As filed with the Securities and Exchange Commission on May 17, 2002
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 July 2, 2002
pursuant to Rule 488.
The title of the securities being registered is AIM European Growth
Fund Class A shares, Class B shares and Class C shares. No filing fee is due in
reliance on Section 24(f) of the Investment Company Act of 1940.
AIM EUROLAND GROWTH FUND
A PORTFOLIO OF AIM GROWTH SERIES
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
July __, 2002
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval of a
proposed combination of AIM Euroland Growth Fund with AIM European Growth Fund
(formerly known as AIM European Development Fund). AIM Euroland Growth Fund
("Euroland") is an investment portfolio of AIM Growth Series, a Delaware
business trust. AIM European Growth Fund ("European Growth") is an investment
portfolio of AIM International Funds, Inc., a Maryland corporation.
The investment objectives of Euroland and European Growth are the same. Each
fund seeks long-term growth of capital. AIM Advisors, Inc. serves as the
investment adviser to Euroland and European Growth. INVESCO Asset Management,
Ltd. serves as subadviser to Euroland. As discussed in the accompanying
document, European Growth can invest in securities of issuers located throughout
Europe and with market capitalizations less than $1 billion, while Euroland
focuses its investments in European companies that are members of the European
Economic and Monetary Union and that are large capitalization companies.
European Growth has generally provided a better return to its shareholders than
Euroland and European Growth's ratio of expenses to net assets is expected to be
lower than that of Euroland after the proposed reorganization. The combination
of the two funds may create economies of scale that could lead to a reduction of
European Growth's expense ratio in the future. The accompanying document
describes the proposed transaction and compares the investment policies,
operating expenses and performance history of Euroland and European Growth in
more detail. You should review the enclosed materials carefully.
Shareholders of Euroland 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 Euroland into
European Growth. After careful consideration, the Board of Trustees of AIM
Growth Series has unanimously approved the proposal and recommends that you vote
FOR the proposal.
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 by telephone or on the internet at http://www.aimfunds.com by following
the instructions that appear on the enclosed proxy materials.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
AIM EUROLAND 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 SEPTEMBER 4, 2002
TO THE SHAREHOLDERS OF AIM EUROLAND 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 September 4, 2002, at 3:00 p.m., Central Time. At the Special
Meeting, shareholders of AIM Euroland Growth Fund ("Euroland"), an investment
portfolio of AGS, will be asked to consider the following proposals:
1. To approve an Agreement and Plan of Reorganization (the "Agreement")
by and among AGS, acting on behalf of Euroland, AIM International Funds, Inc.
("AIF"), acting on behalf of AIM European Growth Fund (formerly known as AIM
European Development Fund) ("European Growth") and A I M Advisors, Inc. The
Agreement provides for the combination of Euroland with European Growth (the
"Reorganization"). Pursuant to the Agreement, all of the assets of Euroland will
be transferred to European Growth. European Growth will assume all of the
liabilities of Euroland, and AIF will issue Class A shares of European Growth to
Euroland's Class A shareholders, Class B shares of European Growth to Euroland's
Class B shareholders, and Class C shares of European Growth to Euroland's Class
C shareholders. The value of each Euroland shareholder's account with European
Growth immediately after the Reorganization will be the same as the value of
such shareholder's account with Euroland immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction. No initial sales charge will be imposed in connection with the
Reorganization.
2. To transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies or
their substitutes.
Shareholders of record as of the close of business on June 10, 2002,
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 OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED
PROXY MATERIALS. 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
July __, 2002
2
AIM EUROLAND GROWTH FUND AIM EUROPEAN GROWTH FUND
A PORTFOLIO OF A PORTFOLIO OF
AIM GROWTH SERIES AIM INTERNATIONAL FUNDS, INC.
11 GREENWAY PLAZA 11 GREENWAY PLAZA
SUITE 100 SUITE 100
HOUSTON, TEXAS 77046-1173 HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327 TOLL FREE: (800) 454-0327
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: JULY __, 2002
This document is being furnished in connection with a special meeting
of shareholders of AIM Euroland Growth Fund ("Euroland"), an investment
portfolio of AIM Growth Series ("AGS"), a Delaware business trust, to be held on
September 4, 2002 (the "Special Meeting"). At the Special Meeting, the
shareholders of Euroland are being asked to consider and approve an Agreement
and Plan of Reorganization (the "Agreement") by and among AGS, acting on behalf
of Euroland, AIM International Funds, Inc. ("AIF"), acting on behalf of AIM
European Growth Fund (formerly known as AIM European Development Fund)
("European Growth"), and AIM Advisors, Inc. ("AIM Advisors"). The Agreement
provides for the combination of Euroland with European Growth (the
"Reorganization"). THE BOARD OF TRUSTEES OF AGS HAS UNANIMOUSLY APPROVED THE
AGREEMENT AND THE REORGANIZATION AS BEING IN THE BEST INTEREST OF THE
SHAREHOLDERS OF EUROLAND.
European Growth is an investment portfolio of AIF, an open-end, series
management investment company. Pursuant to the Agreement, all of the assets of
Euroland will be transferred to European Growth, European Growth will assume all
of the liabilities of Euroland, and AIF will issue Class A shares of European
Growth to Euroland's Class A shareholders, Class B shares of European Growth to
Euroland's Class B shareholders, and Class C shares of European Growth to
Euroland's Class C shareholders. The value of each Euroland shareholder's
account with European Growth immediately after the Reorganization will be the
same as the value of such shareholder's account with Euroland 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.
The investment objective of European Growth is the same as the
investment objective of Euroland -- long-term growth of capital. Euroland seeks
to meet its investment objective by investing primarily in equity securities of
issuers domiciled in countries that are members of the European Economic and
Monetary Union (the "EMU") while European Growth invests in equity securities
issued by companies located anywhere in Europe. In addition, European Growth may
invest in issuers of any size capitalization, while Euroland is limited to
investing the majority of its assets in large capitalization companies. See
"Comparison of Investment Objectives and Policies."
This Combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus") sets forth the information that a shareholder of Euroland
should know before voting on the Agreement. It should be read and retained for
future reference.
The current Prospectus of Euroland, dated May 1, 2002, as supplemented
May 1, 2002, (the "Euroland Prospectus"), together with the related Statement of
Additional Information also dated May 1, 2002, as supplemented May 1, 2002, are
on file with the Securities and Exchange Commission (the "SEC") and are
incorporated by reference herein. The Prospectus of European Growth dated March
1, 2002, as supplemented March 5, 2002, (the "European Growth Prospectus"), and
the related Statement of Additional Information also dated March 1, 2002, as
supplemented March 5, 2002, have been filed with the SEC and are incorporated by
reference herein. A copy of the European Growth 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 Euroland
and European Growth 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.
3
[AIM LOGO APPEARS HERE]
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
INTRODUCTION.................................................................5
SYNOPSIS.....................................................................5
The Reorganization.......................................................5
Reasons for the Reorganization...........................................6
Comparison of European Growth and Euroland...............................6
RISK FACTORS.................................................................9
Comparative Risks........................................................9
Risks Associated with European Growth...................................10
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES............................10
Investment Objectives of European Growth and Euroland...................10
Investment Policies of European Growth..................................10
Investment Policies of Euroland.........................................11
European Growth Portfolio Management....................................11
Management's Discussion and Analysis of Performance.....................11
FINANCIAL HIGHLIGHTS........................................................12
ADDITIONAL INFORMATION ABOUT THE AGREEMENT..................................15
Terms of the Reorganization.............................................15
The Reorganization......................................................15
Board Considerations....................................................15
LIPPER RANK (Percentile)(1).................................................16
Other Terms.............................................................16
Federal Tax Consequences................................................17
Accounting Treatment....................................................19
ADDITIONAL INFORMATION ABOUT EUROPEAN GROWTH AND
EUROLAND....................................................................19
RIGHTS OF SHAREHOLDERS......................................................19
General ...............................................................19
Liability of Shareholders...............................................19
Election of Directors/Trustees; Terms...................................20
Removal of Directors/Trustees...........................................20
Meetings of Shareholders................................................20
Liability of Directors/Trustees and Officers; Indemnification...........20
Termination.............................................................21
Voting Rights of Shareholders...........................................21
Dissenters' Rights......................................................21
Amendments to Organization Documents....................................21
OWNERSHIP OF EUROLAND AND EUROPEAN GROWTH
SHARES......................................................................22
Significant Holders.....................................................22
Share Ownership by Executive Officers and Directors/Trustees............23
CAPITALIZATION..............................................................24
EUROLAND AND EUROPEAN GROWTH................................................24
LEGAL MATTERS...............................................................24
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION...............24
APPENDIX I................Agreement and Plan of Reorganization
APPENDIX II...............Prospectus of European Growth
APPENDIX III..............European Growth Discussion & Analysis of Performance
</Table>
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.
4
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Trustees of AGS for use at the special
meeting of shareholders to be held at 11 Greenway Plaza, Suite 100, Houston, TX
77046, on September 4, 2002, at 3:00 p.m., Central Time (such meetings and any
adjournments thereof are referred to as the "Special Meeting").
All properly executed and unrevoked proxies received in time for the
Special Meeting will be voted in accordance with the instructions contained
therein. If no instructions are given, shares represented by proxies will be
voted FOR the proposal to approve the Agreement and in accordance with
management's recommendation on other matters. The presence in person or by proxy
of one-third of the shares of beneficial interests that are issued and
outstanding in Euroland at the Special Meeting will constitute a quorum.
Approval of the Agreement by Euroland requires the affirmative vote of a
majority of the shares cast by shareholders of Euroland. 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 June 10, 2002
(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 Euroland 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 the Reorganization is expected to be approximately
$172,000. Euroland and European Growth will each bear their own costs and
expenses incurred in connection with the Reorganization.
AGS intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about July __, 2002.
SYNOPSIS
THE REORGANIZATION
The Reorganization will result in the combination of Euroland with
European Growth. Euroland is a portfolio of AGS, a Delaware business trust.
European Growth is a portfolio of AIF, a Maryland corporation.
If shareholders of Euroland approve the Agreement and other closing
conditions are satisfied, all of the assets of Euroland will be transferred to
European Growth, European Growth will assume all of the liabilities of Euroland,
and AIF will issue Class A shares of European Growth to Euroland's Class A
shareholders, Class B shares of European Growth to Euroland's Class B
shareholders and Class C shares of European Growth to Euroland's Class C
shareholders. The shares of European Growth issued in the Reorganization will
have an aggregate net asset value equal to the value of Euroland's net assets
transferred to European Growth. Shareholders will not pay any initial sales
charge for shares of European Growth received in connection with the
Reorganization. The value of each shareholder's account with European Growth
immediately after the Reorganization will be the same as the value of such
shareholder's account with Euroland 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.
Euroland 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.
5
REASONS FOR THE REORGANIZATION
The Board of Trustees of AGS, including the independent trustees, has
determined that the reorganization of Euroland into European Growth is in the
best interests of Euroland and its shareholders and that the interests of the
shareholders of Euroland 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.
European Growth invests in equity securities of issuers located anywhere in
Europe, while Euroland focuses its investments in equity securities of issuers
in countries that are members of the EMU. In addition, European Growth may
invest in issuers of any size capitalization, while Euroland is limited to
investing at least 65% of its assets in large capitalization companies. The
Board of Trustees also noted that European Growth has historically outperformed
Euroland, providing a better total return to shareholders. Since inception,
European Growth Class A shares have an average annual return of 12.58% compared
to an average annual return of 8.36% for Euroland Class A shares. Although past
performance does not guarantee future results, the combination of better
performance and a broader range of investment options should make European
Growth a better investment for Euroland shareholders.
COMPARISON OF EUROPEAN GROWTH AND EUROLAND
Investment Objective and Policies
European Growth seeks to meet its objective of long-term growth of
capital by investing, normally, at least 80% of its assets in marketable equity
securities of European companies, including companies with market
capitalizations of less than $1 billion. European Growth considers European
companies to be those (1) organized under the laws of a country in Europe and
having a principal office in a country in Europe; (2) that derive 50% or more of
their total revenues from business in Europe; or (3) whose equity securities are
traded principally on a stock exchange, or in an over-the-counter market, in
Europe. European Growth will normally invest in the securities of companies
located in at least three European countries. European Growth may invest up to
65% of its total assets in European companies located in developing countries,
i.e., those that are in the initial stages of their industrial cycles.
Euroland seeks to meet its objective of long-term growth of capital by
investing, normally, at least 80% of its assets in equity securities of issuers
domiciled in countries that are members of the EMU. These countries are
designated as Euroland's primary investment area. Euroland typically considers a
company to be domiciled in a particular country if it (1) is organized under the
laws of a particular country or has its principal office in a particular
country; or (2) derives 50% or more of its total revenues from business in that
country, provided that, in the view of the portfolio manager, the value of the
issuer's securities tends to reflect such country's development to a greater
extent than developments elsewhere. Euroland will normally invest at least 65%
of its total assets in equity securities of large capitalization companies.
These securities may include common stocks, convertible bonds, convertible
preferred stocks and warrants of companies with market capitalizations within
the range of the market capitalizations of companies in the top 50% of the
Morgan Stanley Capital International EMU Index at the time of purchase.
Investment Advisory Services
AIM Advisors serves as investment adviser and INVESCO Asset Management
Ltd., an affiliate of the adviser, serves as the subadviser to Euroland. AIM
Advisors also serves as investment adviser to European Growth. Because INVESCO
Asset Management Ltd. does not serve as subadviser for European Growth, the
Reorganization will end its role in the management of the assets of Euroland.
6
Performance
Average annual total returns for the periods indicated for Class A
shares of European Growth and Euroland, including sales charges, are shown
below. Past performance cannot guarantee comparable future results.
<Table>
<Caption>
EUROPEAN
GROWTH EUROLAND
CLASS A CLASS A
SHARES SHARES
-------- --------
1 Year Ended December 31, 2001................... (28.87)% (36.77)%
5 Years Ended December 31, 2001.................. N/A (1.39)%
10 Years Ended December 31, 2001................. N/A 2.77%
Since Inception*................................. 12.58% 8.36%
</Table>
- ----------
* Inception date for Class A shares of European Growth is November 3, 1997, and
for Class A shares of Euroland is July 19, 1985.
Expenses
A comparison of annual operating expenses as a percentage of net assets
("Expense Ratio"), based on the fiscal year ended December 31, 2001 for the
Class A, Class B and Class C shares of Euroland and for the fiscal year ended
October 31, 2001 for the Class A, Class B and Class C shares of European Growth
are shown below. Pro forma estimated Expense Ratios of European Growth giving
effect to the Reorganization are also provided.
<Table>
<Caption>
EUROPEAN
EUROPEAN GROWTH
EUROLAND GROWTH 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% 0.95% 0.95% 0.95% 0.93% 0.93% 0.93%
Distribution and/or Service
(12b-1) fees.................... 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other expenses.................... 0.56% 0.56% 0.56% 0.54%(2) 0.54%(2) 0.54%(2) 0.51%(2) 0.51%(2) 0.51%(2)
----- ----- ---- ---- ---- ----
Total fund operating
expenses(3)............. 1.89%(4) 2.54%(4) 2.54%(4) 1.84% 2.49% 2.49% 1.79% 2.44% 2.44%
===== ===== ===== ==== ==== ==== ==== ===== ====
</Table>
- ----------
(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.
(2) Other Expenses have been restated to reflect expense arrangements in effect
as of March 4, 2002.
(3) There is no guarantee that actual expenses will be the same as those shown
in the table.
(4) AIM has agreed to limit, voluntarily, Total Annual Fund Operating Expenses
of Euroland (excluding interest, taxes, dividends on short sales, merger
transaction expenses, extraordinary items and increases in expenses due to
expense offset arrangements, if any) on Class A, Class B, and Class C
shares to 2.00%, 2.65%, and 2.65%, respectively.
7
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.
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
EUROLAND
Class A shares(1).............................. $731 $ 1,111 $1,515 $2,640
Class B shares:
Assuming complete redemption at end of
period(2).............................. $757 $ 1,091 $1,550 $2,717
Assuming no redemption.................... $257 $ 791 $1,350 $2,717
Class C shares:
Assuming complete redemption at end of
period(2).............................. $357 $ 791 $1,350 $2,875
Assuming no redemption.................... $257 $ 791 $1,350 $2,875
EUROPEAN GROWTH
Class A shares(1).............................. $727 $ 1,097 $ 1,491 $2,590
Class B shares:
Assuming complete redemption at end of
period(2).............................. $752 $ 1,076 $ 1,526 $2,666
Assuming no redemption.................... $252 $ 776 $ 1,326 $2,666
Class C shares:
Assuming complete redemption at end of
period(2).............................. $352 $ 776 $ 1,326 $2,826
Assuming no redemption.................... $252 $ 776 $ 1,326 $2,826
COMBINED FUND
Class A shares(1).............................. $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
</Table>
- ----------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
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 European Growth received
in connection with the Reorganization.
European Growth Class A shares, which will be issued to Euroland Class
A shareholders pursuant to the Agreement, are sold at net asset value plus an
initial sales charge of 5.50%. European 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. European Growth Class C Shares
are offered at net asset value, without an initial sales charge, and are subject
to maximum contingent deferred sales charge of 1.00% on certain redemptions made
within one year from the date such shares were purchased.
8
European Growth pays a fee in the amount of 0.35% of the average daily
net assets of Class A shares to AIM Distributors for distribution services.
