TOKITARO HIROSHIGE
ONE OF THE LAST GREAT PRINTMAKERS OF THE UKIYO E SCHOOL,
HIROSHIGE WAS 19TH-CENTURY JAPAN'S MOST POPULAR ARTIST.
BEFORE HIROSHIGE, JAPANESE LANDSCAPES WERE PAINTED IN A FOR-
MAL, ACADEMIC MANNER. HIROSHIGE INTRODUCED A MORE NATURAL,
LYRICAL APPROACH THAT HAD ENORMOUS POPULAR APPEAL. DURING
HIS LIFETIME, HIROSHIGE PRODUCED MORE THAN 5,000 PRINTS. THE
WAVE BELONGS TO A SERIES DEPICTING WELL-KNOWN VIEWS AROUND
EDO (NOW TOKYO).
-------------------------------------
AIM Japan Growth Fund is for shareholders seeking long-term growth of capital.
The fund invests primarily in equity securities of companies located in Japan.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Japan Growth Fund's performance figures are historical, and they reflect
fund expenses, reinvestment of distributions and changes in net asset value.
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 A, Class B and Class C shares will
differ due to different sales-charge structure and class expenses.
o During the fiscal year ended 12/31/00, the fund paid distributions of
$0.6940 per Class A share and $0.6235 per Class B and Class C 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
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o Investing in a single-region mutual fund may involve greater risk and
potential reward than investing in a more diversified fund.
o Investing in micro-, small and mid-sized companies may involve risks not
associated with more established companies. Also, micro and small companies
may have business risk, significant stock-price fluctuations and
illiquidity.
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 Japan Index is a market-value-weighted average of the
performance of more than 300 securities on the Japanese stock exchanges
tracked by Morgan Stanley Capital International.
o The unmanaged Standard and Poor's 500 Index (S&P 500) is an index of common
stocks frequently used as a general measure of U.S. stock market
performance.
o The unmanaged National Association of Securities Dealers Automated Quotation
System Composite Index (the Nasdaq) is a market-value-weighted index
comprising all domestic and non-U.S.-based common stocks listed on the
Nasdaq system.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not include sales charges
or fund expenses.
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 JAPAN GROWTH FUND
275
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
It's an honor to address you as AIM Funds' new chairman. I
feel privileged to succeed Ted Bauer, who recently retired
[PHOTO OF as AIM's chairman after a long, successful career in the
Robert H. investment industry. Ted has always shown the highest degree
Graham, of integrity and commitment to excellence, and I have always
Chairman of admired him greatly. I'm also proud to be part of the team
the Board of that launched AIM almost 25 years ago. From the beginning,
THE FUND AIM has been a very people-oriented, service-minded company,
APPEARS HERE] and I plan to carry on that tradition for our shareholders,
financial advisors and employees.
UNCERTAIN MARKETS
The markets in 2000 were particularly unsettling, especially
for investors who have only experienced the bull market of
the 1990s. After almost a decade of double-digit returns,
the S&P 500 finished 2000 down 9.1%. But 20% to 30% returns,
such as we have seen recently, are not typical. Historically, markets decline in
one out of every four years. What we have seen in 2000 is a normal downturn, and
it appears to be a worldwide trend. In 2000, most overseas markets were more
turbulent than their U.S. counterpart.
Regardless of the impact of market conditions, we know you are counting on
us to deliver attractive investment performance. We don't like it when we don't
live up to your expectations. We have been disappointed along with you. Because
we ourselves invest in AIM funds and use them in our retirement plans, virtually
everyone who works here has a stake in at least one AIM fund. All of us have
seen the value of our own accounts decline. We know how unpleasant this
experience is.
What are we doing about it? We are sticking with our motto: Invest with
Discipline. We still manage our funds with the same security-selection
disciplines that have produced excellent long-term performance for so many of
our funds while making prudent adjustments to our portfolios. We know that every
now and then there will be a down period in the markets, like the one last year.
We just have to be patient, and we urge you to be, too. Remember that the
long-term historical trend of the markets is upward.
REASONS FOR OPTIMISM
Though we can expect the situation to remain difficult for some time, there are
reasons for optimism. Shortly after the close of the calendar year, the Federal
Reserve Board lowered interest rates, and many expect more cuts in the months to
come. With the correction and lower rates, we now see the most attractive market
valuation in several years. While there is concern that the economy's record
long expansion may be rolling over to recession, the Fed has achieved its goal
of slowing the economy and has reversed course, adding liquidity and lowering
rates. Historically, this has proven to be an important catalyst to stabilizing
the economy and turning markets.
The current environment illustrates the value of professional money
management. During downturns, investors may be tempted to make decisions based
on emotions, not strategy. The wisest choice is to rely on a professional money
manager, keeping in mind that mutual funds are long-term investments.
In the following pages, your fund's portfolio managers discuss market
activity and how they managed your fund during the fiscal year. If you have any
questions or comments, please contact us through our Web site, www.aimfunds.com,
or call our Client Services Department at 800-959-4246 during normal business
hours. Information about your account is available at our Web site and on our
automated AIM Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
AIM JAPAN GROWTH FUND
276
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND CHALLENGED BY VOLATILE MARKET CONDITIONS
STOCK VOLATILITY ROCKED MARKETS AROUND THE WORLD. HOW DID THE FUND PERFORM IN
THIS ENVIRONMENT?
It was a challenging fiscal year for Japanese securities. In 1999, a
Cinderella-like atmosphere prevailed in Japanese markets, with high-tech stocks
leading the charmed environment. Indeed, some Japanese-sector mutual funds
returned more than 100% in 1999, including AIM Japan Growth Fund. Y2K reversed
the fairy tale, however, as equity markets around the world sold off sharply. In
this environment, AIM Japan Growth Fund returned -53.73% for Class A shares and
- -53.97% for Class B and Class C shares for the one-year period ended December
31, 2000. These returns are at net asset value, excluding sales charges.
DESCRIBE THE MARKET ENVIRONMENT IN JAPAN DURING THE REPORTING PERIOD.
Japan was one of the world's star performers in 1999. Indeed, Japanese equity
markets began 2000 filled with optimism about both the economy and the stock
market. A number of bank mergers in 1999 convinced many that Japan's
banking-system problems were a dimming memory and perhaps the economy was
finally digging out of the doldrums. And like so many other world equity
markets, Japan was riding the global tech-stock craze.
Euphoria surrounding high-tech stocks, however, came to an end in March as
the Nasdaq sold off sharply. Most world markets followed suit, including Japan.
Extreme stock-market volatility became almost commonplace. This trend continued
into the second quarter, although there was a recovery of sorts in June. Foreign
investors, major sellers of the Japanese market earlier in the year, returned as
net purchasers in late June.
And there were signs in the third quarter that the market had stabilized.
Improved investor sentiment toward growth stocks in the United States and a
growing feeling that the Fed had finished raising rates helped the Japanese
market stage a modest rebound led by electronics.