European Growth pays AIM Distributors fees at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares and Class C shares
for distribution services. For more information, see the discussion under the
heading "Shareholder Information-Distribution and Service (12b-1) Fees" in the
European Growth Prospectus attached as Appendix II to this Proxy
Statement/Prospectus.
The Class A shares of Euroland are sold at net asset value plus an
initial sales charge of 5.50%. Euroland 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. Euroland 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.
Euroland 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. Euroland
pays AIM Distributors at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares and Class C shares for distribution services.
Distribution; Purchase, Exchange and Redemption
Shares of European Growth and Euroland 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 European Growth is contained in this
Proxy Statement/ Prospectus and in the current prospectus for European Growth
that is attached hereto as Appendix II. Further information concerning Euroland
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
European Growth and Euroland both invest in equity securities of
European companies. Accordingly, many of the risks associated with an investment
in European Growth are the same as the risks associated with an investment in
Euroland. However, shareholders should keep in mind that the potential risks and
benefits associated with investments in Euroland and in European Growth differ
because of differences in geographic diversification and the size of the
companies in which each fund invests. Euroland normally seeks to invest at least
80% of its assets in equity securities of issuers domiciled in countries that
are members of the EMU. As a result, the performance of Euroland depends to a
significant extent on the condition and performance of the EMU economy.
Investors in Euroland are thus directly exposed to a significant degree to both
the upturns and downturns in the EMU Market.
The investments of European Growth are more diverse within the European
market. Rather than limiting its investments to companies in the EMU, European
Growth seeks to invest in securities of issuers throughout the European markets.
As a result, following the Reorganization Euroland shareholders will lose any
benefits associated with a fund that is heavily dependent on the performance of
companies domiciled in countries that are members of the EMU. In return, such
shareholders will gain the benefit of exposure to the full European economy
European Growth offers.
In addition, Euroland normally invests at least 80% of its assets in
equity securities of large capitalization companies. By contrast, European
Growth is not limited by the size of a company's market capitalization. While
this flexibility allows European Growth to take advantage of growth
opportunities in the small and micro-cap markets, the prices of equity
securities of small and micro-cap companies may fluctuate more than the prices
of equity securities of larger, more established companies. Further, since the
equity securities of small and micro-cap companies may not be traded as often as
equity securities of larger, more established companies, it may be difficult or
impossible for European Growth to sell these securities at a desired price. You
should carefully consider these benefits and risks in determining whether to
vote in favor of the proposed Reorganization.
9
RISKS ASSOCIATED WITH EUROPEAN GROWTH
European Growth invests primarily in equity securities. The prices of
equity securities change in response to many factors, including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market liquidity.
European Growth invests in securities of foreign companies, which generally
involves greater risks than investing in securities of domestic companies. The
prices of foreign securities may be further affected by other factors,
including:
Currency exchange rates. The dollar value of European Growth's foreign
investments will be affected by changes in the exchange rates between the dollar
and the currencies in which those investments are traded.
Political and economic conditions. The value of European Growth's
foreign investments may be adversely affected by political and social
instability in their home countries and by changes in economic or taxation
policies in those countries.
Regulations. Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
Markets. The securities markets of other countries are smaller than
U.S. securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign
companies located in developing countries more than those in countries with
mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES OF EUROPEAN GROWTH AND EUROLAND
The investment objective of European Growth is the same as the
investment objective of Euroland - long-term growth of capital.
INVESTMENT POLICIES OF EUROPEAN GROWTH
European Growth seeks to meet its objective by investing, normally, at
least 80% of its assets in marketable equity and debt securities of European
companies, including companies with market capitalizations of less than $1
billion. European Growth considers European companies to be those (1) organized
under the laws of a country in Europe and having a principal office in a country
in Europe; (2) that derive 50% or more of their total revenues from business in
Europe; or (3) whose equity securities are traded principally, in a stock
exchange, or in an over-the-counter market, in Europe.
European Growth will normally invest in the securities of companies
located in at least three European countries. European Growth may invest up to
65% of its assets in European companies located in developing countries, i.e.,
those that are in the initial stages of their industrial cycles.
European Growth may invest up to 20% of its total assets in securities
exchangeable for or convertible into equity securities of European companies.
European Growth may invest up to 20% of its assets in securities of non-European
companies. European Growth may also invest up to 20% of its total assets in
high-grade short-term securities and in debt securities, including U.S.
Government obligations, investment-grade corporate bonds or taxable municipal
securities.
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 portfolio managers consider whether to sell a
particular security when any of these factors materially change.
10
INVESTMENT POLICIES OF EUROLAND
Euroland seeks to meet its objective by investing normally, at least
80% of its assets in equity securities of issuers domiciled in countries that
are members of the EMU. These countries are designated as Euroland's primary
investment area. Euroland typically considers a company to be domiciled in a
particular country if it (1) is organized under the laws of a particular country
or has its principal office in a particular country; or (2) derives 50% or more
of its total revenues from business in that country, provided that, in the view
of the portfolio manager, the value of the issuer's securities tends to reflect
such country's development to a greater extent than developments elsewhere.
Euroland will normally invest at least 65% of its total assets in
equity securities of large capitalization companies. These securities may
include common stocks, convertible bonds, convertible preferred stocks and
warrants of companies with market capitalizations within the range of the market
capitalizations of companies in the top 50% of the Morgan Stanley Capital
International EMU Index at the time of purchase.
Euroland may invest up to 20% of its assets in equity securities of
issuers domiciled in developed countries outside of its primary investment area
or in U.S. and foreign investment-grade debt securities, or securities deemed by
the portfolio managers to be of comparable quality.
In selecting investments, the portfolio managers seek to identify those
countries and 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 countries and industries. The portfolio managers allocate
investments among fixed-income securities based on their views as to the best
values then available in the marketplace. The portfolio managers consider
whether to sell a particular security when any of these factors materially
change.
EUROPEAN GROWTH 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 European Growth's portfolio are
o Jason T. Holzer, Senior Portfolio Manager, has been
responsible for the fund since 1999 and has been associated
with the adviser and/or its affiliates since 1996,
o Clas G. Olsson, Senior Portfolio Manager, has been responsible
for the fund since its inception in 1997 and has been
associated with the adviser and/or its affiliates since 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of European Growth for the fiscal year
ended October 31, 2001, is set forth in Appendix III to this Proxy
Statement/Prospectus.
11
FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Class A share, a Class B
share and a Class C share of European Growth outstanding during each of the
fiscal years ended October 31, 2001, 2000, 1999 and for the period November 3,
1997 (inception date), through October 31, 1998. This information has been
audited by AIF's independent accountants whose unqualified report on the
financial statements of European Growth are included in its annual report to
shareholders for the fiscal year ended October 31, 2001. European Growth's
annual report to shareholders dated October 31, 2001, 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.
EUROPEAN GROWTH CLASS A SHARES
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED)
------------------------------------------------- TO OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
------------ ------------ ------------ ----------------
Net asset value, beginning of
period .................................... $ 23.59 $ 16.42 $ 12.96 $ 10.00
------------ ------------ ------------ ------------
Income from investment operations:
Net investment income (loss) .............. (0.06) (0.21) (0.11) (0.08)
Net gains (losses) on securities (both
realized and unrealized) .............. (7.01) 7.38 3.58 3.04
------------ ------------ ------------ ------------
Total from investment
operations ........................ (7.07) 7.17 3.47 2.96
------------ ------------ ------------ ------------
Less distributions from net investment
income .................................. -- -- (0.01) --
------------ ------------ ------------ ------------
Net asset value, end of
period ............................ $ 16.52 $ 23.59 $ 16.42 $ 12.96
============ ============ ============ ============
Total return(b) ............................. (29.97)% 43.67% 26.81% 29.60%
Ratios/supplemental data:
Net assets, end of period (000s
omitted) .............................. $ 157,651 $ 273,605 $ 99,148 $ 76,686
Ratios of expenses to average net assets: ... 1.83%(c) 1.69% 1.88% 1.98%(d)(e)
Ratio of net investment income
(loss) to average net assets ............ (0.32)%(c) (0.82)% (0.69)% (0.58)%(e)
Portfolio turnover rate ..................... 99% 112% 122% 93%
</Table>
- ----------
(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 $212,672,819.
(d) Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.15%.
(e) Annualized.
12
EUROPEAN GROWTH CLASS B SHARES
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED)
------------------------------------------------- TO OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
------------ ------------ ------------ ----------------
Net asset value, beginning of period ......... $ 23.11 $ 16.20 $ 12.87 $ 10.00
------------ ------------ ------------ ------------
Income from investment operations:
Net investment income (loss) ............... (0.19) (0.38) (0.22) (0.18)
Net gains (losses) on securities
(both realized and unrealized) ........... (6.85) 7.29 3.55 3.05
------------ ------------ ------------ ------------
Total from investment operations .... (7.04) 6.91 3.33 2.87
------------ ------------ ------------ ------------
Net asset value, end of period ...... $ 16.07 $ 23.11 $ 16.20 $ 12.87
============ ============ ============ ============
Total return(b) .............................. (30.46)% 42.65% 25.87% 28.70%
Ratios/supplemental data:
Net assets, end of period (000s
omitted) ................................. $ 105,324 $ 169,614 $ 67,074 $ 50,121
Ratio of expenses to average net assets: ... 2.50%(c) 2.39% 2.63% 2.72%(d)(e)
Ratio of net investment income (loss)
to average net assets .................... (0.98)%(c) (1.52)% (1.44)% (1.32)%(e)
Portfolio turnover rate .................... 99% 112% 122% 93%
</Table>
- ----------
(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 $136,238,861.
(d) Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.89%.
(e) Annualized.
13
EUROPEAN GROWTH CLASS C SHARES
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------
NOVEMBER 3, 1997
YEAR ENDED OCTOBER 31, (DATE OPERATIONS
------------------------------------------------- COMMENCED)
TO OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
------------ ------------ ------------ ----------------
Net asset value, beginning of period ......... $ 23.13 $ 16.21 $ 12.88 $ 10.00
------------ ------------ ------------ ------------
Income from investment operations:
Net investment income (loss) ............... (0.19) (0.38) (0.23) (0.18)
Net gains (losses) on securities (both
realized and unrealized) ..................... (6.85) 7.30 3.56 3.06
------------ ------------ ------------ ------------
Total from investment operations .... (7.04) 6.92 3.33 2.88
------------ ------------ ------------ ------------
Net asset value, end of period ...... $ 16.09 $ 23.13 $ 16.21 $ 12.88
============ ============ ============ ============
Total return(b) .............................. (30.44)% 42.69% 25.85% 28.80%
Ratios/supplemental data:
Net assets, end of period (000s omitted) ... $ 32,604 $ 54,164 $ 11,938 $ 9,639
Ratio of expenses to average net assets: ... 2.50%(c) 2.39% 2.63% 2.72%(d)(e)
Ratio of net investment income (loss) to
average net assets ....................... (0.98)%(c) (1.52)% (1.44)% (1.32)%(e)
Portfolio turnover rate .................... 99% 112% 122% 93%
</Table>
- ----------
(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 $43,051,257.
(d) Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.89%.
(e) Annualized.
14
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
European Growth will acquire all of the assets of Euroland in exchange
for shares of European Growth and the assumption by European Growth of the
liabilities of Euroland. Consummation of the Reorganization (the "Closing") is
expected to occur on September 23, 2002, 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 20, 2002.
At the Effective Time, all of the assets of Euroland shall be delivered
to the Custodian for the account of European Growth in exchange for the
assumption by European Growth of all of the liabilities of any kind of Euroland
and delivery by AIF directly to (i) Euroland Class A shareholders of a number of
European Growth Class A shares and to (ii) Euroland Class B shareholders of a
number of European Growth Class B shares and to (iii) Euroland Class C
shareholders of a number of European Growth Class C shares, having an aggregate
net asset value equal to the net value of the assets of Euroland transferred.
BOARD CONSIDERATIONS
The Board of Trustees of AGS has determined that the Reorganization of
Euroland is in the best interests of the shareholders of Euroland and will not
dilute the interests of Euroland Shareholders. The Board of Trustees recommends
approval of the Agreement by the shareholders of Euroland 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 14-15, 2002, AIM
Advisors proposed that the Board of Trustees consider the Reorganization of
Euroland into European Growth. The Trustees received from AIM Advisors written
materials that contained information concerning Euroland and European Growth,
including comparative total return and fee and expense information, a comparison
of the investment objectives of Euroland and European Growth and pro forma
expense ratios of European Growth. AIM Advisors also provided the trustees with
written materials concerning the structure of the proposed Reorganization and
the Federal tax consequences of the Reorganization.
In considering the Reorganization, the Board of Trustees noted that
Euroland and European Growth have the same investment objective -- long-term
growth of capital. European Growth seeks to meet its objective by investing,
normally, at least 80% of its total assets in marketable equity securities of
European companies, including companies with market capitalizations of less than
$1 billion. European Growth will normally invest in the securities of companies
located in at least three European countries. European Growth may invest up to
65% of its total assets in European companies located in developing countries,
i.e., those that are in the initial stages of their industrial cycles. Euroland,
on the other hand, is limited to investing the majority of its assets in the
equity securities of large capitalization companies domiciled in countries that
are members of the EMU. The Board of Trustees noted that the broader range of
investment options available to European Growth provides AIM Advisors greater
flexibility to respond to changing market conditions.
In addition, the Board of Trustees noted that Euroland is a fund that
attracts market timers, in spite of AIM Advisors' best efforts to eliminate
them. For the period January 1, 2002 through February 22, 2002, Euroland had in
excess of $139 million redeemed or exchanged by market timers. These fund flows
adversely affect AIM Advisors' ability to manage Euroland's investments and have
a detrimental effect on fund performance.
The Board of Trustees considered the performance of Euroland in
relation to the performance of European Growth, noting that European Growth has
generally outperformed Euroland. European Growth has provided a higher average
annual return to its shareholders in each of the most recent one and three-year
periods. Moreover, since inception, European Growth has provided an average
annual total return to its shareholders of 12.58%, compared to an average annual
total return for Euroland of 8.36%. AIM
15
Advisors noted that Euroland's performance has been poor. It ranks in the bottom
ten percent of its Lipper and Morningstar categories for 1, 3, 5 and 10 years.
In addition, the Board of Trustees compared the relative performance of
European Growth and Euroland in their respective fund sectors. As of December
31, 2001, the Lipper Inc. rankings for European Growth and Euroland were as
follows:
LIPPER RANK (PERCENTILE)(1)
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
European Growth(2) 66% 6% N/A N/A
Euroland 94% 89% 93% 95%
</Table>
- ----------
(1) Under the Lipper ranking system, the lower the percentile rank, the better
the performance.
(2) Lipper places European Growth and Euroland in the European Stock Fund
category.
The Board considered the operating expenses incurred by the two funds.
The total operating expenses of Euroland, expressed as a percentage of average
daily net assets, are higher than the total operating expenses of European
Growth. AIM Advisors reported to the Board of Trustees that on a pro forma
basis, the total operating expense ratios for European Growth Class A, B and C
shares are expected to be approximately 0.10% lower than the total operating
expense ratios for Euroland Class A, B and C shares.
AIM Advisors noted that European Growth's better long-term performance
and lower expense ratio should make European Growth a better investment for
shareholders than Euroland.
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 European Growth. However, AIM Advisors could also
benefit in the future if the assets of the combined fund grow faster than the
assets of the individual funds would have grown in the absence of the
Reorganization.
The Board of Trustees also noted that no initial sales or other charges
would be imposed on any of the shares of European Growth issued to the
shareholders of Euroland in connection with the Reorganization. Finally, the
Board of Trustees reviewed the principal terms of the Agreement. The Board of
Trustees noted that Euroland would be provided with an opinion of counsel that
the Reorganization would be tax-free as to Euroland and its shareholders.
Based on the foregoing, and the information presented, at its meeting
held on May 14-15, 2002, the Board of Trustees determined that the
Reorganization will not dilute the interests of the shareholders of Euroland and
is in the best interest of the Euroland shareholders in view of the better
historical performance and greater capital and geographical diversification of
European Growth. Therefore, the Board of Trustees recommends the approval of the
Reorganization by the shareholders of Euroland.
At a meeting of the Board of Directors of European Growth held on May
14-15, 2002, the Board recommended approval of the Reorganization by the
shareholders of European Growth. The Board of Directors determined that the
Reorganization was in the best interests of the shareholders of European Growth
and that the Reorganization will not dilute the interests of European Growth's
shareholders.
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 Euroland or
European Growth are subject to various conditions, including the following:
16
o the assets of Euroland to be acquired by European Growth shall
constitute at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross
assets held by Euroland 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 Euroland 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 Euroland, European Growth or their shareholders.
Euroland and European Growth will bear their own costs and expenses in
connection with the Reorganization.
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 Euroland. 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 Euroland shareholders do not approve the Agreement or if the
Closing does not occur on or before December 1, 2002.
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 Euroland upon the
transfer of its assets to European Growth;
o no gain or loss will be recognized by any shareholder of
Euroland upon the exchange of shares of Euroland solely for
shares of European Growth;
o the tax basis of the shares of European Growth to be received
by a shareholder of Euroland will be the same as the tax basis
of the shares of Euroland surrendered in exchange therefor;
o the holding period of the shares of European Growth to be
received by a shareholder of Euroland will include the holding
period for which such shareholder held the shares of Euroland
exchanged therefor, provided that such shares of Euroland are
capital assets in the hands of such shareholder as of the
Closing;
o no gain or loss will be recognized by European Growth on the
receipt of assets of Euroland in exchange for shares of
European Growth and European Growth's assumption of Euroland's
liabilities;
o the tax basis of the assets of Euroland in the hands of
European Growth will be the same as the tax basis of such
assets in the hands of Euroland immediately prior to the
Reorganization;
o European Growth will succeed to and take into account the
capital loss carryover and certain other tax attributes of
Euroland, subject to all relevant conditions and limitations
on the use of such tax benefits; and
17
o the holding period of the assets of Euroland to be received by
European Growth will include the holding period of such assets
in the hands of Euroland immediately prior to the
Reorganization.
As a condition to Closing, Ballard Spahr Andrews & Ingersoll, LLP will
render a favorable opinion to AGS and AIF as to the foregoing Federal income tax
consequences of the Reorganization, which opinion will be conditioned upon the
accuracy, as of the date of Closing, of certain representations of AGS and AIF
upon which Ballard Spahr Andrews & Ingersoll, LLP will rely in rendering its
opinion, which representations include, but are not limited to, the following
(taking into account for purposes thereof any events that are part of the plan
of reorganization):
o there is no plan or intention by the shareholders of Euroland
to redeem a number of shares of European Growth received in
the Reorganization that would reduce Euroland shareholders'
ownership of European Growth 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
Euroland as of the Closing Date;
o following the Reorganization, European Growth will continue
the historic business of Euroland (for this purpose "historic
business" shall mean the business most recently conducted by
Euroland which was not entered into in connection with the
Reorganization) or use a significant portion of Euroland's
historic business assets in its business;
o at the direction of Euroland, European Growth will issue
directly to each Euroland shareholder pro rata the shares of
European Growth that Euroland constructively receives in the
Reorganization and Euroland will distribute its other
properties (if any) to its shareholders on, or as promptly as
practicable after, the Closing;
o European Growth has no plan or intention to reacquire any of
its shares issued in the Reorganization, except to the extent
that European Growth is required by the Investment Company Act
of 1940 (the "1940 Act") to redeem any of its shares presented
for redemption;
o European Growth does not plan or intend to sell or otherwise
dispose of any of the assets of Euroland 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 European Growth, Euroland and the shareholders of Euroland
will pay their respective expenses, if any, incurred in
connection with the Reorganization;
o European Growth 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 Euroland immediately before
the Reorganization, including for this purpose any amounts
used by Euroland to pay its reorganization expenses and all
redemptions and distributions made by Euroland immediately
before the Reorganization (other than redemptions pursuant to
a demand of a shareholder in the ordinary course of Euroland'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 European Growth and Euroland have each elected to be taxed as
a RIC under Section 851 of the Code and will each have
qualified for the special Federal tax treatment afforded RICs
under the Code for all taxable periods (including the last
short taxable period of Euroland ending on the Closing and the
taxable year of European Growth that includes the Closing).
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF EUROLAND. EUROLAND 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.
18
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to European Growth of the assets of Euroland
will be the same as the book cost basis of such assets to Euroland.
ADDITIONAL INFORMATION ABOUT EUROPEAN GROWTH
AND EUROLAND
For more information with respect to AIF and European Growth concerning
the following topics, please refer to European Growth's Prospectus as indicated:
(i) see "Investment Objective and Strategies" and "Fund Management" for further
information regarding AIF and European Growth; (ii) see "Investment Objective
and Strategies," "Fund Management," and "Other Information" for further
information regarding management of AIF and European Growth; (iii) see "Fund
Management" and "Other Information" for further information regarding the shares
of AIF and European Growth; (iv) see "Fund Management," "Other Information," and
"Shareholder Information" for further information regarding the purchase,
redemption and repurchase of shares of AIF and European Growth.
For more information with respect to AGS and Euroland concerning the
following topics, please refer to Euroland's Prospectus as indicated: (i) see
"Investment Objective and Strategies" and "Fund Management" for further
information regarding AGS and Euroland; (ii) see discussion in "Investment
Objective and Strategies," "Fund Management," and "Other Information" for
further information regarding the shares of AGS and Euroland; (iii) see "Fund
Management," "Other Information," and "Shareholder Information" for further
information regarding the purchase, redemption and repurchase of AGS and
Euroland.
RIGHTS OF SHAREHOLDERS
The following discussion provides information with respect to the
differences in the rights of shareholders under Maryland law and Delaware law.
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.
19
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 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.
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.
REMOVAL OF DIRECTORS/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.
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.
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 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
20
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.
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.
21
OWNERSHIP OF EUROLAND AND EUROPEAN GROWTH SHARES
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person
who as of _____________, 2002 to the knowledge of AGS, owned 5% or more of any
class of the outstanding shares of Euroland:
<Table>
<Caption>
PERCENT OWNED
CLASS OF NUMBER OF SHARES PERCENT OWNED OF RECORD AND
NAME AND ADDRESS SHARES OWNED OF RECORD* BENEFICIALLY
- ---------------- -------- ---------------- ------------- -------------
</Table>
- ----------
* AGS has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
22
Listed below is the name, address and percent ownership of each person
who as of __________, 2002 to the knowledge of AIF, owned 5% or more of any
class of the outstanding shares of European Growth:
<Table>
<Caption>
PERCENT OWNED
CLASS OF NUMBER OF SHARES PERCENT OWNED OF RECORD AND
NAME AND ADDRESS SHARES OWNED OF RECORD* BENEFICIALLY
- ---------------- -------- ---------------- ------------- -------------
</Table>
- ----------
* AIF has no knowledge of whether all or any portion of the shares owned of
record 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.]
SHARE OWNERSHIP BY EXECUTIVE OFFICERS AND DIRECTORS/TRUSTEES
To the best of the knowledge of AGS, the ownership of shares of
Euroland by executive officers or trustees of AGS as a group constituted less
than 1% of the outstanding shares of each class of such fund as of __________,
2002. To the best of the knowledge of AIF, the ownership of shares of European
Growth by executive officers and directors of AIF as a group constituted less
than 1% of the outstanding shares of each class of such fund as of ___________,
2002.
23
CAPITALIZATION
The following table sets forth as of October 31, 2001, (i) the
capitalization of Euroland Class A, Class B and Class C Shares, (ii) the
capitalization of European Growth Class A, Class B and Class C shares, and (iii)
the pro forma capitalization of European Growth Class A, Class B, and Class C
shares as adjusted to give effect to the transactions contemplated by the
Agreement.
EUROLAND AND EUROPEAN GROWTH
<Table>
<Caption>
PRO FORMA
EUROLAND EUROPEAN GROWTH EUROPEAN GROWTH
CLASS A CLASS A CLASS A SHARES
SHARES SHARES AS ADJUSTED
-------- --------------- ---------------
Net Assets.............. $207,463,521 $157,650,544 $365,114,065
Shares Outstanding...... 21,244,356 9,543,012 22,107,017
Net Asset Value Per Share $ 9.77 $ 16.52 $ 16.52
</Table>
<Table>
PRO FORMA
EUROLAND EUROPEAN GROWTH EUROPEAN GROWTH
CLASS B CLASS A CLASS B SHARES
SHARES SHARES AS ADJUSTED
-------- --------------- ---------------
Net Assets.............. $ 33,818,428 $105,324,387 $139,142,815
Shares Outstanding...... 3,641,592 6,553,435 8,658,624
Net Asset Value Per Share $ 9.29 $ 16.07 $ 16.07
</Table>
<Table>
PRO FORMA
EUROLAND EUROPEAN GROWTH EUROPEAN GROWTH
CLASS C CLASS C CLASS C SHARES
SHARES SHARES AS ADJUSTED
-------- --------------- ---------------
Net Assets.............. $ 2,477,776 $32,603,718 $35,081,494
Shares Outstanding...... 266,887 2,026,798 2,180,727
Net Asset Value Per Share $ 9.28 $ 16.09 $ 16.09
</Table>
LEGAL MATTERS
Certain legal matters concerning AIF and its participation in the
Reorganization, the issuance of shares of European Growth in connection with the
Reorganization and the tax consequences of the Reorganization will be passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor,
Philadelphia, PA 19103-7599. Certain legal matters concerning AGS and its
participation in the Reorganization will be passed upon by Kirkpatrick &
Lockhart, LLP 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036-1800.
INFORMATION FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which AGS and
AIF have filed with the SEC pursuant to the requirements of the 1933 Act and the
1940 Act, to which reference is hereby made. The SEC file number for AGS's
registration statement containing the Prospectus and Statement of Additional
Information relating to Euroland is Registration No. 811-02699. 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 European Growth is
Registration No. 811-05426. 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 European
Growth on Form N-14 of which this Proxy Statement/Prospectus is a part and which
is hereby incorporated by reference) may be inspected without charge and copied
at the public reference facilities maintained by the SEC at Room 1014, Judiciary
Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the following regional
office of the SEC: 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.
24
APPENDIX I
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM EUROLAND GROWTH FUND
a separate portfolio of
AIM GROWTH SERIES
May ___, 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
ARTICLE 1 DEFINITIONS..............................................................1
Section 1.1. Definitions.................................................1
ARTICLE 2 TRANSFER OF ASSETS.......................................................4
Section 2.1. Reorganization of Euroland Growth...........................4
Section 2.2. Computation of Net Asset Value..............................5
Section 2.3. Valuation Date..............................................5
Section 2.4. Delivery....................................................5
Section 2.5. Termination of Series.......................................6
Section 2.6. Issuance of European Development Shares.....................6
Section 2.7. Investment Securities.......................................7
Section 2.8. Liabilities.................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AGS....................................7
Section 3.1. Organization; Authority.....................................7
Section 3.2. Registration and Regulation of AGS..........................7
Section 3.3. Financial Statements........................................8
Section 3.4. No Material Adverse Changes; Contingent Liabilities.........8
Section 3.5. Euroland Growth 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..................................9
Section 3.10. Permits....................................................10
Section 3.11. No Actions, Suits or Proceedings...........................10
Section 3.12. Contracts..................................................11
Section 3.13. Properties and Assets......................................11
Section 3.14. Taxes......................................................11
Section 3.15. Benefit and Employment Obligations.........................12
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 Euroland Growth.............................12
Section 3.23. Value of Shares............................................13
Section 3.24. Shareholder Expenses.......................................13
Section 3.25. Intercompany Indebtedness..................................13
</Table>
i
<Table>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AIF..............................................................13
Section 4.1. Organization; Authority...............................................................13
Section 4.2. Registration and Regulation of AIF....................................................13
Section 4.3. Financial Statements..................................................................13
Section 4.4. No Material Adverse Changes; Contingent Liabilities...................................14
Section 4.5. Registration of European Development Class A Shares, European Development
Class B Shares and European Development 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...............................................................................16
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....................................18
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.........................................................................19
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.......................................................20
Section 5.8. Submission of Agreement to Shareholders...............................................20
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION.........................................................20
Section 6.1. Conditions Precedent of AIF...........................................................20
Section 6.2. Mutual Conditions.....................................................................21
Section 6.3. Conditions Precedent of AGS...........................................................22
ARTICLE 7 TERMINATION OF AGREEMENT...........................................................................22
Section 7.1. Termination...........................................................................22
Section 7.2. Survival After Termination............................................................24
ARTICLE 8 MISCELLANEOUS......................................................................................24
Section 8.1. Survival of Representations and Warranties............................................24
Section 8.2. Governing Law.........................................................................24
Section 8.3. Binding Effect, Persons Benefiting, No Assignment.....................................24
Section 8.4. Obligations of AIF and AGS............................................................24
Section 8.5. Amendments............................................................................25
Section 8.6. Enforcement...........................................................................25
</Table>
ii
<Table>
Section 8.7. Interpretation........................................................................25
Section 8.8. Counterparts..........................................................................25
Section 8.9. Entire Agreement; Schedules...........................................................25
Section 8.10. Notices...............................................................................25
Section 8.11. Representations by AIM Advisors.......................................................26
Schedule 6.1(d) Opinion of Counsel to AGS
Schedule 6.2(f) Tax Opinions
Schedule 6.3(d) Opinion of Counsel to AIF
</Table>
iii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of May ___,
2002 (this "Agreement"), by and among AIM Growth Series, a Delaware business
trust ("AGS"), acting on behalf of AIM Euroland Growth Fund ("Euroland Growth"),
a separate series of AGS, AIM International Funds, Inc., a Maryland corporation
("AIF"), acting on behalf of AIM European Development Fund ("European
Development") (to be renamed "AIM European Growth Fund" effective July 1, 2002),
a separate series of AIF, and A I M Advisors, Inc. ("AIM Advisors"), a Delaware
corporation.
WITNESSETH
WHEREAS, AGS 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 Euroland Growth,
for sale to the public; and
WHEREAS, AIF 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 European
Development, for sale to the public; and
WHEREAS, AIM Advisors provides investment advisory services to
both AGS and AIF; and
WHEREAS, Euroland Growth desires to provide for its
reorganization through the transfer of all of its assets to European Development
in exchange for the assumption by European Development of all of the liabilities
of Euroland Growth and the issuance by AIF of shares of European Development 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, AGS, AIF 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.
"Affiliated Person" means an affiliated person as defined in
Section 2(a)(3) of the Investment Company Act.
1
"Agreement" means this Agreement and Plan of Reorganization,
together with all schedules and exhibits attached hereto and all amendments
hereto and thereof.
"AGS" means AIM Growth Series, a Delaware business trust.
"AGS Registration Statement" means the registration statement
on Form N-1A of AGS, as amended, 1940 Act Registration No. 811-02699.
"AIF" means AIM International Funds, Inc., a Maryland
corporation.
"AIF Registration Statement" means the registration statement
on Form N-1A of AIF, as amended, 1940 Act Registration No. 811-06463.
"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 AGS on behalf of
Euroland Growth, or otherwise providing benefits to any current or former
employee, officer or trustee of AGS.
"Closing" means the transfer of the assets of Euroland Growth
to European Development, the assumption of all of Euroland Growth's liabilities
by European Development and the issuance of European Development Shares directly
to Euroland Growth Shareholders as described in Section 2.1 of this Agreement.
"Closing Date" means September 23, 2002 or such other date as
the parties may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended,
and all rules and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting
in its capacity as custodian for the assets of European Development and Euroland
Growth.
"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.
"Euroland Growth Shareholders Meeting" means a meeting of the
shareholders of Euroland Growth convened in accordance with applicable law and
the Agreement and Declaration of Trust of AGS to consider and vote upon the
approval of this Agreement and the Reorganization of Euroland Growth
contemplated by this Agreement.
"European Development" means AIM European Development Fund, a
separate series of shares of the capital stock of AIF.
2
"European Development Class A Shares" means Class A Shares of
stock of European Development issued by AIF.
"European Development Class B Shares" means Class B Shares of
stock of European Development issued by AIF.
"European Development Class C Shares" means Class C Shares of
stock of European Development issued by AIF.
"European Development Financial Statements" shall have the
meaning set forth in Section 4.3 of this Agreement.
"European Development Shares" means shares of capital stock of
European Development issued pursuant to Section 2.6 of this Agreement.
"Euroland Growth" means AIM Euroland Growth Fund, a separate
series of AGS.
"Euroland Growth Class A Shares" means Class A Shares of
beneficial interest of Euroland Growth issued by AGS.
"Euroland Growth Class B Shares" means Class B Shares of
beneficial interest of Euroland Growth issued by AGS.
"Euroland Growth Class C Shares" means Class C Shares of
beneficial interest of Euroland Growth issued by AGS.
"Euroland Growth Financial Statements" shall have the meaning
set forth in Section 3.3 of this Agreement.
"Euroland Growth Shareholders" means the holders of record as
of the Effective Time of the issued and outstanding shares of beneficial
interest in Euroland Growth.
"Euroland Growth Shares" means the issued and outstanding
shares of beneficial interest in Euroland Growth.
"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.
3
"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.
"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
Euroland Growth by European Development in consideration of the assumption by
European Development of all of the liabilities of Euroland Growth and the
issuance by AIF of European Development Shares directly to Euroland Growth
Shareholders as described in this Agreement, and the termination of Euroland
Growth's status as a designated series of shares of AGS.
"Required Shareholder Vote" shall have the meaning set forth
in Section 3.17 of this Agreement.
"Return" means any return, report or form or any attachment
thereto required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations adopted pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or
levy (including income taxes (including alternative minimum tax and estimated
tax), franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross
receipts taxes, value added taxes, employment taxes, excise taxes, ad valorem
taxes, property taxes, withholding taxes, payroll taxes, minimum taxes, or
windfall profit taxes), together with any related penalties, fines, additions to
tax or interest, imposed by the United States or any state, county, local or
foreign government or subdivision or agency thereof.
"Valuation Date" shall have the meaning set forth in Section
2.3 of this Agreement.
ARTICLE 2
TRANSFER OF ASSETS
Section 2.1. Reorganization of Euroland Growth At the Effective Time,
all of the assets of Euroland Growth shall be delivered to the Custodian for the
account of European Development in exchange for the assumption by European
Development of all of the liabilities of any kind of Euroland Growth and
delivery by AIF directly to (i) the holders of record as of the Effective Time
of the issued and outstanding Class A shares of Euroland Growth of a number of
European Development 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
4
outstanding Class B shares of Euroland Growth of a number of European
Development 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 Euroland Growth
of a number of European Development 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 Euroland Growth so
transferred, assigned and delivered, all determined and adjusted as provided in
Section 2.2 below. Upon delivery of such assets, AIM European Development 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 European Development Shares, and
the net value of the assets of Euroland Growth, shall, in each case, be
determined as of the close of regular trading on the New York Stock Exchange
("NYSE") on the Valuation Date.