This improvement, however, was not to last as a number of downward earnings
revisions in the United States (notably Intel and Apple, neither fund holdings)
hit Japanese shares severely (despite many upward revisions to earnings on
Japanese stocks). Continued worldwide stock volatility and a stalling Japanese
economy--job growth, industrial production, retail sales and business confidence
all took a downturn late in the year--drove investors, especially foreign
investors, to further sell Japanese equities in the final quarter.
HOW HAVE OTHER FACTORS AFFECTED JAPANESE MARKETS?
The flood of stock on Japanese markets was due not only to foreign investors
selling their shares but also to the unwinding of bank and corporate cross-share
holdings. For decades, Japanese companies have held substantial positions in
firms with which they have relationships a relic of an era when companies sealed
business deals by buying each other's stock. New accounting procedures and the
need to focus on return on investment rather than asset growth have led many
companies to unwind or sell significant portions of their cross-share holdings.
The mood, however, was not entirely dire in Japanese markets. Japanese
small-cap stocks in general performed well, handily beating most large-cap
shares. And certain companies in the shipbuilding, steel and metals and minerals
industries did well as corporate restructurings, mergers and historically low
stock valuations led to selective buying of these types of companies.
Japan's currency, the yen, also appeared strong most of the year. Late in
2000, the yen did start to weaken as the economy slowed down. But a falling yen
has its benefits. A weaker yen could help boost earnings for Japanese export
companies.
HOW DID YOU MANAGE THE FUND?
The companies we own are the ones we hope will lead the future growth of the
Japanese economy. We conduct extensive research into a company, including its
market capitalization, balance sheet, management and stock price. We continue to
believe that any increase in capital expenditure by corporations will be
directed to improving productivity, increasing production flexibility and
improving profitability by reducing costs. These companies, we hope, will
continue to provide the greatest earnings surprises.
-------------------------------------
EUPHORIA SURROUNDING HIGH-TECH
STOCKS, HOWEVER, CAME TO AN END IN
MARCH AS THE NASDAQ SOLD OFF
SHARPLY. MOST WORLD MARKETS FOL-
LOWED SUIT, INCLUDING JAPAN.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM JAPAN GROWTH FUND
2
277
ANNUAL REPORT / MANAGERS' OVERVIEW
-------------------------------------
READ THIS REPORT ONLINE!
A NEW SERVICE--ELECTRONIC DELIVERY
OF FUND REPORTS AND PROSPECTUSES--
IS AVAILABLE. YOU CAN READ THE SAME
AIM REPORT YOU ARE READING NOW--
ONLINE. ONCE YOU SIGN UP FOR THE
SERVICE, WE WILL SEND YOU A LINK TO
THE REPORT VIA E-MAIL. IF YOU CHOOSE
TO RECEIVE YOUR REPORTS ONLINE, YOU
WILL NOT RECEIVE A PAPER COPY BY
MAIL. YOU MAY CANCEL THE SERVICE AT
ANY TIME BY VISITING OUR WEB SITE.
PLEASE VISIT OUR WEB SITE AT
www.aimfunds.com AND GO TO "YOUR
AIM ACCOUNT." LOG INTO YOUR
ACCOUNT AND THEN CLICK ON THE "VIEW
OTHER ACCOUNT OPTIONS" DROPDOWN
MENU AND SELECT "eDELIVERY."
-------------------------------------
While the structure of the fund remains relatively unchanged, we have
reduced our risk profile somewhat by reducing positions in smaller companies and
adding larger, more defensive companies in their place.
COULD YOU DISCUSS SOME OF YOUR HOLDINGS?
Often, stocks in international portfolios are not household names in the United
States. But you may be more familiar with their products than you think. Here's
an overview of some of the fund's top holdings:
o Kao Corporation: Japan's foremost manufacturer of personal-care, laundry and
cleaning products, this company also owns U.S. skin-care company Andrew Jergens.
Kao also makes cooking oils, fatty acids and chemicals such as those used in
printers and copiers.
o Takeda Chemical Industries: One of Japan's top drug makers, it makes and
markets cold remedies, vitamins, food additives and chemical products like
insecticides and wood preservatives.
Takeda sells its products in some 100 countries, including the United
States, and has alliances with several firms, including a pact with a Johnson &
Johnson subsidiary to sell Tylenol and other nonprescription drugs in Japan.
o Nippon Telegraph and Telephone Corporation (NTT): This company is actually a
holding company for regional local phone companies NTT East and NTT West, which
enjoy de facto monopolies in their markets, and long-distance carrier NTT
Communications.
o NTT DoCoMo: The wireless spin-off of Nippon Telegraph and Telephone (NTT),
this company has a 55% market share of the mobile-phone industry in Japan. The
company also provides maritime and in-flight phone service and sells handsets
and pagers.
WHAT WERE CONDITIONS LIKE AS THE FISCAL YEAR CLOSED ON DECEMBER 31, 2000?
Although growth rates may be slowing in Japan, corporate capital spending could
continue to grow. The Tankan survey of business confidence in December, although
not as positive as previous surveys, still showed that large manufacturers
expect capital expenditure to grow. And despite some negative economic data,
Finance Minister Kiichi Miyazawa indicated that the economy will become
"self-sustaining" in fiscal year 2001 and a supplemental budget would be
unnecessary to support the economy.
The recovery of the Japanese economy as a whole, however, remains uncertain.
Still, we believe that the best investment in Japan is to find individual stocks
and sectors that perform well regardless of the country's economic situation.
[ART WORK]
PORTFOLIO COMPOSITION
As of 12/31/00, based on total net assets
=============================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- -------------------------------------------------------------------------------------------------------------
1. Kao Corp. 5.40% 1. Electronics (Component Distributors) 20.75%
2. Secom Co., Ltd. 5.37 2. Electrical Equipment 8.83
3. Canon Inc. 4.80 3. Personal Care 7.38
4. Nippon Telegraph & Telephone Corp. 4.58 4. Services (Commercial & Consumer) 5.37
5. Murata Manufacturing Co., Ltd. 4.51 5. Investment Banking/Brokerage 5.01
6. Fujitsu Ltd. 4.49 6. Office Equipment & Supplies 4.80
7. Rohm Co., Ltd. 4.27 7. Telecommunications (Long Distance) 4.58
8. NTT DoCoMo, Ltd. 3.65 8. Telecommunications (Cellular/Wireless) 3.65
9. ORIX Corp. 3.59 9. Financial (Diversified) 3.59
10. Takeda Chemical Industries, Ltd. 3.55 10. Health Care (Drugs-Generic & Other) 3.55
The fund's holdings are subject to change, and there is no assurance that the
fund will continue to hold any particular security.
=============================================================================================================
See important fund and index disclosures inside front cover.