(b) The net asset value of European Development Shares shall
be computed in accordance with the policies and procedures of European
Development as described in the AIF Registration Statement.
(c) The net value of the assets of Euroland Growth to be
transferred to European Development pursuant to this Agreement shall be computed
in accordance with the policies and procedures of Euroland Growth as described
in the AGS Registration Statement.
(d) All computations of value regarding the net assets of
Euroland Growth and the net asset value of European Development Shares to be
issued pursuant to this Agreement shall be made by agreement of AGS and AIF. 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 Euroland Growth and the net
asset value per share of European Development 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 Euroland Growth
will be permanently closed as of the close of business on the Valuation Date and
only requests for the redemption of shares of Euroland Growth received in proper
form prior to the close of regular trading on the NYSE on the Valuation Date
shall be accepted by Euroland Growth. Redemption requests thereafter received by
Euroland Growth shall be deemed to be redemption requests for European
Development Class A Shares, European Development Class B Shares or European
Development Class C Shares, as applicable (assuming that the transactions
contemplated by this Agreement have been consummated), to be distributed to
Euroland Growth Shareholders under this Agreement.
Section 2.4. Delivery
(a) Assets held by Euroland Growth shall be delivered by AGS
to the Custodian on the Closing Date. No later than three (3) business days
preceding the Closing Date, AGS shall instruct the Custodian to transfer such
assets to the account of European Development. The assets so delivered shall be
duly endorsed in proper form for transfer in such condition as to
5
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 Euroland
Growth 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 European Development at the Custodian.
(b) If, on the Closing Date, Euroland Growth is unable to make
delivery in the manner contemplated by Section 2.4(a) of securities held by
Euroland Growth for the reason that any of such securities purchased prior to
the Closing Date have not yet been delivered to Euroland Growth or its broker,
then AIF shall waive the delivery requirements of Section 2.4(a) with respect to
said undelivered securities if Euroland Growth 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 AIF 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 Euroland Growth as a designated series of
shares of AGS shall be terminated; provided, however, that the termination of
the status of Euroland Growth as a series of shares of AGS shall not be required
if the Reorganization shall not have been consummated.
Section 2.6. Issuance of European Development Shares At the Effective
Time, Euroland Growth Shareholders of record as of the close of regular trading
on the NYSE on the Valuation Date holding Euroland Growth Class A shares shall
be issued that number of full and fractional Class A shares of European
Development having a net asset value equal to the net asset value of Euroland
Growth Class A shares held by Euroland Growth Shareholders on the Valuation
Date, Euroland Growth Shareholders of record as of the Valuation Date holding
Euroland Growth Class B shares shall be issued that number of full and
fractional Class B shares of European Development having a net asset value equal
to the net asset value of Euroland Growth Class B Shares held by Euroland Growth
Shareholders on the Valuation Date, and Euroland Growth Shareholders of record
as of the Valuation Date holding Euroland Growth Class C shares shall be issued
that number of full and fractional Class C shares of European Development having
a net asset value equal to the net asset value of Euroland Growth Class C shares
held by Euroland Growth Shareholders on the Valuation Date. All issued and
outstanding shares of beneficial interest in Euroland Growth shall thereupon be
canceled on the books of AGS. AGS shall provide instructions to the transfer
agent of AIF with respect to European Development Class A Shares, European
Development Class B Shares and European Development Class C Shares to be issued
to Euroland Growth Shareholders. AIF 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. AIF shall
record on its books the ownership of European Development Class A shares,
European Development Class B shares and European Development Class C Shares by
Euroland Growth Shareholders and shall forward a confirmation of such ownership
to Euroland Growth Shareholders. No redemption or repurchase of such shares
credited to former Euroland Growth Shareholders in respect of Euroland Growth
shares represented by unsurrendered shares certificates shall be permitted until
such certificates have been surrendered to AIF for cancellation, or if such
certificates are lost or misplaced, until lost certificate affidavits have been
executed and delivered to AIF.
6
Section 2.7. Investment Securities On or prior to the Valuation Date,
AGS shall deliver a list setting forth the securities Euroland Growth then owned
together with the respective Federal income tax bases thereof. AGS shall provide
to AIF 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 European Development hereunder. Such records shall be made available by AGS
prior to the Valuation Date for inspection by the Treasurer (or his or her
designee) or the auditors of AIF upon reasonable request.
Section 2.8. Liabilities Euroland Growth 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 AGS
AGS, on behalf of Euroland Growth, represents and warrants to
AIF as follows:
Section 3.1. Organization; Authority AGS 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 AGS AGS is duly registered
with the SEC as an investment company under the Investment Company Act and all
Euroland Growth 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 AGS to revoke or rescind
any such registration or qualification. Euroland Growth is in compliance in all
material respects with all applicable laws, rules and regulations, including,
without limitation, the Investment Company Act, the Securities Act, the Exchange
Act and all applicable state securities laws. Euroland Growth is in compliance
in all material respects with the investment policies and restrictions
applicable to it set forth in the AGS Registration Statement currently in
effect. The value of the net assets of Euroland Growth is determined using
portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Euroland Growth
and all purchases and redemptions of Euroland Growth Shares have been effected
at the net asset value per share calculated in such manner.
7
Section 3.3. Financial Statements The books of account and related
records of Euroland Growth fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements for
the fiscal year ended December 31, 2001 of Euroland Growth previously delivered
to AIF (the "Euroland Growth Financial Statements") present fairly in all
material respects the financial position of Euroland Growth as of the date
indicated and the results of operations and changes in net assets for the period
then ended in accordance with generally accepted accounting principles applied
on a consistent basis for the period then ended.
Section 3.4. No Material Adverse Changes; Contingent Liabilities Since
December 31, 2001 no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Euroland
Growth or the status of Euroland Growth as a regulated investment company under
the Code, other than changes resulting from any change in general conditions in
the financial or securities markets or the performance of any investments made
by Euroland Growth or occurring in the ordinary course of business of Euroland
Growth or AGS. There are no contingent liabilities of Euroland Growth not
disclosed in the Euroland Growth Financial Statements which are required to be
disclosed in accordance with generally accepted accounting principles.
Section 3.5. Euroland Growth Shares; Liabilities; Business Operations
(a) Euroland Growth 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 Euroland Growth nor any person related to Euroland
Growth (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 Euroland Growth for consideration other than shares of Euroland
Growth, except for shares redeemed in the ordinary course of Euroland Growth's
business as an open-end investment company as required by the Investment Company
Act, or (ii) made distributions with respect to Euroland Growth'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
Euroland Growth on the Effective Date.
(c) At the time of its Reorganization, Euroland Growth shall
not have outstanding any warrants, options, convertible securities or any other
type of right pursuant to which any Person could acquire Euroland Growth Shares,
except for the right of investors to acquire Euroland Growth Shares at net asset
value in the normal course of its business as a series of an open-end management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the
Closing Date, Euroland Growth 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
8
unchanged manner. In anticipation of its Reorganization, Euroland Growth 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 European Development.
(e) AGS 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 Euroland Growth Financial Statements for the period ended December 31,
2001, 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 AGS on behalf of Euroland Growth and,
assuming this Agreement has been duly executed and delivered by AIF and approved
by Euroland Growth Shareholders, constitutes the legal, valid and binding
obligation of AGS enforceable against AGS in accordance with its terms from and
with respect to the revenues and assets of Euroland Growth, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors rights generally, or by
general equity principles (whether applied in a court 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 AGS on behalf of Euroland Growth and performance by AGS of its
obligations hereunder has been duly authorized by all necessary trust action on
the part of AGS, other than Euroland Growth 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 bylaws of AGS 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
Euroland Growth (except for such breaches or defaults or Liens that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect) under (A) any indenture, mortgage or loan agreement or any other
material agreement or instrument to which AGS is a party or by which it may be
bound and which relates to the assets of Euroland Growth or to which any
property of Euroland Growth 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 AGS or any property of
Euroland Growth. AGS is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
Section 3.9. Authorizations or Consents Other than those which shall
have been obtained or made on or prior to the Closing Date and those that must
be made after the Closing Date to comply 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
9
made by AGS in connection with the due execution and delivery by AGS of this
Agreement and the consummation by AGS of the transactions contemplated hereby.
Section 3.10. Permits AGS 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
Euroland Growth, and there has occurred no default under any Permit, except for
the absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of AGS 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 AGS, has any litigation been overtly threatened in writing
or, if probable of assertion, orally, against AGS 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
AGS, threatened in writing or, if probable of assertion, orally, against AGS
affecting any property, asset, interest or right of Euroland Growth, that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect with respect to Euroland Growth. There are not in existence on
the date hereof any plea agreements, judgments, injunctions, consents, decrees,
exceptions or orders that were entered by, filed with or issued by Governmental
Authority relating to AGS's conduct of the business of Euroland Growth affecting
in any significant respect the conduct of such business. AGS is not, and has not
been to the knowledge of AGS, the target of any investigation by the SEC or any
state securities administrator with respect to its conduct of the business of
Euroland Growth.
10
Section 3.12. Contracts AGS 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 Euroland
Growth, by which the assets, business, or operations of Euroland Growth may be
bound or affected, or under which it or the assets, business or operations of
Euroland Growth 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 AGS there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
Section 3.13. Properties and Assets Euroland Growth has good and
marketable title to all properties and assets reflected in the Euroland Growth
Financial Statements as owned by it, free and clear of all Liens, except as
described in Euroland Growth Financial Statements.
Section 3.14. Taxes
(a) Euroland Growth has elected to be treated as a regulated
investment company under Subchapter M of the Code and is a separate corporation
within the meaning of Section 851(g)(1) of the Code. Euroland Growth 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. Euroland Growth 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
Euroland Growth as a "regulated investment company" for tax purposes and (ii)
eliminate any tax liability of Euroland Growth arising by reason of
undistributed investment company taxable income or net capital gain, AGS will
declare on or prior to the Valuation Date to the shareholders of Euroland Growth
a dividend or dividends that, together with all previous such dividends, shall
have the effect of distributing (A) all of Euroland Growth's investment company
taxable income (determined without regard to any deductions for dividends paid)
for the short taxable year beginning on January 1, 2002 and ending on the
Closing Date and (B) all of Euroland Growth's net capital gain recognized in
such short taxable year (after reduction for any capital loss carryover).
(b) Euroland Growth has timely filed all Returns required to
be filed by it and all Taxes with respect thereto have been paid, except where
the failure so to file or so to pay, would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. Adequate
provision has been made in the Euroland Growth 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 Euroland Growth, and no
deficiency has been proposed, assessed or asserted, in writing, where such
deficiency would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. No waivers of the time to assess any such Taxes
are outstanding nor are any written requests for such waivers pending and no
Returns of Euroland Growth are currently being or have been audited with respect
to income taxes or other Taxes by any Federal, state, local or foreign Tax
authority.
11
(c) To the best knowledge of AGS, the fiscal year of Euroland
Growth has not been changed for tax purposes since the date on which it
commenced operations.
Section 3.15. Benefit and Employment Obligations On or prior to the
Closing Date, Euroland Growth 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,
except that Euroland Growth Fund is liable for its proportionate share of the
expenses arising in connection with the retirement and deferred compensation
benefits made available to the directors and trustees of certain investment
companies advised by AIM Advisors.
Section 3.16. Brokers No broker, finder or similar intermediary has
acted for or on behalf of AGS 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 AGS or any action taken by it.
Section 3.17. Voting Requirements The vote of a majority of the shares
cast at a meeting of Euroland Growth 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 Euroland Growth necessary to
approve this Agreement and the Reorganization of Euroland Growth 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
Reorganization, this Agreement or any of the transactions contemplated by this
Agreement.
Section 3.19. Books and Records The books and records of AGS relating
to Euroland Growth, reflecting, among other things, the purchase and sale of
Euroland Growth Shares, the number of issued and outstanding shares owned by
Euroland Growth Shareholders 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 Euroland Growth
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 European Development 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 Euroland Growth The liabilities of
Euroland Growth that are to be assumed by European Development in connection
with the Reorganization, or to which the assets of Euroland Growth to be
transferred in the Reorganization are subject, were incurred by Euroland Growth
in the ordinary course of its business. The fair market value of the assets of
12
Euroland Growth to be transferred to European Development in the Reorganization
will equal or exceed the sum of the liabilities to be assumed by European
Development 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 European
Development Class A Shares received by Euroland Growth Shareholders in the
Reorganization will be approximately equal to the fair market value of Euroland
Growth Class A shares constructively surrendered in exchange therefor, the fair
market value of European Development Class B Shares received by Euroland Growth
Shareholders in the Reorganization will be approximately equal to the fair
market value of Euroland Growth Class B shares constructively surrendered in
exchange therefor, and the fair market value of European Development Class C
Shares received by Euroland Growth Shareholders in the Reorganization will be
approximately equal to the fair market value of Euroland Growth Class C shares
constructively surrendered in exchange therefor.
Section 3.24. Shareholder Expenses Euroland Growth 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 AGS and AIF that was issued or acquired, or will be
settled, at a discount.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AIF
AIF, on behalf of European Development, represents and
warrants to AGS as follows:
Section 4.1. Organization; Authority AIF 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 AIF AIF is duly registered
with the SEC as an investment company under the Investment Company Act. European
Development 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. European Development is in compliance in all material respects with the
applicable investment policies and restrictions set forth in the AIF
Registration Statement. The value of the net assets of European Development is
determined using portfolio valuation methods that comply in all material
respects with the requirements of the Investment Company Act and the policies of
European Development and all purchases and redemptions of European Development
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 European Development fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements for
the fiscal year ended October 31, 2001 of European Development previously
delivered to AGS (the "European Development Financial Statements") present
fairly
13
in all material respects the financial position of European Development as of
the date indicated and the results of operations and changes in net assets for
the period then ended in accordance with generally accepted accounting
principles applied on a consistent basis for the period then ended.
Section 4.4. No Material Adverse Changes; Contingent Liabilities Since
October 31, 2001, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of European
Development or the status of European Development 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 European Development or occurring in the ordinary course of
business of European Development or AIF. There are no contingent liabilities of
European Development not disclosed in the European Development Financial
Statements which are required to be disclosed in accordance with generally
accepted accounting principles.
Section 4.5. Registration of European Development Class A Shares,
European Development Class B Shares and European Development Class C Shares
(a) The shares of beneficial interest of AIF are divided into
six portfolios, including European Development. European Development currently
has three classes of shares, Class A shares, Class B shares and Class C shares.
[Under its Charter, AIF is authorized to issue 480,000,000 Class A shares,
240,000,000 Class B shares and 240,000,000 Class C shares of European
Development.] [Ballard to verify].
(b) European Development 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 AIF then in effect.
(c) European Development 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, European Development shall not have outstanding any
warrants, options, convertible securities or any other type of right pursuant to
which any Person could acquire European Development Class A, European
Development Class B or European Development Class C shares, except for the right
of investors to acquire European Development Class A Shares, European
Development Class B Shares or European Development 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 AIF's Registration Statement
on Form N-14, shall be furnished to Euroland Growth Shareholders entitled to
vote at the Euroland Growth Shareholders Meeting. The Combined Proxy
Statement/Prospectus and related Statement of Additional Information of European
Development, 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
14
which they were made, not materially misleading, provided, however, that no
representation or warranty is made with respect to written information provided
by AGS for inclusion in the Combined Proxy Statement/Prospectus.
(e) The shares of European Development which have been or are
being offered for sale (other than the European Development Shares to be issued
in connection with the Reorganization) have been duly registered under the
Securities Act by the AIF Registration Statement and have been duly registered,
qualified or are exempt from registration or qualification under the securities
laws of each state or other jurisdiction in which such shares have been or are
being offered for sale, and no action has been taken by AIF to revoke or rescind
any such registration or qualification.
Section 4.6. Accountants PricewaterhouseCoopers LLP, which has reported
upon the European Development Financial Statements for the period ended October
31, 2001, 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 AIF on behalf of European Development and,
assuming this Agreement has been duly executed and delivered by AGS, constitutes
the legal, valid and binding obligation of AIF, enforceable against AIF in
accordance with its terms from and with respect to the revenues and assets of
European Development, 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 AIF on behalf of European Development and performance by AIF of its
obligations hereunder have been duly authorized by all necessary corporate
action on the part of AIF and (i) do not, and on the Closing Date will not,
result in any violation of the Charter or bylaws of AIF 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
European Development (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 AIF is a party or by which it may be
bound and which relates to the assets of European Development or to which any
properties of European Development 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 AIF or any property of European
Development. AIF 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
15
made by AIF in connection with the due execution and delivery by AIF of this
Agreement and the consummation by AIF of the transactions contemplated hereby.
Section 4.10. Permits AIF has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
European Development, 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 AIF 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 AIF, has any litigation been overtly threatened in writing or,
if probable of assertion, orally, against AIF 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
AIF, threatened in writing or, if probable of assertion, orally, against AIF,
affecting any property, asset, interest or right of European Development, that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to European Development. 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 AIF's conduct of the business
of European Development affecting in any significant respect the conduct of such
business. AIF is not, and has not been, to the knowledge of AIF, the target of
any investigation by the SEC or any state securities administrator with respect
to its conduct of the business of European Development.
Section 4.12. Taxes
(a) European Development 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. European
Development 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. European Development 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) European Development 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 European Development Financial
16
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 European
Development, and no deficiency has been proposed, assessed or asserted, in
writing, where such deficiency would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. No waivers of the time to
assess any such Taxes are outstanding nor are any written requests for such
waivers pending and no Return of European Development 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 European Development has not been
changed for tax purposes since the date on which it commenced operations.
Section 4.13. Brokers No broker, finder or similar intermediary has
acted for or on behalf of AIF 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 AIF or any action taken by it.
Section 4.14. Representations Concerning the Reorganization
(a) AIF has no plan or intention to reacquire any European
Development Shares issued in the Reorganization, except to the extent that
European Development 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) European Development has no plan or intention to sell or
otherwise dispose of any of the assets of Euroland Growth 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, European Development will
continue an "historic business" (within the meaning of Section 1.368-1(d) of the
Income Tax Regulations under the Code) of Euroland Growth or use a significant
portion of Euroland Growth's historic business assets in a business.
(d) Prior to or in the Reorganization, neither European
Development nor any person related to European Development (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 Euroland Growth with consideration other than shares
of European Development. There is no plan or intention by European Development
or any person related to European Development to acquire or redeem any of the
European Development Shares issued in the Reorganization either directly or
through any transaction, agreement, or arrangement with any other person, other
than redemptions in the
17
ordinary course of European Development'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 European
Development 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.
Section 4.16. Value of Shares The fair market value of European
Development Class A Shares received by Euroland Growth Shareholders in the
Reorganization will be approximately equal to the fair market value of Euroland
Growth Class A shares constructively surrendered in exchange therefor, the fair
market value of European Development Class B Shares received by Euroland Growth
Shareholders in the Reorganization will be approximately equal to the fair
market value of Euroland Growth Class B shares constructively surrendered
therefor, and the fair market value of European Development Class C Shares
received by Euroland Growth Shareholders in the Reorganization will be
approximately equal to the fair market value of Euroland Growth Class C shares
constructively surrendered therefor.
Section 4.17. Intercompany Indebtedness; Consideration There is no
intercompany indebtedness between AGS and AIF that was issued or acquired, or
will be settled, at a discount. No consideration other than European Development
Shares (and European Development's assumption of Euroland Growth's liabilities,
including for this purpose all liabilities to which the assets of Euroland
Growth are subject) will be issued in exchange for the assets of Euroland Growth
acquired by European Development in connection with the Reorganization. The fair
market value of the assets of Euroland Growth transferred to European
Development in the Reorganization will equal or exceed the sum of the
liabilities assumed by European Development, 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), AGS shall conduct the business of Euroland Growth only
in the ordinary course and substantially in accordance with past practices, and
shall use its reasonable best efforts to preserve intact its business
organization and material assets and maintain the rights, franchises and
business and customer relations necessary to conduct the business of Euroland
Growth 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), AIF shall conduct the business of European Development
only in the ordinary course and substantially in accordance with past practices,
and shall use its reasonable best efforts to
18
preserve intact its business organization and material assets and maintain the
rights, franchises and business relations necessary to conduct the business
operations of European Development in the ordinary course in all material
respects.
Section 5.2. Announcements AGS and AIF 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 AGS nor AIF shall issue any such press release or make any public
statement without the prior written approval of the other party to this
Agreement, such approval not to be unreasonably withheld, except as may be
required by law.
Section 5.3. Expenses Euroland Growth and European Development 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 Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
Section 5.5. Notice of Events AIF shall give prompt notice to AGS, and
AGS shall give prompt notice to AIF, of (a) the occurrence or non-occurrence of
any event which to the knowledge of AIF or to the knowledge of AGS, the
occurrence or non-occurrence of which would be likely to result in any of the
conditions specified in (i) in the case of AGS, Sections 6.1 and 6.2 or (ii) in
the case of AIF, Sections 6.2 and 6.3, not being satisfied so as to permit the
consummation of the Reorganization 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) AGS will, during regular business hours and on reasonable
prior notice, allow AIF and its authorized representatives reasonable access to
the books and records of AGS pertaining to the assets of Euroland Growth and to
officers of AGS knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of AGS.
(b) AIF will, during regular business hours and on reasonable
prior notice, allow AGS and its authorized representatives reasonable access to
the books and records of AIF pertaining to the assets of European Development
and to officers of AIF knowledgeable thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of AIF.
19
Section 5.7. Consents, Approvals and Filings Each of AGS and AIF 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 Reorganization and the other transactions contemplated by
this Agreement. In addition, each of AGS and AIF 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 Reorganization and the other transactions contemplated herein
and (ii) to obtain as promptly as reasonably practicable all necessary permits,
orders or other consents of Governmental Authorities and consents of all third
parties necessary for the consummation of the Reorganization and the other
transactions contemplated herein. Each of AGS and AIF 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 AGS shall take all
action necessary in accordance with applicable law and its Agreement and
Declaration of Trust and bylaws to convene the Euroland Growth Shareholders
Meeting. AGS shall, through its Board of Trustees, recommend to Euroland Growth
Shareholders approval of this Agreement and the transactions contemplated by
this Agreement. AGS shall use its reasonable best efforts to hold a Euroland
Growth Shareholders Meeting as soon as practicable after the date hereof.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1. Conditions Precedent of AIF The obligation of AIF 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 AIF.
(a) The representations and warranties of AGS on behalf of
Euroland Growth participating in the Reorganization set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date with the same effect as though all such
representations and warranties had been made as of the Closing Date.
(b) AGS shall have complied with and satisfied in all material
respects all agreements and conditions relating to Euroland Growth participating
in the Reorganization set forth herein on its part to be performed or satisfied
at or prior to the Closing Date.
(c) AIF shall have received at the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AGS, in such
individual's capacity as an officer of AGS 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 AGS certifying as to the accuracy and
completeness of the attached Agreement and Declaration of Trust and bylaws of
AGS, and resolutions, consents and authorizations of or regarding AGS with
respect to the execution and delivery of this Agreement and the transactions
contemplated hereby.
20
(d) AIF shall have received the signed opinion of Ballard
Spahr Andrews & Ingersoll, LLP, counsel to AGS, or other counsel reasonably
acceptable to AIF, in form and substance reasonably acceptable to counsel for
AIF, as to the matters set forth in Schedule 6.1(d).
(e) The dividend or dividends described in the last sentence
of Section 3.14(a) shall have been declared.
Section 6.2. Mutual Conditions The obligations of AGS and AIF 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 AGS and AIF, 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 AGS and AIF 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 Euroland Growth and
related matters shall have been approved and adopted at the Euroland Growth
Shareholders Meeting by the shareholders of Euroland Growth on the record date
by the Required Shareholder Vote.
(c) The assets of Euroland Growth to be acquired by European
Development 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
Euroland Growth immediately prior to the Reorganization. For purposes of this
Section 6.2(c), assets used by Euroland Growth 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 Euroland Growth's business as a series of an open-end
management investment company) after the date of this Agreement shall be
included as assets of Euroland Growth 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 AIF with
respect to European Development Shares to be issued to Euroland Growth
Shareholders in connection with the Reorganization shall have become effective
under the Securities Act and no
21
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) AGS and AIF 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 AGS and AIF, as to the matters set forth on
Schedule 6.2(f). In rendering such opinion, BSA&I may request and rely upon
representations contained in certificates of officers of AGS, AIF and others,
and the officers of AGS and AIF shall use their best efforts to make available
such truthful certificates.
Section 6.3. Conditions Precedent of AGS The obligation of AGS 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 AGS.
(a) The representations and warranties of AIF on behalf of
European Development 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) AIF shall have complied with and satisfied in all material
respects all agreements and conditions relating to European Development
participating in the Reorganization set forth herein on its part to be performed
or satisfied at or prior to the Closing Date.
(c) AGS shall have received on the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AIF, in such
individual's capacity as an officer of AIF 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 AIF certifying as to the accuracy and
completeness of the attached Charter and bylaws, as amended, of AIF and
resolutions, consents and authorizations of or regarding AIF with respect to the
execution and delivery of this Agreement and the transactions contemplated
hereby.
(d) AGS shall have received the signed opinion of Ballard
Spahr Andrews & Ingersoll, LLP, counsel to AIF, or other counsel reasonably
acceptable to AGS, in form and substance reasonably acceptable to counsel for
AGS, 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:
22
(i) by mutual written consent of AGS and AIF; or
(ii) at the election of AGS or AIF:
(A) if the Closing Date shall not be on or
before December 1, 2002, or such later date as the parties
hereto may agree upon, unless the failure to consummate the
Reorganization is the result of a willful and material breach
of this Agreement by the party seeking to terminate this
Agreement;
(B) if, upon a vote at the Euroland Growth
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.
23
Section 7.2. Survival After Termination If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of Euroland Growth
is not consummated, this Agreement shall become void and of no further force and
effect with respect to such Reorganization and the respective Euroland Growth,
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 AIF and AGS
(a) AGS and AIF hereby acknowledge and agree that European
Development is a separate investment portfolio of AIF, that AIF is executing
this Agreement on behalf of European Development, and that any amounts payable
by AIF under or in connection with this Agreement shall be payable solely from
the revenues and assets of European Development. AGS further acknowledges and
agrees that this Agreement has been executed by a duly authorized officer of AIF
in his or her capacity as an officer of AIF intending to bind AIF as provided
herein, and that no officer, director or shareholder of AIF shall be personally
liable for the liabilities or obligations of AIF incurred hereunder.
(b) AGS and AIF hereby acknowledge and agree that Euroland
Growth is a separate investment portfolio of AGS, that AGS is executing this
Agreement on behalf of Euroland Growth and that any amounts payable by AGS under
or in connection with this Agreement shall be payable solely from the revenues
and assets of Euroland Growth. AIF further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of AGS in his or her
capacity as an officer of AGS intending to bind AGS as provided herein, and that
no officer, trustee or shareholder of AGS shall be personally liable for the
liabilities of AGS incurred hereunder.
24
Section 8.5. Amendments This Agreement may not be amended, altered or
modified except by a written instrument executed by AGS and AIF.
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.
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 AGS:
AIM Growth Series
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
25
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
(b) If to AIF:
AIM International Funds, Inc.
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 AGS, AIM Advisors represents to AIF that to the best of
its knowledge the representations and warranties of AGS and Euroland Growth
contained in this Agreement are true and correct as of the date of this
Agreement. In its capacity as investment adviser to AIF, AIM Advisors represents
to AGS that to the best of its knowledge the representations and warranties of
AIF and European Development contained in this Agreement are true and correct as
of the date of this Agreement. For purposes of this Section 8.11, the best
knowledge standard shall be deemed to mean that the officers of AIM Advisors who
have substantive responsibility for the provision of investment advisory
services to AGS and AIF do not have actual knowledge to the contrary after due
inquiry.
26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
AIM GROWTH SERIES, acting
on behalf of AIM Euroland Growth Fund
By:
-------------------------------------------
AIM INTERNATIONAL FUNDS, INC., acting
on behalf of AIM European Development Fund
By:
-------------------------------------------
A I M ADVISORS, INC.
By:
-------------------------------------------
27
Schedule 6.1(d)
Opinion of Counsel to AGS
1. AGS is duly organized and validly existing as a business trust
under the Delaware Business Trust Act.
2. AGS 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
AGS have been duly authorized and approved by all requisite
trust action on the part of AGS. The Agreement has been duly
executed and delivered by AGS and constitutes the valid and
binding obligation of AGS.
4. Euroland Growth Shares outstanding on the date hereof have
been duly authorized and validly issued, are fully paid and
are non-assessable.
5. To the best of our knowledge, AGS 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 Euroland
Growth (i) with respect to the Agreement or (ii) which involves in excess of
$500,000 in damages.
Schedule 6.2(f)
Tax Opinions
(i) The transfer of the assets of Euroland Growth to European
Development in exchange for European Development Shares distributed directly to
Euroland Growth Shareholders, as provided in the Agreement, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code and that
Euroland Growth and European Development 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 Euroland Growth on the transfer of
its assets to European Development solely in exchange for European Development
Class A Shares, European Development Class B Shares and European Development
Class C Shares or on the distribution of European Development Class A Shares,
European Development Class B Shares and European Development Class C Shares to
Euroland Growth Shareholders.
(iii) In accordance with Section 1032 of the Code, no gain or loss will
be recognized by European Development upon the receipt of assets of Euroland
Growth in exchange for European Development Class A Shares, European Development
Class B Shares and European Development Class C Shares issued directly to
Euroland Growth Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by Euroland Growth Shareholders on the receipt of European
Development Class A Shares, European Development Class B Shares and European
Development Class C Shares in exchange for Euroland Growth Shares.
(v) In accordance with Section 362(b) of the Code, the basis to
European Development of the assets of Euroland Growth will be the same as the
basis of such assets in the hands of Euroland Growth immediately prior to the
Reorganization.
(vi) In accordance with Section 358(a) of the Code, a Euroland Growth
Shareholder's basis for European Development Class A Shares, European
Development Class B Shares or European Development Class C Shares received by
the Euroland Growth Shareholder will be the same as his basis for Euroland
Growth Shares exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a Euroland Growth
Shareholder's holding period for European Development Class A Shares, European
Development Class B Shares or European Development Class C Shares will be
determined by including Euroland Growth Shareholder's holding period for
Euroland Growth Shares exchanged therefor, provided that the Euroland Growth
Shareholder held Euroland Growth Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the holding
period with respect to the assets of Euroland Growth transferred to European
Development in the Reorganization will include the holding period for such
assets in the hands of Euroland Growth.
Schedule 6.3(d)
Opinion of Counsel to AIF
1. AIF is a corporation validly existing and in good standing
under the Maryland General Corporation Law.
2. AIF 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
AIF have been duly authorized and approved by all requisite
corporate action on the part of AIF. The Agreement has been
duly executed and delivered by AIF and constitutes the valid
and binding obligation of AIF.
4. European Development 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, AIF 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 European
Development (i) with respect to the Agreement or (ii) which involves in excess
of $500,000 in damages.
APPENDIX II
CLASS A, CLASS B AND CLASS C SHARES OF
AIM EUROPEAN DEVELOPMENT FUND
Supplement dated March 5, 2002
to the Prospectus dated March 1, 2002
The Securities and Exchange Commission ("SEC") has adopted a rule that generally
requires mutual funds that have names suggesting a focus in a particular type of
investment, industry or geographic region to invest at least 80% of their assets
in such investment, industry or geographic region. In accordance with the
requirements of this new SEC rule and the underlying statutory purposes of the
new rule, the Board of Directors of the fund has approved the changes described
in this supplement.
At a meeting held on February 7, 2002, the Board of Directors of AIM
International Funds, Inc., on behalf of AIM European Development Fund, voted to
change the fund's name to "AIM European Growth Fund."
The Board of Directors also approved the following changes to the fund's
investment strategies:
The following information replaces the first sentence of the second paragraph
under the heading "INVESTMENT OBJECTIVE AND STRATEGIES":
"The fund seeks to meet its objective by investing, normally, at least
80% of its net assets, plus the amount of any borrowings for investment
purposes, in securities of European companies. In complying with this
80% investment requirement, the fund will invest primarily in
marketable equity securities, including convertible securities, but its
investments may include other securities, such as synthetic
instruments. Synthetic instruments are investments that have economic
characteristics similar to the fund's direct investments, and may
include warrants, futures, options, exchange-traded funds and ADRs."
The following information replaces in its entirety the fourth paragraph under
the heading "INVESTMENT OBJECTIVE AND STRATEGIES":
"The fund may invest up to 20% of its net assets in securities of
non-European companies. The fund may invest up to 20% of its total
assets in securities exchangeable for or convertible into equity
securities of European companies. The fund may invest up to 20% of its
net assets in high-grade short-term securities and in debt securities,
including U.S. government obligations, investment-grade corporate bonds
or taxable municipal securities. The fund's investments may include
investments in companies with market capitalizations of less than $1
billion. Any percentage limitations with respect to assets of the fund
are applied at the time of purchase."
The following information replaces in its entirety the sixth paragraph under the
heading "INVESTMENT OBJECTIVE AND STRATEGIES":
"In anticipation of or in response to adverse market or other
conditions, or atypical circumstances such as unusually large cash
inflows or redemptions, the fund may temporarily hold all or a portion
of its assets in cash or the following liquid assets: money market
instruments, shares of affiliated money market funds or high-quality
debt obligations. As a result, the fund may not achieve its investment
objective. For cash management purposes, the fund may also hold a
portion of its assets in cash or such liquid assets."
The changes noted above become effective July 1, 2002.
AIM EUROPEAN
DEVELOPMENT FUND
--------------------------------------------------------------------------
AIM European Development Fund seeks to provide long-term growth of
capital.
AIM--Registered Trademark--
PROSPECTUS
MARCH 1, 2002
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--
-----------------------------
AIM EUROPEAN DEVELOPMENT FUND
-----------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-9
Taxes A-9
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</Table>
The AIM Family of Funds, 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, AIM
Internet Connect, AIM Private Asset Management, AIM Private Asset Management and
Design, AIM stylized and/or Design, AIM Alternative Assets and Design,
myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and AIM Lifetime
America 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.
-----------------------------
AIM EUROPEAN DEVELOPMENT FUND
-----------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is 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, normally, at least 80% of
its total assets in marketable equity securities of European companies,
including companies with market capitalizations of less than $1 billion. The
fund considers European companies to be those (1) organized under the laws of a
country in Europe and having a principal office in a country in Europe; (2) that
derive 50% or more of their total revenues from business in Europe; or (3) whose
equity securities are traded principally in a stock exchange, or in an
over-the-counter market, in Europe.