AIM JAPAN GROWTH FUND
3
278
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM JAPAN GROWTH FUND VS. BENCHMARK INDEX
7/19/85-12/31/00
in thousands
================================================================================
AIM JAPAN GROWTH FUND, MSCI
DATE CLASS A SHARES JAPAN INDEX
- --------------------------------------------------------------------------------
7/19/85 9,450 10,000
12/31/1985 11,718 12,554
12/31/1986 18,904 25,035
12/31/1987 28,770 35,801
12/31/1988 35,052 48,466
12/31/1989 56,334 49,299
12/31/1990 40,145 31,496
12/31/1991 39,028 34,302
12/31/1992 30,633 26,946
12/31/1993 40,891 33,805
12/31/1994 43,574 41,052
12/31/1995 44,414 41,338
12/31/1996 41,111 34,932
12/31/1997 37,828 26,664
12/31/1998 37,625 28,007
12/31/1999 86,818 45,242
12/31/2000 $40,169 $32,501
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
This chart compares the performance of your fund's Class A shares to a benchmark
index over the period 7/19/85-12/31/00. (Please note that index performance
figures are for the period 7/31/85-12/31/00.) It is important to understand the
differences between your fund and an index. Your fund's total return is shown
with a sales charge, and it includes fund expenses and management fees. An index
measures the performance of a hypothetical portfolio. A market index such as the
MSCI 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 12/31/00, including sales charges
================================================================================
CLASS A SHARES
Inception (7/19/85) 9.42%
10 Years -0.56
5 Years -3.08
1 Year -56.28*
*-53.73%, excluding sales charges
CLASS B SHARES
Inception (4/1/93) 1.29%
5 Years -2.91
1 Year -56.13**
**-53.97%, excluding CDSC
CLASS C SHARES
Inception (5/3/99) -7.76%
1 Year -54.40***
***-53.97%, excluding CDSC
================================================================================
The performance of the fund's Class A, Class B and Class C shares will differ
due to different fees and expenses. FOR FUND PERFORMANCE CALCULATIONS AND A
DESCRIPTION OF THE INDEX ON THIS PAGE, PLEASE SEE THE INSIDE FRONT COVER.
AIM JAPAN GROWTH FUND
4
279
ANNUAL REPORT / FOR CONSIDERATION
AIM PRIVACY POLICY
We are always aware that when you invest in an AIM fund, you entrust us with
more than your money. You also share personal and financial information with us
that is necessary for your transactions and your account records. We take very
seriously the obligation to keep that information confidential and private.
AIM collects nonpublic personal information about you from applications or
other forms you complete and from your transactions with us or our affiliates.
We do not disclose information about you, or our former customers, to our
affiliates or to service providers or other third parties except on the limited
basis permitted by law. For example, we use this information to administer your
accounts with us through such activities as sending you transaction
confirmations, annual reports, prospectuses and tax forms.
Even within AIM, only people involved with servicing your accounts have
access to your information.
To ensure the highest level of confidentiality and security, AIM maintains
physical, electronic and procedural safeguards that meet or exceed federal
standards. Special measures, such as data encryption and authentication, apply
to your communications with us on our Web site--www.aimfunds.com. More detail is
available to you at that site.
A I M Capital Management, Inc. o A I M Distributors, Inc. o The AIM Family of
Funds--Registered Trademark-- o AMVESCAP National Trust Company
AIM JAPAN GROWTH FUND
5
280
SCHEDULE OF INVESTMENTS
December 31, 2000
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS (JAPAN)-98.61%
AUTOMOBILES-2.48%
Toyota Motor Corp. 81,400 $ 2,598,478
==============================================================
BROADCASTING (TELEVISION, RADIO &
CABLE)-1.69%
Tokyo Broadcasting System, Inc. 60,000 1,773,658
==============================================================
COMPUTERS (HARDWARE)-2.60%
NEC Corp. 149,000 2,723,544
==============================================================
COMPUTERS (NETWORKING)-1.49%
Net One Systems Co., Ltd. 43 1,071,803
- --------------------------------------------------------------
NextCom K.K.(a) 9 494,315
==============================================================
1,566,118
==============================================================
COMPUTERS (SOFTWARE &
SERVICES)-1.75%
Trend Micro Inc.(a) 14,000 1,012,594
- --------------------------------------------------------------
Yahoo Japan Corp.(a) 14 822,809
==============================================================
1,835,403
==============================================================
CONSUMER FINANCE-0.54%
Aiful Corp. 6,950 567,111
==============================================================
ELECTRICAL EQUIPMENT-8.83%
Fujitsu Ltd. 320,000 4,712,961
- --------------------------------------------------------------
Nidec Corp. 4,400 207,801
- --------------------------------------------------------------
TDK Corp. 23,000 2,236,838
- --------------------------------------------------------------
Toshiba Corp. 315,000 2,104,775
==============================================================
9,262,375
==============================================================
ELECTRONICS (COMPONENT
DISTRIBUTORS)-20.75%
Kyocera Corp. 27,600 3,010,075
- --------------------------------------------------------------
Murata Manufacturing Co., Ltd. 40,400 4,734,651
- --------------------------------------------------------------
Omron Corp. 170,000 3,531,135
- --------------------------------------------------------------
Rohm Co., Ltd. 23,600 4,478,923
- --------------------------------------------------------------
Sanyo Electric Co., Ltd. 354,000 2,941,228
- --------------------------------------------------------------
Sony Corp. 44,500 3,074,602
==============================================================
21,770,614
==============================================================
FINANCIAL (DIVERSIFIED)-3.59%
Orix Corp. 37,600 3,768,550
==============================================================
MARKET
SHARES VALUE
FOODS-1.19%
Ariake Japan Co., Ltd. 20,000 $ 1,243,659
==============================================================
HEALTH CARE (DRUGS-GENERIC &
OTHER)-3.55%
Takeda Chemical Industries, Ltd. 63,000 3,724,681
==============================================================
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.81%
Hogy Medical Co., Ltd. 31,200 1,896,449
==============================================================
INVESTMENT BANKING/BROKERAGE-5.01%
Nikko Securities Co., Ltd. (The) 394,000 3,049,589
- --------------------------------------------------------------
Nomura Securities Co., Ltd. (The) 123,000 2,210,644
==============================================================
5,260,233
==============================================================
MACHINERY (DIVERSIFIED)-1.09%
Fanuc Ltd. 16,800 1,141,648
==============================================================
MANUFACTURING (SPECIALIZED)-2.81%
Nippon Sheet Glass Co., Ltd. 177,000 2,157,932
- --------------------------------------------------------------
THK Co., Ltd. 37,200 793,843
==============================================================
2,951,775
==============================================================
METALS MINING-2.19%
Mitsui Mining & Smelting Co., Ltd. 298,000 2,293,511
==============================================================
NATURAL GAS-2.27%
Tokyo Gas Co., Ltd. 806,000 2,382,613
==============================================================
OFFICE EQUIPMENT & SUPPLIES-4.80%
Canon, Inc. 144,000 5,037,607
==============================================================
PERSONAL CARE-7.38%
Kao Corp. 195,000 5,662,061
- --------------------------------------------------------------
Shiseido Co., Ltd. 186,000 2,074,077
==============================================================
7,736,138
==============================================================
RAILROADS-1.56%
East Japan Railway Co. 279 1,634,861
==============================================================
RETAIL (DEPARTMENT STORES)-3.47%
Marui Co., Ltd. 241,000 3,635,867
==============================================================
RETAIL (GENERAL MERCHANDISE)-1.31%
Paris Miki, Inc. 67,500 1,378,455
==============================================================
RETAIL (SPECIALTY)-0.78%
Tsutsumi Jewelry Co., Ltd. 60,000 813,888
==============================================================
6
281
MARKET
SHARES VALUE
RETAIL (SPECIALTY-APPAREL)-2.07%
Fast Retailing Co., Ltd. 11,100 $ 2,172,626
==============================================================
SERVICES (COMMERCIAL &
CONSUMER)-5.37%
Secom Co., Ltd. 86,500 5,636,042
==============================================================
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-3.65%
NTT DoCoMo, Inc. 222 3,824,908
==============================================================
TELECOMMUNICATIONS (LONG
DISTANCE)-4.58%
Nippon Telegraph & Telephone Corp. 668 4,808,151
==============================================================
Total Foreign Stocks & Other
Equity Interests (JAPAN)
(Cost $105,985,433) 103,438,963
==============================================================
MARKET
SHARES VALUE
MONEY MARKET FUNDS-20.63%
STIC Liquid Assets Portfolio(b) 10,823,097 $ 10,823,097
- --------------------------------------------------------------
STIC Prime Portfolio(b) 10,823,097 10,823,097
==============================================================
Total Money Market Funds (Cost
$21,646,194) 21,646,194
==============================================================
TOTAL INVESTMENTS-119.24%
(Cost $127,631,627) 125,085,157
==============================================================
LIABILITIES LESS OTHER
ASSETS-(19.24%) (20,183,176)
==============================================================
NET ASSETS-100.00% $104,901,981