The fund will normally invest in the securities of companies located in at
least three European countries. The fund may invest up to 65% of its total
assets in European 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 equity securities of European companies. The fund may
invest up to 20% of its total assets in securities of non-European companies.
The fund may also invest up to 20% of its total assets in high-grade short-term
securities and in debt securities, including U.S. Government obligations,
investment-grade corporate bonds or taxable municipal securities. 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 portfolio managers also
consider such factors as the prospect for relative economic growth among
countries or regions, economic or political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. The
portfolio managers consider whether to sell a particular security when any of
these factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
1
-----------------------------
AIM EUROPEAN DEVELOPMENT FUND
-----------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of small and micro-cap
companies, whose prices may go up and down more than the prices of equity
securities of larger, more established companies. Also, since equity securities
of small and micro-cap companies may not be traded as often as equity securities
of larger, more established companies, it may be difficult or impossible for the
fund to sell securities at a desired price.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the fund
may make in IPOs may significantly increase the fund's total return. As the
fund's assets grow, the impact of IPO investments will decline, which may reduce
the effect of IPO investments on the fund's total return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
-----------------------------
AIM EUROPEAN DEVELOPMENT 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 (before and after taxes) is
not necessarily an indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<Table>
<Caption>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1998.................................................................. 40.62%
1999.................................................................. 66.62%
2000.................................................................. -3.28%
2001.................................................................. -24.72%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
54.69% (quarter ended December 31, 1999) and the lowest quarterly return was
- -21.50% (quarter ended March 31, 2001).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 2001) 1 YEAR INCEPTION DATE
- -----------------------------------------------------------------------------
Class A
Return Before Taxes (28.87)% 12.58% 11/03/97
Return After Taxes on Distributions (28.87) 12.57 11/03/97
Return After Taxes on Distributions
and Sale of Fund Shares (17.58) 10.40 11/03/97
Class B
Return Before Taxes (28.96) 12.98 11/03/97
Class C
Return Before Taxes (25.95) 13.33 11/03/97
MSCI Europe Index(1) (19.90) 3.42(2) 10/31/97(2)
(reflects no deduction for fees,
expenses, or taxes)
- -----------------------------------------------------------------------------
</Table>
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on an investor's tax situation and may
differ from those shown, and after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts. After-tax returns are shown for
Class A only and after-tax returns for Class B and C will vary.
(1) The Morgan Stanley Capital International Europe Index is an unmanaged index
that is designed to represent the performance of developed stock markets in
Europe.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
-----------------------------
AIM EUROPEAN DEVELOPMENT FUND
-----------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
<Table>
<Caption>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(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%
- -------------------------------------------------------
</Table>
<Table>
<Caption>
ANNUAL FUND OPERATING EXPENSES(2)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
Management Fees 0.95% 0.95% 0.95%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses(3) 0.54 0.54 0.54
Total Annual Fund
Operating Expenses 1.84 2.49 2.49
- -------------------------------------------------------
</Table>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) There is no guarantee that actual expenses will be the same as those shown
in the table.
(3) Effective December 12, 2001, the fund adopted a revised Multiple Class Plan
requiring each class to bear proportionately all Other Expenses incurred by
the fund based on the relative net assets attributable to each such class.
Other Expenses have been restated to reflect the adoption of the revised
plan.
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 operating expenses remain the same. To the extent fees are waived and/or
expenses are reimbursed, your expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
Class A $727 $1,097 $1,491 $2,590
Class B 752 1,076 1,526 2,666
Class C 352 776 1,326 2,826
- ----------------------------------------------
</Table>
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
Class A $727 $1,097 $1,491 $2,590
Class B 252 776 1,326 2,666
Class C 252 776 1,326 2,826
- ----------------------------------------------
</Table>
4
-----------------------------
AIM EUROPEAN DEVELOPMENT 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 including the fund's investment
decisions and the execution of securities transactions. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. 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 150
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 2001, the advisor received compensation
of 0.95% 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
- - Jason T. Holzer, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1996.
- - Clas G. Olsson, Senior Portfolio Manager, who has been responsible for the
fund since its inception in 1997 and has been associated with the advisor
and/or its affiliates since 1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM European Development 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 any long-term and short-term capital gains, if
any, annually.
5
-----------------------------
AIM EUROPEAN DEVELOPMENT 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).
The information for the fiscal year 2001 has been audited by
PricewaterhouseCoopers LLP, whose report, along with the fund's financial
statements, is included in the fund's annual report, which is available upon
request. Information prior to fiscal year 2001 was audited by KPMG LLP.
<Table>
<Caption>
CLASS A
-----------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------- OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
-------- -------- ------- ----------------
Net asset value, beginning of period $ 23.59 $ 16.42 $ 12.96 $ 10.00
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.21) (0.11) (0.08)
- -------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) (7.01) 7.38 3.58 3.04
===================================================================================================================
Total from investment operations (7.07) 7.17 3.47 2.96
===================================================================================================================
Less distributions from net investment income -- -- (0.01) --
===================================================================================================================
Net asset value, end of period $ 16.52 $ 23.59 $ 16.42 $ 12.96
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (29.97)% 43.67% 26.81% 29.60%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $157,651 $273,605 $99,148 $76,686
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets 1.83%(c) 1.69% 1.88% 1.98%(d)(e)
- -------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (0.32)%(c) (0.82)% (0.69)% (0.58)%(e)
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 99% 112% 122% 93%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(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 $212,672,819.
(d)Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.15%.
(e)Annualized.
6
-----------------------------
AIM EUROPEAN DEVELOPMENT FUND
-----------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
CLASS B
-----------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------- OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
-------- -------- ------- ----------------
Net asset value, beginning of period $ 23.11 $ 16.20 $ 12.87 $ 10.00
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19) (0.38) (0.22) (0.18)
- -------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) (6.85) 7.29 3.55 3.05
===================================================================================================================
Total from investment operations (7.04) 6.91 3.33 2.87
===================================================================================================================
Net asset value, end of period $ 16.07 $ 23.11 $ 16.20 $ 12.87
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (30.46)% 42.65% 25.87% 28.70%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $105,324 $169,614 $67,074 $50,121
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets 2.50%(c) 2.39% 2.63% 2.72%(d)(e)
- -------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (0.98)%(c) (1.52)% (1.44)% (1.32)%(e)
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 99% 112% 122% 93%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(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 $136,238,861.
(d)Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.89%.
(e)Annualized.
<Table>
<Caption>
CLASS C
---------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------- OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
------- ------- ------- ----------------
Net asset value, beginning of period $ 23.13 $ 16.21 $ 12.88 $10.00
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19) (0.38) (0.23) (0.18)
- -----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) (6.85) 7.30 3.56 3.06
=================================================================================================================
Total from investment operations (7.04) 6.92 3.33 2.88
=================================================================================================================
Net asset value, end of period $ 16.09 $ 23.13 $ 16.21 $12.88
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) (30.44)% 42.69% 25.85% 28.80%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,604 $54,164 $11,938 $9,639
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets 2.50%(c) 2.39% 2.63% 2.72%(d)(e)
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (0.98)%(c) (1.52)% (1.44)% (1.32)%(e)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate 99% 112% 122% 93%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(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 $43,051,257.
(d)Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.89%.
(e)Annualized.
7
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<Table>
<Caption>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
- - 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 charge on redemptions within six charge on redemptions within
purchases(1,2) years one year(2)
- - 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 at - Does not convert to Class A
the end of the month which is shares
eight years after the date on
which shares were purchased
along with a pro rata portion
of its reinvested dividends and
distributions(3)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</Table>
(1) A contingent deferred sales charge may apply in some cases.
(2) AIM Small Cap Opportunities Fund will not accept any single purchase
order in excess of $250,000.
(3) 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
Sales charges on the AIM Funds and classes of those Funds are detailed below. As
used below, the term "offering price" with respect to all categories of Class A
shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<Table>
<Caption>
CATEGORY I INITIAL SALES CHARGES
- -------------------------------------------------------------
Investor's
Sales Charge
----------------------------
AMOUNT OF INVESTMENT As a % of As a % of
IN SINGLE TRANSACTION(1) 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
- -------------------------------------------------------------
</Table>
(1) AIM Small Cap Opportunities Fund will not accept any single purchase order
in excess of $250,000.
A-1 MCF--1/02
-------------
THE AIM FUNDS
-------------
<Table>
<Caption>
CATEGORY II INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</Table>
<Table>
<Caption>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</Table>
SHARES SOLD WITHOUT AN INITIAL SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a
contingent deferred sales charge (CDSC) of 1%.
You can also make a Large Purchase of Class A shares of Category III Funds at
net asset value. If your purchase occurs on or after November 15, 2001, the
shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months
after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make
additional purchases at net asset value that result in account balances of
$1,000,000 or more, the additional shares purchased will be subject to a CDSC
(an 18-month, 1.0% CDSC for Category I and II Fund shares, and a 12-month, 0.25%
CDSC for Category III Fund shares.) The CDSC for Category III Fund shares will
not apply to additional purchases made prior to November 15, 2001.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money
Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those
shares through an exchange, and the shares originally purchased were subject to
a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large
Purchases.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<Table>
<Caption>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</Table>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B or C) 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 other 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.
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 AIM Floating
Rate Fund will not be taken into account in determining whether a purchase
qualifies for a reduction in initial sales charges.
MCF--1/02 A-2
-------------
THE AIM FUNDS
-------------
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 privileges; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Large Cap Opportunities Fund, AIM Mid Cap Opportunities Fund and AIM Small Cap
Opportunities Fund) are as follows:
<Table>
<Caption>
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 25
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</Table>
The minimum initial investment for AIM Large Cap Opportunities Fund, AIM Mid Cap
Opportunities Fund and AIM Small Cap Opportunities Fund (the Special
Opportunities Funds) accounts is $10,000. The minimum subsequent investment is
$1,000. The maximum amount for a single purchase order of AIM Small Cap
Opportunities Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not
be processed unless the account application and purchase payment are received in
good order.
<Table>
<Caption>
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 check to the transfer agent, slip from your confirmation
A I M Fund Services, Inc., statement to the transfer agent.
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 #
</Table>
A-3 MCF--1/02
-------------
THE AIM FUNDS
-------------
<Table>
<Caption>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
By AIM Bank Connection(SM) Open your account using one of the Select the AIM Bank Connection
methods described above. option on your completed account
application or complete an AIM Bank
Connection form. Mail the
application or 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. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</Table>
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 $25 ($1,000 for any of
the Special Opportunities Funds). 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 a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
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 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
sponsored retirement plan assesses an annual maintenance fee of $10. Contact
your financial consultant for details.
MCF--1/02 A-4
-------------
THE AIM FUNDS
-------------
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 CLASS A SHARES AND AIM CASH
RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15,
2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund or AIM
Cash Reserve Shares of AIM Money Market Fund at net asset value prior to
November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001
to purchase $1,000,000 or more of Class A shares of a Category I, II or III Fund
at net asset value, your shares may be subject to a contingent deferred sales
charge (CDSC) upon redemption, as described below.
<Table>
<Caption>
SHARES
INITIALLY SHARES HELD AFTER AN CDSC APPLICABLE UPON
PURCHASED EXCHANGE REDEMPTION OF SHARES
- ------------ --------------------- ---------------------
- - Class A - Class A shares of - 1% if shares are
shares of Category I or II redeemed within 18
Category I Fund months of initial
or II Fund - Class A shares of purchase of
Category III Fund Category I or II
- AIM Cash Reserve Fund shares
Shares of AIM Money
Market Fund
- - Class A - Class A shares of - No CDSC
shares of Category III Fund
Category - Class A shares of
III Fund AIM Tax-Exempt Cash
Fund
- AIM Cash Reserve
Shares of AIM Money
Market Fund
</Table>
REDEMPTION OF CLASS A SHARES AND AIM CASH
RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15,
2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund or AIM Cash
Reserve Shares of AIM Money Market Fund on and after November 15, 2001, or if
you make additional purchases of Class A shares or AIM Cash Reserve Shares on
and after November 15, 2001 at net asset value, your shares may be subject to a
CDSC upon redemption, as described below.
<Table>
<Caption>
SHARES
INITIALLY SHARES HELD AFTER AN CDSC APPLICABLE UPON
PURCHASED EXCHANGE REDEMPTION OF SHARES
- ------------ --------------------- ---------------------
- - Class A - Class A shares of - 1% if shares are
shares of Category I or II redeemed within 18
Category I Fund months of initial
or II Fund - Class A shares of purchase of
Category III Fund Category I or II
- AIM Cash Reserve Fund shares
Shares of AIM Money
Market Fund
- - Class A - Class A shares of - 1% if shares are
shares of Category I or II redeemed within 18
Category Fund months of initial
III Fund purchase of
Category III Fund
shares
- - Class A - Class A shares of - 0.25% if shares are
shares of Category III Fund redeemed within 12
Category - Class A shares of months of initial
III Fund AIM Tax-Exempt Cash purchase of
Fund Category III Fund
- AIM Cash Reserve shares
Shares of AIM Money
Market Fund
</Table>
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.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<Table>
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.
</Table>
A-5 MCF--1/02
-------------
THE AIM FUNDS
-------------
<Table>
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 $250,000; 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.
You may, with limited exceptions, redeem from an IRA account
by telephone. Redemptions from other types of retirement
accounts must be requested in writing.
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 $250,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
- ------------------------------------------------------------------------------------------
</Table>
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
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 $250,000;
(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.
MCF--1/02 A-6
-------------
THE AIM FUNDS
-------------
REINSTATEMENT PRIVILEGES
You may, within 120 days after you sell shares (except Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate
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.
You may, within 120 days after you sell Class A shares of a Category III Fund,
reinvest all or part of your redemption proceeds in Class A shares of that same
Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as
indicated in the section "Purchasing Shares".
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.
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 also exchange Class A shares of an AIM
Fund for AIM Cash Reserve Shares of AIM Money Market Fund. 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 into
shares that are subject to a CDSC, we will begin the holding period for purposes
of calculating the CDSC on the date you made your initial purchase.
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial 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 with an initial sales charge 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 initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares, and Class C shares for other Class
C shares; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class C shares.
A-7 MCF--1/02
-------------
THE AIM FUNDS
-------------
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege.
For shares purchased prior to November 15, 2001, you may not exchange:
- - Class A shares of Category I or II Funds purchased at net asset value and
subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM
Tax-Exempt Cash Fund;
- - Class A shares of Category III Funds purchased at net asset value for Class A
shares of a Category I or II Fund;
- - AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares
of any AIM Fund;
- - AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are
subject to a CDSC; or
- - on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund
or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category
III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
- - Class A shares of Category I or II Funds purchased at net asset value and
subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
- - Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM
Fund that are subject to a CDSC or for AIM Cash Reserve Shares of AIM Money
Market Fund; or
- - AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares
of any AIM Fund or for Class A shares of any AIM Fund that are subject to a
CDSC, however, if you originally purchased Class A shares of a Category I or
II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money
Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A
shares of a Category I or II 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.
MCF--1/02 A-8
-------------
THE AIM FUNDS
-------------
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 ALL OR 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.
- -------------------------------------------------------------------------------
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' short-term investments are valued at
amortized cost when the security has 60 days or less to maturity. 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 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 order. 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.
A-9 MCF--1/02
-----------------------------
AIM EUROPEAN DEVELOPMENT FUND
-----------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<Table>
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
</Table>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM European Development Fund
SEC 1940 Act file number: 811-6463
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com EDF-PRO-1 INVEST WITH DISCIPLINE
- --Registered Trademark-- --Registered Trademark--
APPENDIX III
FUND CONTENDS WITH DIFFICULT MARKET CONDITIONS
HOW DID AIM EUROPEAN DEVELOPMENT FUND PERFORM DURING THE REPORTING PERIOD?
Over the fiscal year, economic growth slowed across Europe and stock markets,
for the most part, were disappointing. A volatile euro and ever-so-slow interest
rate reductions by the European Central Bank (ECB) also troubled investors.
Given this environment, for the fiscal year ended October 31, 2001, AIM European
Development Fund returned -30.00% for Class A shares, -30.49% for Class B shares
and -30.47% for Class C shares based on net asset value (without-sales charges).
By comparison, the fund's index, the MSCI Europe Index returned -22.85% over the
same period. However, the fund's growth-oriented investment style is more
closely related to the MSCI Europe Growth Index which returned -31.14% for the
period.
Also, these figures belie a growth stock rally in world markets in October.
In October, the fund returned 3.25% for Class A shares and 3.21% for Class B and
C shares, excluding sales charges. And as the chart below illustrates, over the
longer term, the fund has outperformed its index.
HOW DID EUROPEAN MARKETS FARE DURING THE FISCAL YEAR?
Slowing global economic conditions and concern over deteriorating corporate
earnings translated into lower equity markets worldwide. For most of the fiscal
year, European equity markets declined but the third quarter was particularly
harsh as the effects of the terrorists attacks on September 11 dominated all
markets. Following the attacks, stock markets in the United States were closed
for nearly a week. European markets remained open but were volatile.
As part of a global effort to calm markets in the wake of the attacks,
central banks in Europe joined other world banks and reduced interest rates in
tandem with the U.S. Federal Reserve. The reporting period ended on an up note,
however, as this injection of liquidity into financial markets helped spur most
world markets--including those in Europe--higher in October.