______________________________________________________________
==============================================================
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
7
282
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2000
ASSETS:
Investments, at market value (cost
$127,631,627) $125,085,157
- ------------------------------------------------------------
Foreign currencies, at value (cost $1,533,873) 1,528,619
- ------------------------------------------------------------
Receivables for:
Fund shares sold 675,203
- ------------------------------------------------------------
Dividends 77,606
- ------------------------------------------------------------
Foreign currency contracts outstanding 826,418
- ------------------------------------------------------------
Other assets 14,739
============================================================
Total assets 128,207,742
============================================================
LIABILITIES:
Payables for:
Investments purchased 9,661,423
- ------------------------------------------------------------
Fund shares reacquired 13,277,601
- ------------------------------------------------------------
Accrued advisory fees 91,724
- ------------------------------------------------------------
Accrued administrative services fees 4,235
- ------------------------------------------------------------
Accrued distribution fees 131,384
- ------------------------------------------------------------
Accrued transfer agent fees 54,005
- ------------------------------------------------------------
Accrued operating expenses 85,389
============================================================
Total liabilities 23,305,761
============================================================
Net assets applicable to shares outstanding $104,901,981
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 60,289,218
____________________________________________________________
============================================================
Class B $ 39,121,450
____________________________________________________________
============================================================
Class C $ 5,491,313
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 6,785,974
____________________________________________________________
============================================================
Class B 4,621,728
____________________________________________________________
============================================================
Class C 648,499
____________________________________________________________
============================================================
Class A:
Net asset value and redemption price per
share $ 8.88
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $8.88 divided by
94.50%) $ 9.40
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 8.46
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 8.47
____________________________________________________________
============================================================
STATEMENT OF OPERATIONS
For the year ended December 31, 2000
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$102,570) $ 572,085
============================================================
Dividends from affiliated money market funds 526,085
============================================================
Total investment income 1,098,170
============================================================
EXPENSES:
Advisory fees 1,928,148
- ------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------
Custodian fees 175,650
- ------------------------------------------------------------
Distribution fees -- Class A 387,087
- ------------------------------------------------------------
Distribution fees -- Class B 751,764
- ------------------------------------------------------------
Distribution fees -- Class C 111,080
- ------------------------------------------------------------
Transfer agent fees 496,618
- ------------------------------------------------------------
Trustees' fees 14,160
- ------------------------------------------------------------
Other 165,809
============================================================
Total expenses 4,080,316
============================================================
Less: Expenses paid indirectly (11,569)
- ------------------------------------------------------------
Net expenses 4,068,747
============================================================
Net investment income (loss) (2,970,577)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FOREIGN CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 16,612,217
- ------------------------------------------------------------
Foreign currencies (707,218)
============================================================
15,904,999
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (155,143,883)
- ------------------------------------------------------------
Foreign currencies 10,296
- ------------------------------------------------------------
Foreign currency contracts 826,418
============================================================
(154,307,169)
============================================================
Net gain (loss) from investment securities,
foreign currencies and foreign currency
contracts (138,402,170)
============================================================
Net increase (decrease) in net assets
resulting from operations $(141,372,747)
____________________________________________________________
============================================================
See Notes to Financial Statements.
8
283
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2000 and 1999
2000 1999
------------- ------------
OPERATIONS:
Net investment income (loss) $ (2,970,577) $ (1,792,021)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and foreign currency contracts 15,904,999 (11,813,497)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and foreign
currency contracts (154,307,169) 155,213,033
===========================================================================================
Net increase (decrease) in net assets resulting from
operations (141,372,747) 141,607,515
===========================================================================================
Distributions to shareholders from net investment income:
Class A (4,572,797) --
- -------------------------------------------------------------------------------------------
Class B (2,809,470) --
- -------------------------------------------------------------------------------------------
Class C (457,787) --
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (21,137,204) 44,477,119
- -------------------------------------------------------------------------------------------
Class B (18,539,562) 41,640,397
- -------------------------------------------------------------------------------------------
Class C (1,021,999) 10,758,430
- -------------------------------------------------------------------------------------------
Advisor Class* (9,719,700) 3,653,432
===========================================================================================
Net increase (decrease) in net assets (199,631,266) 242,136,893
===========================================================================================
NET ASSETS:
Beginning of year 304,533,247 62,396,354
===========================================================================================
End of year $ 104,901,981 $304,533,247
___________________________________________________________________________________________
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 119,137,205 $185,594,011
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (827,635) (14,299,977)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and foreign currency
contracts (11,698,375) (19,358,742)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and foreign currency
contracts (1,709,214) 152,597,955
===========================================================================================
$ 104,901,981 $304,533,247
___________________________________________________________________________________________
===========================================================================================
* Advisor Class shares were converted to Class A shares effective as of the
close of business on February 11, 2000.
See Notes to Financial Statements.
9
284
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Japan 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 five
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund consists of three different classes of shares:
Class A shares, Class B shares and Class C shares. The Fund formerly offered
Advisor Class shares; however, as of the close of business on February 11, 2000,
the Advisor Class shares were converted to Class A 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 accounting
principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session 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 as of the
close of the customary trading session 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 the
customary trading session 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 customary
trading session 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 on the accrual basis from
settlement date. Dividend income is recorded on the ex-dividend date.
On December 31, 2000, undistributed net investment income was increased by
$24,282,973, undistributed net realized gains were decreased by $8,244,632
and paid in capital was decreased by $16,038,341 as a result of differing
book/tax treatment of nondeductible organizational expenses, foreign currency
transactions and net operating loss reclassifications. Net assets of the fund
were unaffected by the reclassifications discussed above.
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 from
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 $8,987,413 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
10
285
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 the 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.
Outstanding foreign currency contracts at December 31, 2000 were as
follows:
CONTRACT TO
SETTLEMENT ----------------------- UNREALIZED
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
---------- -------- --------- ----------- ----------- ------------
12/15/00 JPY 3,884,020 $35,000,000 $34,409,415 $590,585
---------------------------------------------------------------------------------------
12/20/00 JPY 1,666,530 15,000,000 14,764,167 235,833
=======================================================================================
5,550,550 $50,000,000 $49,173,582 $826,418
______________________________________________________________________________________
=======================================================================================
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 Japan 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. Under the terms of a
master sub-advisory agreement between AIM and INVESCO Japan, AIM pays INVESCO
Japan 40% of the amount paid by the Fund to AIM.
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. For the year ended December 31, 2000, AIM was
paid $50,000 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 December 31, 2000, AFS
was paid $291,396 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
Class A, Class B and Class C 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,
2000, the Class A, Class B and Class C shares paid AIM Distributors $387,087,
$751,764 and $111,080, respectively, as compensation under the Plans.
AIM Distributors received commissions of $118,634 from sales of the Class A
shares of the Fund during the year ended December 31, 2000. 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, 2000,
AIM Distributors received $107,046 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-INDIRECT EXPENSES
For the year ended December 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $2,918 and reductions in custodian
fees of $8,651 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $11,569.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. 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 December 31,
2000, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
11
286
NOTE 5-PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the lender did not increase the
collateral accordingly. It is the Fund's policy to obtain additional collateral
from or return excess collateral to the borrower by the end of the next business
day. Therefore, the value of the collateral may be temporarily less than the
value of the securities on loan.
At December 31, 2000, there were no securities on loan to brokers.
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, 2000 was
$119,161,414 and $160,790,736, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 2000 is as follows:
Aggregate unrealized appreciation of
investment securities $ 14,599,463
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (19,858,112)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $ (5,258,649)
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $130,343,806.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2000 and 1999
were as follows:
2000 1999
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sold:
Class A 28,099,376 $ 374,926,995 19,428,484 $ 241,844,051
- --------------------------------------------------------------------------------------------------------------------------
Class B 2,623,447 40,508,157 7,771,106 96,657,608
- --------------------------------------------------------------------------------------------------------------------------
Class C* 1,440,250 20,037,673 1,505,640 20,997,654
- --------------------------------------------------------------------------------------------------------------------------
Advisor Class** 153,964 2,847,769 1,449,716 19,444,530
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 403,242 3,979,998 -- --
- --------------------------------------------------------------------------------------------------------------------------
Class B 258,645 2,433,851 -- --
- --------------------------------------------------------------------------------------------------------------------------
Class C* 38,533 362,593 -- --
- --------------------------------------------------------------------------------------------------------------------------
Advisor Class** -- -- -- --
==========================================================================================================================
Conversion of Advisor Class shares to Class A shares:***
Class A 421,633 8,116,431 -- --
- --------------------------------------------------------------------------------------------------------------------------
Advisor Class (414,104) (8,116,431) -- --
==========================================================================================================================
Reacquired:
Class A (30,003,101) (408,160,628) (15,790,359) (197,366,932)
- --------------------------------------------------------------------------------------------------------------------------
Class B (4,271,341) (61,481,570) (4,429,756) (55,017,211)
- --------------------------------------------------------------------------------------------------------------------------
Class C* (1,589,418) (21,422,265) (746,506) (10,239,224)
- --------------------------------------------------------------------------------------------------------------------------
Advisor Class** (226,080) (4,451,038) (1,182,546) (15,791,098)
==========================================================================================================================
(3,064,954) $ (50,418,465) 8,005,779 $ 100,529,378
__________________________________________________________________________________________________________________________
==========================================================================================================================
* Class C shares commenced sales on May 3, 1999.
** Advisor Class share activity for the period January 1, 2000 through February
11, 2000 (date of conversion).
*** Effective as of the close of business February 11, 2000, pursuant to
approval by the Board of Trustees on November 3, 1999, all outstanding
shares of Advisor Class shares were converted to Class A shares of the fund.
12
287
NOTE 8-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a) 1996(a)
------- -------- ------- -------- -------
Net asset value, beginning of period $ 20.54 $ 8.90 $ 8.96 $ 9.76 $ 11.00
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.18) (0.14) (0.02) (0.08) (0.04)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (10.79) 11.78 (0.03) (0.70) (0.77)
===================================================================================================================
Total from investment operations (10.97) 11.64 (0.05) (0.78) (0.81)
===================================================================================================================
Less distributions:
Dividends from net investment income (0.69) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.01) (0.02) (0.43)
===================================================================================================================
Total distributions (0.69) -- (0.01) (0.02) (0.43)
===================================================================================================================
Net asset value, end of period $ 8.88 $ 20.54 $ 8.90 $ 8.96 $ 9.76
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (53.73)% 130.79% (0.54)% (7.99)% (7.43)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $60,289 $161,527 $37,608 $ 44,583 $63,585
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers(c) 1.79%(d) 1.87% 1.96% 1.99% 1.84%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.79%(d) 1.87% 2.33% 2.06% 1.94%
===================================================================================================================
Ratio of net investment income (loss) to average net assets (1.23)%(d) (1.03)% (0.19)% (0.61)% (0.40)%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 62% 43% 67% 58% 31%
___________________________________________________________________________________________________________________
===================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Prior to the period ended December 31, 1999, ratios include expense
reductions.
(d) Ratios are based on average daily net assets of $110,596,248.
13
288
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2000(a) 1999(a) 1998(a) 1997(a) 1996(a)
------- -------- ------- -------- -------
Net asset value, beginning of period $ 19.62 $ 8.55 $ 8.67 $ 9.49 $ 10.78
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26) (0.21) (0.07) (0.14) (0.11)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (10.28) 11.28 (0.04) (0.66) (0.75)
===================================================================================================================
Total from investment operations (10.54) 11.07 (0.11) (0.80) (0.86)
===================================================================================================================
Less distributions:
Dividends from net investment income (0.62) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.01) (0.02) (0.43)
===================================================================================================================
Total distributions (0.62) -- (0.01) (0.02) (0.43)
===================================================================================================================
Net asset value, end of period $ 8.46 $ 19.62 $ 8.55 $ 8.67 $ 9.49
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (54.02)% 129.47% (1.25)% (8.42)% (8.05)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $39,121 $117,953 $22,815 $ 24,250 $32,116
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers(c) 2.44%(d) 2.52% 2.61% 2.64% 2.49%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.44%(d) 2.52% 2.98% 2.71% 2.59%
===================================================================================================================
Ratio of net investment income (loss) to average net assets (1.88)%(d) (1.68)% (0.84)% (1.26)% (1.05)%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 62% 43% 67% 58% 31%
___________________________________________________________________________________________________________________
===================================================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Prior to the period ended December 31, 1999, ratios include expense
reductions.
(d) Ratios are based on average daily net assets of $75,176,436.