Increasingly, investors moved out of growth investments and into either more
defensive stocks or fixed-income securities. Therefore, AIM European Development
Fund's more growth-oriented approach was out of favor for much of the fiscal
year. Historically, however, no one style or sector remains in favor or
out-of-favor, indefinitely. The month of October illustrated that as growth
investing was once again in favor--a real positive for the fund.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Over the fiscal year, the fund became more defensive. Keep in mind, however, the
fund is not sector or country driven--rather, allocation is a result of stock
picking. This was particularly true in the third quarter and more obviously so
in response to the events of September 11. Due to the changing environment, we
increased exposure to defensive sectors such as consumer staples and health care
and added to some sectors/stocks that sold off after the
FUND AT A GLANCE
[COVER IMAGE]
AIM European Development Fund is for shareholders who seek long-term growth of
capital. The fund invests in a diversified portfolio of equity securities of
companies located in Europe with strong earnings momentum.
INVESTMENT STYLE: GROWTH (Focuses on the growth potential of a company's
earnings, the most tangible measure of growth and success)
o The fund may invest in all market-cap sizes--small, medium and large
companies.
o The fund focuses first on companies, not countries, realizing that earnings
growth can occur anywhere.
o The fund may invest in the following countries: Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden and the United Kingdom.
PERFORMANCE SINCE INCEPTION
Average Annual Total Returns,
excluding sales charges 11/3/97-10/31/01
[BAR CHART]
================================================================================
FUND CLASS A SHARES AT NAV 13.43%
FUND CLASS C SHARES AT NAV 12.65%
FUND CLASS B SHARES AT NAV 12.62%
MSCI EUROPE INDEX 1.90%*
*Index return from 10/31/97--10/31/01
================================================================================
1
PORTFOLIO COMPOSITION
As of 10/31/01, based on total net assets
<Table>
<Caption>
=======================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES TOP 10 COUNTRIES
- -----------------------------------------------------------------------------------------------------------------------
1. Altana A.G. (Germany) 2.8% 1. Pharmaceuticals 12.6% 1. United Kingdom 22.3%
2. Sanofi-Synthelabo S.A. (France) 2.6 2. Banks 9.8 2. France 18.3
3. Grupo Dragados, S.A. (Spain) 2.4 3. Integrated Oil & Gas 6.3 3. Germany 10.0
4. Man Group PLC (United Kingdom) 2.4 4. Construction & Engineering 5.5 4. Spain 8.5
5. Omega Pharma S.A. (Belgium) 2.3 5. Health Care Supplies 5.2 5. Denmark 5.7
6. BNP Paribas S.A. (France) 2.2 6. Food Retail 3.4 6. Netherlands 5.4
7. Royal Bank of Scotland Group PLC 7. Diversified Commercial Services 3.2 7. Sweden 5.3
(United Kingdom) 2.2
8. Aventis S.A. (France) 2.1 8. Diversified Financial Services 3.0 8. Ireland 4.6
9. PSA Peugeot Citroen (France) 1.9 9. Multi-line Insurance 2.5 9. Belgium 3.7
10. Grupo Ferrovial, S.A. (Spain) 1.9 10. Apparel Retail 2.5 10. Switzerland 3.7
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
=======================================================================================================================
</Table>
attacks, such as Muenchener Rueckversicherungs-Gesellschaft (Munich Re) a
reinsurance company. Post-attacks the reinsurance sector rallied as firms
announced future price increases.
In the wake of the attacks, we reduced our weighting in
consumer-discretionary stocks and other companies especially vulnerable to weak
consumer confidence. We sold most exposed retailers--although they provided good
results at the beginning of the year. And we reduced the fund's hotel and
leisure stock exposure.
WHAT OTHER FACTORS MADE CONDITIONS DIFFICULT IN EUROPE?
During the third quarter, the region's manufacturing industry reported
reductions in new orders, consumer confidence continued to decline and
unemployment in some areas started to rise. In France, growth has slowed more
than predicted but is still expected to be in positive territory next year.
Germany--Europe's largest economy--continued to battle a flagging industrial
sector, which pushed up unemployment for months. (Germany's highly regulated
labor market makes it hard to shed workers and difficult to hire on an upswing.)
The United Kingdom, however, was one of the more stable European economies over
the period. It suffered less than other European countries as the British pound
hasn't been beaten up as badly as the euro.
Investors were also concerned about monetary decisions made by the ECB.
Year-to-date through October, the U.S. reduced rates nine times but the ECB only
three times. ECB detractors are quick to point out that this is in the face of
slowing growth. However, the ECB targets "inflation" not economic activity; its
goal is to keep inflation below 2%. Still, investors expressed their disapproval
of ECB strategy when European markets sold off sharply in late October after the
ECB announced there would be no rate reduction at that meeting.
HOW DID THE EURO'S VOLATILITY AFFECT THE FUND?
The euro--the single currency for 12 European countries--was relatively weak
(compared to the U.S. dollar) during the spring and summer, but following the
terrorist attacks, it rallied strongly. The fund, however, does not hedge its
currency positions, a factor that both helped and hindered fund performance as a
weak euro converts into fewer dollars for the fund (i.e. gains are reduced and
losses exaggerated) but a strong euro converts into more dollars (i.e. gains are
magnified and losses lessened) for the fund.
DESCRIBE SOME OF THE FUND'S TOP HOLDINGS.
o Sanofi-Synthelabo: A Paris-based drug manufacturer, this company specializes
in cardiovascular, central nervous system, oncological and internal medicine
drugs.
o Grupo Dragados: This Spanish firm provides a range of civil and industrial
services, infrastructure services and transportation concessions.
o Aventis: A world leader in life sciences, this French company focuses on two
core business areas--pharmaceuticals and agriculture.
ANY FINAL THOUGHTS
As economies around the world have slowed, it is important to note that as of
the end of the reporting period, Europe--unlike a number of other regions and
countries--was not in recession. In fact, economies in Spain and the United
Kingdom were quite healthy. Also, the global economic downturn and lower world
stock markets are less likely to be felt as deeply in the euro area as in the
United States because European households own fewer equities than their U.S.
counterparts.
See important fund and index disclosures inside front cover.
2
YOUR FUND'S LONG-TERM PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/01, including sales charges
================================================================================
CLASS A SHARES
Inception (11/3/97) 11.84%
1 Year -33.84
CLASS B SHARES
Inception (11/3/97) 12.09%
1 Year -33.97
CLASS C SHARES
Inception (11/3/97) 12.65%
1 Year -31.16
The fund's average annual returns as of the close of the reporting period are
shown in the table above. In addition, industry regulations require us to
provide average annual total returns (including sales charges) as of 9/30/01,
the most recent calendar quarter-end, which were: Class A shares, one year,
- -40.21%; inception (11/3/97), 11.19%. Class B shares, one year, -40.31%;
inception (11/3/97), 11.44%. Class C shares, one year, -37.77%; inception
(11/3/97), 12.04%.
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
================================================================================
RESULTS OF A $10,000 INVESTMENT
11/3/97-10/31/01
[HYPO CHART]
================================================================================
11/97 9770 10075 10154 9233 9770
10150 10310 10525 9592 10150
1/98 10600 10694 10962 10026 10600
11590 11576 11820 10972 11590
12850 12452 12661 12172 12850
4/98 13609 12738 12907 12910 13609
14538 13058 13169 13789 14529
14608 13096 13314 13855 14599
7/98 15308 13346 13577 14535 15298
13198 11419 11869 12551 13197
12458 10779 11395 11842 12457
10/98 12878 11533 12306 12248 12867
13558 12190 12961 12900 13546
14168 12758 13527 13489 14156
1/99 15038 12985 13441 14322 15025
14257 12606 13099 13593 14245
13697 12641 13242 13063 13685
4/99 13818 13003 13637 13195 13815
13388 12531 12982 12797 13386
13788 12849 13201 13185 13786
7/99 14538 13065 13324 13904 14526
14878 13171 13460 14244 14876
15169 13027 13357 14528 15167
10/99 16209 13469 13848 15530 16196
19399 14405 14222 18594 19385
23419 16266 15680 22473 23404
1/00 24669 15742 14563 23676 24644
30728 17912 15322 29521 30712
27929 17924 15691 26852 27914
4/00 25088 16953 14999 24130 25064
24218 16610 14876 23307 24194
24968 17004 15196 24043 24944
7/00 25308 16873 14953 24375 25284
25979 16937 14777 25038 25954
24799 16063 14085 23921 24775
10/00 23140 15575 13978 22323 23115
20810 14742 13437 20082 20785
22500 15849 14363 21737 22475
1/01 22270 15801 14370 21528 22246
19821 14469 13108 19164 19805
17640 13199 12130 17064 17617
4/01 18600 14073 12993 18001 18577
18419 13531 12359 17841 18397
17939 12980 11892 17377 17917
7/01 17508 12849 11921 16970 17487
17559 12519 11611 17036 17537
15589 11114 10453 15135 15568
10/01 16080 11501 10785 15629 15770
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
This chart compares the performance of AIM European Development Fund to its
benchmark indexes. It is intended to give you a general idea of how your fund
performed compared to these indexes over the period 11/3/97-10/31/01. (Please
note that the results for these indexes are for the period 10/31/97-10/31/01).
It is important to understand the difference between your fund and an index.
A market index such as the MSCI Europe Index is not managed and incurs no sales
charges, expenses or fees. If you could buy all the securities that make up a
market index, you would incur expenses that would affect your investment return.
An index of funds such as the Lipper European Fund Index includes a number
of mutual funds grouped by investment objective. Each of these funds interprets
that objective differently, and each employs a different management style and
investment strategy.
Your fund's total return is shown with a sales charge, and it includes fund
expenses and management fees. Performance of the fund's Class A, B and C shares
will differ due to different sales charge structures and class expenses. For
fund performance calculations and indexes used in this report, please see the
inside front cover.
Performance shown in the chart and table does not reflect taxes a
shareholder would pay on fund distributions or on redemption of fund shares.
Index performance does not reflect the effects of taxes, either.
3
AIM EUROPEAN GROWTH FUND
A PORTFOLIO OF
AIM INTERNATIONAL FUNDS, INC.
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
AIM EUROLAND 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
(September 4, 2002 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__, 2002 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 September 4, 2002. 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,
2002, as supplemented March 5, 2002, 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 __, 2002.
S-1
TABLE OF CONTENTS
<Table>
THE COMPANY...................................................................3
DESCRIPTION OF PERMITTED INVESTMENTS..........................................3
DIRECTORS AND OFFICERS OF THE COMPANY.........................................3
ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND
PLANS OF DISTRIBUTION....................................................3
PORTFOLIO TRANSACTIONS........................................................3
DESCRIPTION OF SHARES.........................................................3
DETERMINATION OF NET ASSET VALUE..............................................4
TAXES.........................................................................4
PERFORMANCE DATA..............................................................4
FINANCIAL INFORMATION.........................................................4
Appendix I - AIM International Funds, Inc. Statement of Additional Information
Appendix II - Audited Financial Statements of AIM Euroland Growth Fund
Appendix III - Pro Forma Financial Statements for AIM Euroland Growth Fund
</Table>
S-2
THE COMPANY
This Statement of Additional Information relates to AIM International Funds,
Inc. (the "Company") and its investment portfolio, AIM European Growth 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 "Description
of the Funds and Their Investments and Risks" 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 of the Company" 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 "Investment Advisory and
Other Services" and "Distribution of Securities" 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 "Brokerage
Allocation and Other Practices" 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.
S-3
DETERMINATION OF NET ASSET VALUE
For a discussion of the Company's valuation and pricing procedures and a
description of its purchase and redemption procedures, see heading "Purchase,
Redemption and Pricing of Shares" 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 "Calculation of Performance Data" 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 Euroland Growth Fund and the report
thereon by PricewaterhouseCoopers LLP, are set forth in the Annual Report of AIM
Euroland Growth Fund, dated December 31, 2001, which is incorporated herein by
reference and attached hereto as Appendix II.
Pro Forma financial statements for AIM Euroland Growth Fund, giving effect to
the Reorganization, are attached hereto as Appendix III.
S-4
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 March 5, 2002 to the Statement of
Additional Information dated March 1, 2002
The Securities and Exchange Commission ("SEC") has adopted a rule that generally
requires mutual funds with names suggesting a focus in a particular type of
investment, industry or geographic region to invest at least 80% of their assets
in such investment, industry or geographic region. In accordance with the
requirements of this new SEC rule and the underlying statutory purposes of the
rule, the Board of Directors has approved the changes described in this
supplement.
At a meeting held on February 7, 2002, the Board of Directors of AIM
International Funds, Inc., on behalf of AIM Asian Growth Fund, AIM European
Development Fund, and AIM International Equity Fund, voted to change those
funds' names to "AIM Asia Pacific Growth Fund," "AIM European Growth Fund," and
AIM International Growth Fund," respectively.
The Board of Directors also approved the following new non-fundamental policies:
o "AIM European Growth Fund normally invests at least 80% of its net
assets, plus the amount of any borrowings for investment purposes,
in securities of European companies. The Fund will provide written
notice to its shareholders prior to any change to this policy, as
required by the 1940 Act Laws, Interpretations and Exemptions."
o "AIM Asia Pacific Growth Fund normally invests at least 80% of its
net assets, plus the amount of any borrowings for investment
purposes, in securities of companies in the Asia Pacific region
(except Japanese companies). The Fund will provide written notice to
its shareholders prior to any change to this policy, as required by
the 1940 Act Laws, Interpretations and Exemptions."
The changes noted above become effective July 1, 2002.
STATEMENT OF
ADDITIONAL INFORMATION
AIM INTERNATIONAL FUNDS, INC.
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
----------
THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO THE CLASS A, CLASS B AND
CLASS C SHARES OF EACH PORTFOLIO (EACH A "FUND", COLLECTIVELY THE "FUNDS") OF
AIM INTERNATIONAL FUNDS, INC. LISTED BELOW. THIS STATEMENT OF ADDITIONAL
INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUSES FOR THE CLASS A, CLASS B AND CLASS C SHARES OF THE FUNDS LISTED
BELOW. YOU MAY OBTAIN A COPY OF ANY PROSPECTUS FOR ANY FUND LISTED BELOW FROM AN
AUTHORIZED DEALER OR BY WRITING TO:
A I M FUND SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
----------
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED MARCH 1, 2002, RELATES TO THE
CLASS A, CLASS B AND CLASS C SHARES OF THE FOLLOWING PROSPECTUSES:
<Table>
<Caption>
FUND DATED
---- -----
AIM ASIAN GROWTH FUND MARCH 1, 2002
AIM EUROPEAN DEVELOPMENT FUND MARCH 1, 2002
AIM GLOBAL AGGRESSIVE GROWTH FUND MARCH 1, 2002
AIM GLOBAL GROWTH FUND MARCH 1, 2002
AIM GLOBAL INCOME FUND MARCH 1, 2002
AIM INTERNATIONAL EQUITY FUND MARCH 1, 2002
</Table>
AIM INTERNATIONAL FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
GENERAL INFORMATION ABOUT THE COMPANY.........................................................1
Fund History.........................................................................1
The Company and its Shares...........................................................1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS......................................2
Classification.......................................................................2
Investment Strategies and Risks......................................................2
Equity Investments..........................................................8
Foreign Investments.........................................................8
Debt Investments...........................................................10
Other Investments..........................................................13
Investment Techniques......................................................13
Derivatives................................................................18
Additional Securities or Investment Techniques.............................24
Fund Policies.......................................................................24
Temporary Defensive Positions.......................................................26
Portfolio Turnover..................................................................26
MANAGEMENT OF THE COMPANY....................................................................26
Board of Directors..................................................................26
Management Information..............................................................26
Director Ownership of Fund Shares..........................................28
Factors Considered in Approving the Investment Advisory Agreement..........28
Compensation........................................................................28
Retirement Plan For Directors..............................................29
Deferred Compensation Agreements...........................................29
Purchases of Class A Shares of the Funds at Net Asset Value................29
Codes of Ethics.....................................................................30
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................................30
INVESTMENT ADVISORY AND OTHER SERVICES.......................................................30
Investment Advisor..................................................................30
Previous Investment Sub-Advisor.....................................................31
Service Agreements..................................................................32
Other Service Providers.............................................................33
BROKERAGE ALLOCATION AND OTHER PRACTICES.....................................................34
Brokerage Transactions..............................................................34
Commissions.........................................................................34
Brokerage Selection.................................................................34
Directed Brokerage (Research Services)..............................................35
Regular Brokers or Dealers..........................................................35
Allocation of Portfolio Transactions................................................35
Allocation of Equity Offering Transactions..........................................36
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................................37
Purchase and Redemption of Shares...................................................37
Offering Price......................................................................51
Redemption In Kind..................................................................52
Backup Withholding..................................................................52
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.....................................................53
Dividends and Distributions.........................................................53
Tax Matters.........................................................................54
</Table>
i
<Table>
DISTRIBUTION OF SECURITIES...................................................................61
Distribution Plans..................................................................61
Distributor.........................................................................63
CALCULATION OF PERFORMANCE DATA..............................................................64
APPENDICES:
RATINGS OF DEBT SECURITIES..................................................................A-1
DIRECTORS AND OFFICERS......................................................................B-1
DIRECTOR COMPENSATION TABLE.................................................................C-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................................D-1
MANAGEMENT FEES.............................................................................E-1
ADMINISTRATIVE SERVICES FEES................................................................F-1
BROKERAGE COMMISSIONS.......................................................................G-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF
REGULAR BROKERS OR DEALERS..................................................................H-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS.....................I-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS...............................J-1
TOTAL SALES CHARGES.........................................................................K-1
PERFORMANCE DATA............................................................................L-1
FINANCIAL STATEMENTS.........................................................................FS
</Table>
ii
GENERAL INFORMATION ABOUT THE COMPANY
FUND HISTORY
AIM International Funds, Inc. (the "Company") was organized in 1991 as
a Maryland corporation and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end series management investment
company. The Company currently consists of six separate portfolios: 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, (each a "Fund" and collectively, the "Funds"). Under the Articles of
Incorporation of the Company, dated October 30, 1991, as supplemented and
amended, the Board of Directors is authorized to create new series of shares
without the necessity of a vote of shareholders of the Company.