CLASS C
----------------------------
MAY 3, 1999
(DATE SALES
COMMENCED)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
2000(a) 1999(a)
------------ ------------
Net asset value, beginning of period $19.62 $ 10.33
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26) (0.17)
- ------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (10.27) 9.46
==========================================================================================
Total from investment operations (10.53) 9.29
==========================================================================================
Less distributions from dividends from net investment income (0.62) --
==========================================================================================
Net asset value, end of period $ 8.47 $ 19.62
__________________________________________________________________________________________
==========================================================================================
Total return(b) (53.97)% 89.93%
__________________________________________________________________________________________
==========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,491 $14,891
__________________________________________________________________________________________
==========================================================================================
Ratio of expenses to average net assets:
Without fee waivers 2.44%(c) 2.52%(d)
==========================================================================================
Ratio of net investment income (loss) to average net assets (1.88)%(c) (1.68)%(d)
__________________________________________________________________________________________
==========================================================================================
Portfolio turnover rate 62% 43%
__________________________________________________________________________________________
==========================================================================================
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(c) Ratios are based on average daily net assets of $11,107,960.
(d) Annualized.
14
289
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of AIM Growth Series and Shareholders of
AIM Japan 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
Japan Growth Fund (hereafter referred to as the "Fund")
at December 31, 2000, the results of its operations, the
changes in its net assets and the financial highlights
for each of the periods indicated, in conformity with
accounting principles generally accepted in the United
States of America. 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 of America 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, 2000
by correspondence with the custodian and brokers, provide
a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 2001
15
290
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Robert H. Graham Robert H. Graham 11 Greenway Plaza
Chairman, President and Chief Executive Officer, Chairman and President Suite 100
A I M Management Group Inc. Houston, TX 77046
Dana R. Sutton
C. Derek Anderson Vice President and Treasurer INVESTMENT MANAGER
Senior Managing Partner,
Plantagenet Capital Melville B. Cox A I M Advisors, Inc.
Management, LLC (an investment Vice President 11 Greenway Plaza
partnership); Chief Executive Officer, Suite 100
Plantagenet Holdings, Ltd. Gary T. Crum Houston, TX 77046
(an investment banking firm) Vice President
TRANSFER AGENT
Frank S. Bayley Carol F. Relihan
Partner, law firm of Vice President and Secretary A I M Fund Services, Inc.
Baker & McKenzie P.O. Box 4739
Mary J. Benson Houston, TX 77210-4739
Ruth H. Quigley Assistant Vice President and
Private Investor Assistant Treasurer CUSTODIAN
Sheri Morris State Street Bank and Trust Company
Assistant Vice President and 225 Franklin Street
Assistant Treasurer Boston, MA 02110
Nancy L. Martin COUNSEL TO THE FUND
Assistant Secretary
Kirkpatrick & Lockhart LLP
Ofelia M. Mayo 1800 Massachusetts Avenue, N.W.
Assistant Secretary Washington, D.C. 20036-1800
Kathleen J. Pflueger COUNSEL TO THE TRUSTEES
Assistant Secretary
Paul, Hastings, Janofsky & Walker LLP
Timothy D. Yang Twenty Third Floor
Assistant Secretary 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
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to Shareholders during the Fund's tax year ended
December 31, 2000, 0% is eligible for the dividends received deduction for
corporations.
291
-------------------------------------
THE AMOUNT OF INVESTMENT
RISK YOU UNDERTAKE DEPENDS
ON SEVERAL FACTORS: YOUR
FINANCIAL OBJECTIVES, YOUR
RISK TOLERANCE AND YOUR
TIME HORIZON.
-------------------------------------
THE AIM FUNDS-REGISTERED TRADEMARK-- RISK SPECTRUM
On the back cover of this fund report, you'll find the funds in the AIM family
divided into the following categories: sector, international/global, domestic,
taxable and tax-free. You'll also notice that the funds in each category are
listed from more aggressive to more conservative.
Within each category of this risk spectrum, we assessed each fund on the
basis of three factors: its holdings, volatility patterns and diversification.
From that assessment, we assigned a degree of risk to each fund and ordered them
accordingly.
Mutual funds typically invest in stocks, bonds or money market instruments,
each with varying levels of potential risk and reward. Generally, the riskier
the investment, the greater the potential reward.
o Stock funds usually offer the most upside potential, but they also carry the
greatest risk. Funds that invest in large, well-established companies
generally have lower risk/reward potential than funds that invest in small,
fast-growing companies.
o Funds that invest in a broad range of industries are considered more
diversified and less risky--and potentially less rewarding--than funds that
invest in a single sector, such as technology.
o Funds that invest in international markets tend to have higher risk/reward
potential than those that invest solely in domestic securities.
o Bond funds are generally considered safer and therefore potentially less
rewarding than stock funds. Funds that invest in U.S. Treasury securities
typically have lower risk/reward potential than funds that invest in
higher-yielding junk bonds.
o Money market funds, while considered extremely safe, typically produce lower
returns than stock and bond funds. Moreover, it is possible that a money
market fund's returns will not keep pace with inflation.
The amount of investment risk you undertake depends on several factors: your
financial objectives, your risk tolerance and your time horizon. Are you saving
for your later years or are you investing to buy a large item, like a car or a
house, soon? Are you a young adult early in your work life, or are you
approaching retirement?
If your investment plan has a rather long time horizon, you may be able to
invest more aggressively because you could have time to recoup should you
experience losses. If your needs are more immediate, you may need to be more
conservative to meet your goal.
Because these factors change over time, it's a good idea to reassess your
portfolio periodically to make sure it still meets your needs. Your financial
advisor can help you figure out if your portfolio is right where it should be or
if it could use some fine-tuning.
In assessing your investments, remember to keep diversification in mind.
Such a strategy, where you spread your investments over several types of mutual
funds, may help mitigate volatility and/or risk in your portfolio because not
all investments behave the same way at the same time.
AIM has a large selection of mutual funds to choose from. See your financial
advisor for insight into which ones would best fit in your portfolio.
292
THE AIM FAMILY OF FUNDS--Registered Trademark--
EQUITY FUNDS
DOMESTIC EQUITY FUNDS INTERNATIONAL/GLOBAL EQUITY FUNDS A I M Management Group Inc. has
provided leadership in the mutual
MORE AGGRESSIVE MORE AGGRESSIVE fund industry since 1976 and
managed approximately $170 billion
AIM Small Cap Opportunities(1) AIM Latin American Growth in assets for nine million
AIM Mid Cap Opportunities(2) AIM Developing Markets shareholders, including individual
AIM Large Cap Opportunities(3) AIM European Small Company investors, corporate clients and
AIM Emerging Growth AIM Asian Growth financial institutions, as of
AIM Small Cap Growth(4) AIM Japan Growth December 31, 2000.
AIM Aggressive Growth AIM International Emerging Growth The AIM Family of
AIM Mid Cap Growth AIM European Development Funds--Registered Trademark-- is
AIM Small Cap Equity AIM Euroland Growth distributed nationwide, and AIM
AIM Capital Development AIM Global Aggressive Growth today is the eighth-largest mutual
AIM Constellation AIM International Equity fund complex in the United States
AIM Dent Demographic Trends AIM Advisor International Value in assets under management,
AIM Select Growth AIM Worldwide Spectrum according to Strategic Insight, an
AIM Large Cap Growth AIM Global Trends independent mutual fund monitor.
AIM Weingarten AIM Global Growth AIM is a subsidiary of AMVESCAP
AIM Mid Cap Equity PLC, one of the world's largest
AIM Value II MORE CONSERVATIVE independent financial services
AIM Charter companies with $402 billion in
AIM Value SECTOR EQUITY FUNDS assets under management as of
AIM Blue Chip December 31, 2000.
AIM Basic Value MORE AGGRESSIVE
AIM Large Cap Basic Value
AIM Balanced AIM New Technology
AIM Advisor Flex AIM Global Telecommunications and Technology
AIM Global Infrastructure
MORE CONSERVATIVE AIM Global Resources
AIM Global Financial Services
AIM Global Health Care
AIM Global Consumer Products and Services
AIM Advisor Real Estate
AIM Global Utilities
MORE CONSERVATIVE
FIXED-INCOME FUNDS
TAXABLE FIXED-INCOME FUNDS TAX-FREE FIXED-INCOME FUNDS
MORE AGGRESSIVE MORE AGGRESSIVE
AIM Strategic Income AIM High Income Municipal
AIM High Yield II AIM Tax-Exempt Bond of Connecticut
AIM High Yield AIM Municipal Bond
AIM Income AIM Tax-Free Intermediate
AIM Global Income AIM Tax-Exempt Cash
AIM Floating Rate(5)
AIM Intermediate Government MORE CONSERVATIVE
AIM Limited Maturity Treasury
AIM Money Market
MORE CONSERVATIVE
The AIM risk spectrum shown above illustrates the relative risk of AIM's equity
and fixed-income funds within a specified group of funds in The AIM Family of
Funds--Registered Trademark--. When assessing the degree of risk, AIM considered
the following three factors: the funds' portfolio holdings, volatility patterns
over time and diversification permitted within the fund. Fund rankings are
relative to one another within the particular group of The AIM Family of
Funds--Registered Trademark-- and should not be compared with other investments.
There is no guarantee that any one AIM fund will be less volatile than any
other. (1) AIM Small Cap Opportunities Fund closed to new investors Nov. 4,
1999. (2) AIM Mid Cap Opportunities Fund closed to new investors March 21, 2000.
(3) AIM Large Cap Opportunities Fund closed to new investors Sept. 29, 2000. (4)
AIM Small Cap Growth Fund closed to new investors Nov. 8, 1999. (5) AIM Floating
Rate Fund was restructured to offer multiple share classes April 3, 2000.
Existing shares were converted to Class B shares, and Class C shares commenced
offering.
FOR MORE COMPLETE INFORMATION ABOUT ANY AIM FUND, INCLUDING THE RISKS, SALES
CHARGES AND EXPENSES, OBTAIN THE APPROPRIATE PROSPECTUS(ES) FROM YOUR FINANCIAL
ADVISOR. PLEASE READ THE PROSPECTUS(ES) CAREFULLY BEFORE YOU INVEST OR SEND
MONEY. If used as sales material after April 20, 2001, this report must be
accompanied by a fund Performance & Commentary or by an AIM Quarterly Review of
Performance for the most recent quarter end.
[DALBAR LOGO APPEARS HERE] [AIM LOGO APPEARS HERE]
--Registered Trademark--
INVEST WITH DISCIPLINE
--Registered Trademark--
A I M Distributors, Inc. JPG-AR-1
293
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, as
expressed in the Act, 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 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
1
294
2 (a) 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.
(b) 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 Combined Proxy Statement and Prospectus contained in this
Registration Statement.
5 Articles V and VII of the Articles of Restatement, as amended, and
Articles I and IV of the Amended and Restated Bylaws defining the
rights of holders of shares were filed electronically as Exhibits
to Post-Effective Amendment No. 9 on February 28, 1996 and
Post-Effective Amendment No. 10 on February 24, 1997,
respectively, and are hereby incorporated by reference.
6 (a) Master Investment Advisory Agreement, dated June 21, 2000, between
A I M Advisors, Inc. and AIM International Funds, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment No. 21 on
June 20, 2000, and is hereby incorporated by reference.
(b) (1) Copy of Foreign Country Selection and Mandatory Securities
Depository Delegation Agreement, dated September 9, 1998,
between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit in Post-Effective Amendment
No. 15 on December 23, 1998, and is hereby incorporated by
reference.
(2) Amendment No. 1, dated September 28, 1998, to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit in Post-Effective Amendment
No. 15 on December 23, 1998, and is hereby incorporated by
reference.
(3) Amendment No. 2, dated December 14, 1998, to Foreign
Country Selection and Mandatory Securities Depositary
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 16 on February 19, 1999, and is hereby incorporated by
reference.
(4) Amendment No. 3, dated December 22, 1998, to Foreign
Country Selection and Mandatory Securities Depositary
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 16 on February 19, 1999, and is hereby incorporated by
reference.
(5) Amendment No. 4, dated January 16, 1999, to Foreign Country
Selection and Mandatory Securities Depositary
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 16 on February 19, 1999, and is hereby incorporated by
reference.
(6) Amendment No. 5, dated March 1, 1999, to Foreign Country
Selection and Mandatory Securities Depositary
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 16 on February 19, 1999, and is hereby incorporated by
reference.
2
295
(7) Amendment No. 6, dated March 18, 1999, to Foreign Country
Selection and Mandatory Securities Depositary
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 17 on February 23, 2000, and is hereby incorporated by
reference.
(8) Amendment No. 7, dated November 15, 1999, to Foreign
Country Selection and Mandatory Securities Depositary
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 17 on February 23, 2000, and is hereby incorporated by
reference.
(c) Master Sub-Advisory Agreement, dated 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.
(d) Sub-Sub-Advisory Agreement, dated 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.
(e) Sub-Sub-Advisory Agreement, dated 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) 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, and is hereby incorporated by
reference.
(2) 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.
(b) Second Amended and Restated Master Distribution Agreement, dated
July 1, 2000, 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. 22 on
February 22, 2001, and is hereby incorporated by reference.
(c) 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.
(d) Form of Selected Dealer Agreement for Investment Companies Managed
by A I M Advisors, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 22 on February 22, 2001, and is
hereby incorporated by reference.
(e) 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) AIM Funds Retirement Plan for Eligible Directors/Trustees, as
restated March 7, 2000, was filed as an Exhibit to Post-Effective
Amendment No. 21, on June 20, 2000, and is hereby incorporated by
reference.
3
296
(b) Form of Director Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors, as amended March 7, 2000, was filed as
an Exhibit to Post-Effective Amendment No. 21, on June 20, 2000,
and is hereby incorporated by reference.
9 (a) (1) Master Custodian Contract, dated May 1, 2000, between
Registrant and State Street Bank and Trust Company, was
filed as an Exhibit to Post-Effective Amendment No. 21, on
June 20, 2000, and is hereby incorporated by reference.
(2) Amendment to Custodian Contract, dated May 1, 2000, between
Registrant and State Street Bank and Trust Company, was
filed as an Exhibit to Post-Effective Amendment No. 21, on
June 20, 2000, and is herby incorporated by reference.
(b) (1) Subcustodian Agreement with Texas Commerce Bank, 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.
(2) Amendment No. 1, dated October 2, 1998, to Subcustodian
Agreement with Chase Bank of Texas, N.A. (formerly, Texas
Commerce Bank) among Chase Bank of Texas, N.A. (formerly,
Texas Commerce Bank), 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. 17 on February 23, 2000, and is hereby incorporated by
reference.
10 (a) Third Amended and Restated Master Distribution Plan, dated
December 31, 2000, for Registrant's Class B shares was filed
electronically as an Exhibit to Post-Effective Amendment No. 22 on
February 22, 2001, and is hereby incorporated by reference.
(b) Fourth Amended and Restated Master Distribution Plan, dated July
1, 2000, for Registrant's Class A and Class C shares was filed
electronically as an Exhibit to Post-Effective Amendment No. 22 on
February 22, 2001, and is hereby incorporated by reference.
(c) 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.
(d) 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.
(e) 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.
(f) 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 is hereby incorporated by reference.
(g) 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.
(h) Form of Shareholder Service Agreement for Shares of the AIM Mutual
Funds was filed electronically as an Exhibit to Post-Effective
Amendment No. 22 on February 22, 2001 and is hereby incorporated
by reference.
4
297
(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 of Counsel and Consent of Ballard Spahr Andrews &
Ingersoll, LLP, as to the legality of the securities being
registered is filed herewith electronically.
12 Opinion of Counsel of Ballard Spahr Andrews & Ingersoll, LLP, with
respect to tax matters will be filed as part of a Post-Effective
Amendment to this Registration Statement.
13 (a) (1) Transfer Agency and Service Agreement, dated 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.
(2) 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.
(3) Amendment No. 2, dated January 1, 1999, to the Transfer
Agency and Service Agreement, dated as of November 1, 1994,
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.
(4) Amendment No. 3, dated July 1, 2000, to the Transfer Agency
and Service Agreement, dated November 1, 1994, between
Registrant and A I M Fund Services, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 22 on February 22, 2001, and is hereby incorporated by
reference.
(b) (1) Remote Access and Related Services Agreement, dated
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.
(2) 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.
(3) Addendum No. 2, dated October 12, 1995, 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. 9 on February 28, 1996, and
is hereby incorporated by reference.
(4) Amendment No. 3, dated February 1, 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. 12 on August 4, 1997, and
is hereby incorporated by reference.
5
298
(5) Amendment No. 4, dated 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) 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.
(7) 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.
(8) 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.
(9) Amendment No. 7, dated February 29, 2000, 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. 22 on February 22,
2001, and is hereby incorporated by reference.
(10) Amendment No. 8, dated June 26, 2000, 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. 22 on February 22, 2001, and
is hereby incorporated by reference.
(11) Amendment No. 9, dated June 26, 2000, 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. 22 on February 22, 2001, and
is hereby incorporated by reference.
(12) Amendment No. 10, dated July 28, 2000, to the Remote Access
and Related Services Agreement, dated December 23, 1994,
between Registrant and First Data Investor Services Group,
Inc., was filed electronically as an Exhibit to
Post-Effective Amendment No. 22 on February 22, 2001, and
is hereby incorporated by reference.
(c) 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.
(d) Master Administrative Services Agreement, dated June 21, 2000,
between A I M Advisors, Inc. and AIM International Funds, Inc. was
filed as an Exhibit to Post-Effective Amendment No. 21, on June
20, 2000, and is hereby incorporated by reference.
6
299
(e) (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 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,
1997, and is hereby incorporated by reference.
(4) Notice of Addition of Funds to Shareholder Sub-Accounting
Services Agreement, dated 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.
(5) Notice of Addition of Funds to Shareholder Sub-Accounting
Services Agreement, dated 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 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 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 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.
(f) (1) Memorandum of Agreement, dated March 1, 1999, between
Registrant, on behalf of AIM Asian Growth Fund, AIM Global
Income Fund and AIM International Equity Fund, and A I M
Advisors, Inc. was filed as an Exhibit to Post-Effective
Amendment No. 22 on February 22, 2001, and is hereby
incorporated by reference.
7
300
(2) Memorandum of Agreement, dated June 12, 2000, between
Registrant, on behalf of AIM Asian Growth Fund, AIM Global
Income Fund and AIM Global Growth Fund, and A I M Advisors,
Inc. was filed as an Exhibit to Post-Effective Amendment
No. 22 on February 22, 2001, and is hereby incorporated by
reference.
(3) Memorandum of Agreement, dated effective June 21, 2000,
between Registrant, on behalf of AIM Asian Growth Fund, AIM
European Development Fund, AIM Global Aggressive Growth
Fund, AIM Global Growth Fund, AIM Global Income Fund and
AIM International Equity Fund, and A I M Advisors, Inc. was
filed as an Exhibit to Post-Effective Amendment No. 22 on
February 22, 2001, 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 Omitted Financial Statements - None.
16 Powers of Attorney - None.
17 Form of Proxy for the Special Meeting of Shareholders of AIM Growth
Series is filed herewith electronically.
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.
(3) The undersigned registrant undertakes to file an opinion of counsel
supporting the tax matters and consequences to shareholders discussed in the
prospectus in a post-effective amendment to this registration statement.
8
301
SIGNATURES
Pursuant to the Securities Act of 1933, as amended, the Registrant has
duly caused 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 11th day of May, 2001.
AIM INTERNATIONAL FUNDS, INC.
Registrant
By: /s/ Robert H. Graham
------------------------------------
Robert H. Graham
President
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.
SIGNATURE TITLE DATE
/s/ Robert H. Graham Chairman, Director & President May 11, 2001
- --------------------------------------------------
Robert H. Graham
/s/ Bruce L. Crockett Director May 11, 2001
- --------------------------------------------------
Bruce L. Crockett
/s/ Owen Daly II Director May 11, 2001
- --------------------------------------------------
Owen Daly II
/s/ Albert R. Dowden Director May 11, 2001
- --------------------------------------------------
Albert R. Dowden
/s/ Edward K. Dunn Director May 11, 2001
- --------------------------------------------------
Edward K. Dunn
/s/ Jack Fields Director May 11, 2001
- --------------------------------------------------
Jack Fields
/s/ Carl Frischling Director May 11, 2001
- --------------------------------------------------
Carl Frischling
/s/ Prema Mathai-Davis Director May 11,2001
- --------------------------------------------------
Prema Mathai-Davis
/s/ Lewis F. Pennock Director May 11, 2001
- --------------------------------------------------
Lewis F. Pennock
/s/ Louis Sklar Director May 11, 2001
- --------------------------------------------------
Louis Sklar
/s/ Dana R. Sutton Vice President & Treasurer May 11, 2001
- -------------------------------------------------- (Principal Financial Officer)
Dana R. Sutton
9
302
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
11 Opinion of Counsel and Consent of Ballard Spahr Andrews &
Ingersoll, LLP as to securities registered
14(a) Consent of KPMG LLP
(b) Consent of PricewaterhouseCoopers LLP
17 Form of Proxy
10