THE COMPANY AND ITS SHARES
Shares of the Company are redeemable at their net asset value (subject,
in certain circumstances, to a contingent deferred sales charge) at the option
of the shareholder or at the option of the Company in certain circumstances.
The Company allocates moneys and other property it receives from the
issue or sale of shares of each of its series of shares, and all income,
earnings and profits from such issuance and sales, subject only to the rights of
creditors, to the appropriate Fund. These assets constitute the underlying
assets of each Fund, are segregated on the Company's books of account, and are
charged with the expenses of such Fund and its respective classes. The Company
allocates any general expenses of the Company not readily identifiable as
belonging to a particular Fund 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 declared by the
Board. Each Fund, other than AIM International Equity Fund, offers three
separate classes of shares: Class A shares, Class B shares and Class C shares.
AIM International Equity Fund also offers a fourth class of shares,
Institutional Class shares. This Statement of Additional Information relates
solely to the Class A, Class B and Class C shares of the Funds. Each class of
shares represents interests in the same portfolio of investments. Differing
sales charges and expenses 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.
Each share of a Fund has the same voting, dividend, liquidation and
other rights; however, each class of shares of a Fund is subject to different
sales loads, conversion features, exchange privileges and class-specific
expenses. Only shareholders of a specific class may vote on matters relating to
that class' distribution plan. Because Class B shares automatically convert to
Class A shares at month-end eight years after the date of purchase, the Fund's
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act requires
that Class B shareholders must also approve any material increase in
distribution fees submitted to Class A shareholders of that Fund. A pro rata
portion of shares from reinvested dividends and distributions convert along with
the Class B shares.
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 shares of a Fund.
However, on matters affecting an individual Fund or class of shares, a separate
vote of shareholders of that Fund or class is required. Shareholders of a Fund
or class are not entitled to vote on any matter which does not affect that Fund
or class but that requires a separate vote of another Fund or class. An example
of a matter that would be voted on separately by shareholders of each Fund is
the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an
example of a matter that would be voted on separately by shareholders of each
class of shares is approval of the distribution
1
plans. When issued, shares of each Fund are fully paid and nonassessable, have
no preemptive or subscription rights, and are freely transferable. Other than
the automatic conversion of Class B shares to Class A shares, there are no
conversion rights. Shares do not have cumulative voting rights, which means that
in situations in which shareholders elect directors, holders of more than 50% of
the shares voting for the election of directors can elect all of the directors
of the Company, and the holders of less than 50% of the shares voting for the
election of directors will not be able to elect any directors.
The Articles of Incorporation of the Company authorize the issuance of
8.1 billion shares with a par value of $.001 each, of which 720 million shares
represent an interest in AIM Asian Growth Fund (or the classes thereof), 720
million shares represent an interest in AIM European Development Fund (or the
classes thereof), 720 million shares represent an interest in AIM Global
Aggressive Growth Fund (or the classes thereof), 720 million shares represent an
interest in AIM Global Growth Fund (or the classes thereof), 720 million shares
represent an interest in AIM Global Income Fund (or the classes thereof), and
1.2 billion shares represent an interest in AIM International Equity Fund (or
the classes thereof).
The Articles of Incorporation provide that no director or officer of
the Company shall be liable to the Company or its shareholders for money
damages, except (i) to the extent that it is proved that such director or
officer actually received an improper benefit or profit in money, property or
services, for the amount of the benefit or profit in money, property or services
actually received, or (ii) to the extent that a judgment or other final
adjudication adverse to such director or officer is entered in a proceeding
based on a finding in the proceeding that such director's or officer's action,
or failure to act was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. The foregoing
shall not be construed to protect or purport to protect any director or officer
of the Company against any liability to the Company or its shareholders to which
such director or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such office. The Company shall indemnify and advance
expenses to its currently acting and former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Company shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Board of Directors may, by by-law, resolution or agreement make further
provision for indemnification of directors, officers, employees and agents of
the Company to the fullest extent permitted by the Maryland General Corporation
Law.
SHARE CERTIFICATES. Each Fund will issue share certificates upon
written request to A I M Fund Services, Inc. ("AFS"). AFS will not issue
certificates for shares held in prototype retirement plans sponsored by AMVESCAP
National Trust Company, an affiliate of AIM.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Company is an open-end management investment company. Each of the
Funds other than AIM Global Income Fund is "diversified" for purposes of the
1940 Act.
INVESTMENT STRATEGIES AND RISKS
The table on the following pages identifies various securities and
investment techniques used by AIM in managing The AIM Family of
Funds--Registered Trademark--. The table has been marked to indicate those
securities and investment techniques that AIM may use to manage a Fund. A Fund
may not use all of these techniques at any one time. A Fund's transactions in a
particular security or use of a particular technique is subject to limitations
imposed by a Fund's investment objective, policies and restrictions described in
that Fund's Prospectus and/or this Statement of Additional Information, as well
as federal securities laws. The Funds' investment objectives, policies,
strategies and practices are non-fundamental unless otherwise indicated. A more
detailed description of the securities and investment techniques, as well as the
risks associated with those securities and investment techniques that the Funds
utilize, follows the table. The descriptions
2
of the securities and investment techniques in this section supplement the
discussion of principal investment strategies contained in each Fund's
Prospectus; where a particular type of security or investment technique is not
discussed in a Fund's Prospectus, that security or investment technique is not a
principal investment strategy.
3
AIM INTERNATIONAL FUNDS, INC.
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------
FUND AIM ASIAN AIM EUROPEAN AIM GLOBAL AIM AIM GLOBAL AIM
GROWTH DEVELOPMENT AGGRESSIVE GLOBAL INCOME FUND INTERNATIONAL
FUND FUND GROWTH GROWTH EQUITY FUND
SECURITY/ INVESTMENT FUND FUND
TECHNIQUE
- ----------------------------------------------------------------------------------------------------------
EQUITY INVESTMENTS
- ----------------------------------------------------------------------------------------------------------
Common Stock X X X X X X
Preferred Stock X X X X X X
Convertible Securities X X X X X X
Alternative Entity X X X X X X
Securities
- ----------------------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
- ----------------------------------------------------------------------------------------------------------
Foreign Securities X X X X X X
Foreign Government X
Obligations
Foreign Exchange X X X X X X
Transactions
- ----------------------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR FIXED INCOME FUNDS
- ----------------------------------------------------------------------------------------------------------
U.S. Government X
Obligations
Money Market X
Instruments
Mortgage-Backed and X
Asset-Backed
Securities
Collateralized
Mortgage Obligations
Bank Instruments
Commercial Instruments
Participation
Interests
Municipal Securities
Municipal Lease
Obligations
- ----------------------------------------------------------------------------------------------------------
</Table>
4
AIM INTERNATIONAL FUNDS, INC.
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------
FUND AIM ASIAN AIM EUROPEAN AIM GLOBAL AIM AIM GLOBAL AIM
GROWTH DEVELOPMENT AGGRESSIVE GLOBAL INCOME FUND INTERNATIONAL
FUND FUND GROWTH GROWTH EQUITY FUND
SECURITY/ INVESTMENT FUND FUND
TECHNIQUE
- ----------------------------------------------------------------------------------------------------------
Investment Grade X
Corporate Debt
Obligations
Junk Bonds X
- ----------------------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR EQUITY FUNDS
- ----------------------------------------------------------------------------------------------------------
U.S. Government X X X X X
Obligations
Liquid Assets X X X X X
Investment Grade X X X X X
Corporate Debt
Obligations
Junk Bonds
- ----------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS
- ----------------------------------------------------------------------------------------------------------
REITs X X X X X X
Other Investment X X X X X X
Companies
Defaulted Securities X
Municipal Forward
Contracts
Variable or Floating
Rate Instruments
Indexed Securities
Zero-Coupon and
Pay-in-Kind Securities
Synthetic Municipal
Instruments
- ----------------------------------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
- ----------------------------------------------------------------------------------------------------------
Delayed Delivery X X X X X X
Transactions
When-Issued Securities X X X X X X
- ----------------------------------------------------------------------------------------------------------
</Table>
5
AIM INTERNATIONAL FUNDS, INC.
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------
FUND AIM ASIAN AIM EUROPEAN AIM GLOBAL AIM AIM GLOBAL AIM
GROWTH DEVELOPMENT AGGRESSIVE GLOBAL INCOME FUND INTERNATIONAL
FUND FUND GROWTH GROWTH EQUITY FUND
SECURITY/ INVESTMENT FUND FUND
TECHNIQUE
- ----------------------------------------------------------------------------------------------------------
Short Sales X X X X X X
Margin Transactions
Swap Agreements X X X X X X
Interfund Loans X X X X X X
Borrowing X X X X X X
Lending Portfolio X X X X X X
Securities
Repurchase Agreements X X X X X X
Reverse Repurchase X X X X X X
Agreements
Dollar Rolls X
Illiquid Securities X X X X X X
Rule 144A Securities X X X X X X
Unseasoned Issuers X X X X X X
Sale of Money Market
Securities
Standby Commitments
- ----------------------------------------------------------------------------------------------------------
DERIVATIVES
- ----------------------------------------------------------------------------------------------------------
Equity-Linked X X X X X
Derivatives
Put Options X X X X X X
Call Options X X X X X X
Straddles X X X X X X
Warrants X X X X X X
- ----------------------------------------------------------------------------------------------------------
</Table>
6
AIM INTERNATIONAL FUNDS, INC.
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------
FUND AIM ASIAN AIM EUROPEAN AIM GLOBAL AIM AIM GLOBAL AIM
GROWTH DEVELOPMENT AGGRESSIVE GLOBAL INCOME FUND INTERNATIONAL
FUND FUND GROWTH GROWTH EQUITY FUND
SECURITY/ INVESTMENT FUND FUND
TECHNIQUE
- ----------------------------------------------------------------------------------------------------------
Futures Contracts and X X X X X X
Options on Futures
Contracts
Forward Currency X X X X X X
Contracts
Cover X X X X X X
- ----------------------------------------------------------------------------------------------------------
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
- ----------------------------------------------------------------------------------------------------------
Privatized Enterprises X
Supranational X
Organization
Securities
- ----------------------------------------------------------------------------------------------------------
</Table>
7
Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise
cash for business purposes and represents a residual interest in the issuing
company. A Fund participates in the success or failure of any company in which
it holds stock. 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.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a
stated dividend rate payable from a corporation's earnings. If interest rates
rise, the fixed dividend on preferred stocks may be less attractive, causing the
price of preferred stocks to decline. Preferred stock may have mandatory sinking
fund provisions, as well as call/redemption provisions prior to maturity, a
negative feature when interest rates decline. Dividends on some preferred stock
may be "cumulative," requiring all or a portion of prior unpaid dividends to be
paid before dividends are paid on the issuer's common stock. Preferred stock
also generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation, and may be
"participating," which means that it may be entitled to a dividend exceeding the
stated dividend in certain cases. In some cases an issuer may offer auction rate
preferred stock, which means that the interest to be paid is set by auction and
will often be reset at stated intervals. The rights of preferred stocks on the
distribution of a corporation's assets in the event of a liquidation are
generally subordinate to the rights associated with a corporation's debt
securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds,
debentures, notes, preferred stocks and other securities that may be converted
into a prescribed amount of common stock or other equity securities at a
specified price and time. The holder of convertible securities is entitled to
receive interest paid or accrued on debt, or dividends paid or accrued on
preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the
yield of similar nonconvertible securities, the financial strength of the issuer
and the seniority of the security in the issuer's capital structure. Convertible
securities may be illiquid, and may be required to convert at a time and at a
price that is unfavorable to the Fund.
To the extent that AIM Global Income Fund invests in convertible debt
securities with credit ratings below investment grade, such securities may have
a higher likelihood of default, although this may be somewhat offset by the
convertibility feature. See also "Junk Bonds" below.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited
partnerships, limited liability companies, business trusts or other
non-corporate entities may issue equity securities that are similar to common or
preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities
issued by issuers outside the United States, and include securities in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
or other securities representing underlying securities of foreign issuers.
Depositary receipts are typically issued by a bank or trust company and evidence
ownership of underlying securities issued by foreign corporations.
Each Fund may invest all of its total assets in foreign securities.
Investments by a Fund in foreign securities, whether denominated in
U.S. dollars 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 described below.
Currency Risk. The value of the Funds' 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
8
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.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest may not be as developed as the United States' economy
and may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Funds' investments.
Regulatory Risk. Foreign companies are not registered with the
Securities and Exchange Commission ("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, corporate
governance 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.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), 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 (currently, Austria, Belgium,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, and Spain) will replace its local currency with the euro by July 1,
2002. The anticipated replacement of existing currencies with the euro on or
before July 1, 2002 could cause market disruptions and could adversely affect
the value of securities held by a Fund.
Risks of Developing Countries. AIM Asian Growth Fund, AIM Global
Aggressive Growth Fund and AIM Global Growth Fund may invest without limit in
securities of companies domiciled in developing countries. AIM Global Income
Fund may invest up to 20%, and AIM European Development Fund may invest up to
65%, of their total assets in securities of companies domiciled in developing
countries. AIM International Equity Fund may invest without limit, but does not
intend to invest more than 20% of its total assets in securities of companies
domiciled in developing countries. Investments in developing countries present
risks greater than, and in addition to, those presented by investments in
foreign issuers in general. A number of developing countries restrict, to
varying degrees, foreign investment in stocks. Repatriation of investment
income, capital, and the proceeds of sales by foreign investors may require
governmental registration and/or approval in some developing countries. A number
of the currencies of developing countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may occur subsequent to
investments in these currencies by the Funds. Inflation and rapid fluctuations
in inflation rates have had and may continue to have negative effects on the
economies and securities markets of certain emerging market countries. Many of
the developing securities markets are relatively small or less diverse, have low
trading volumes, suffer periods of relative illiquidity, and are characterized
by significant price volatility. There is a risk in developing countries that a
future economic or political crisis could lead to price controls, forced mergers
of companies, expropriation or confiscatory taxation, seizure, nationalization,
or creation of government monopolies, any of which may have a detrimental effect
on the Funds' investments.
9
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign
governments involve the risks discussed above with respect to foreign
securities. Additionally, the issuer of the debt or the governmental authorities
that control repayment of the debt may be unwilling or unable to pay interest or
repay principal when due. Political or economic changes or the balance of trade
may affect a country's willingness or ability to service its debt obligations.
Periods of economic uncertainty may result in the volatility of market prices of
sovereign debt obligations, especially debt obligations issued by the government
of developing countries.
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include
direct purchases of futures contracts with respect to foreign currency, 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. Such
contractual commitments may be forward contracts entered into directly with
another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies
of the different countries in which it will invest as a hedge against possible
variations in the foreign exchange rates between those currencies. A Fund may
commit the same percentage of its total assets to foreign exchange hedges as it
can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction
hedging") or portfolio positions ("position hedging") to hedge foreign currency
exposure through foreign exchange transactions. Transaction hedging is the
purchase or sale of foreign currency with respect to specific receivables or
payables of a Fund accruing in connection with the purchase or sale of its
portfolio securities, the sale and redemption of shares of the Fund, or the
payment of dividends and distributions by the Fund. Position hedging is the
purchase or sale of foreign currency with respect to portfolio security
positions (or underlying portfolio security positions, such as in an ADR)
denominated or quoted in a foreign currency. Additionally, foreign exchange
transactions may involve some of the risks of investments in foreign securities.
Debt Investments
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities include bills, notes and
bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S.
Treasury obligations representing future interest or principal payments on U.S.
Treasury notes or bonds. Stripped securities are sold at a discount to their
"face value," and may exhibit greater price volatility than interest-bearing
securities since investors receive no payment until maturity. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association ("GNMA"), are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association ("FNMA"), are supported by the right of the issuer
to borrow from the Treasury; others, such as those of the Student Loan Marketing
Association ("SLMA"), are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, though issued by
an instrumentality chartered by the U.S. Government, like the Federal Farm
Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality.
The U.S. Government may choose not to provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not legally
obligated to do so.
MONEY MARKET INSTRUMENTS. Money market instruments in which AIM Global
Income Fund will invest will be "Eligible Securities" as defined in Rule 2a-7
under the 1940 Act, as such Rule may be amended from time to time. An Eligible
Security is generally a rated security with a remaining maturity of 397 calendar
days or less that has been rated by the Requisite NRSROs (as defined below) in
one of the two highest short-term rating categories, or a security issued by an
issuer that has received a rating by the Requisite NRSROs in one of the two
highest short-term rating categories with respect to a class of debt obligations
(or any debt obligation within that class). Eligible Securities may also include
unrated securities determined by AIM (under the supervision of and pursuant to
guidelines established by the Board of Directors) to be of comparable quality to
such rated securities. If an unrated security is subject to a guarantee, to be
an Eligible Security, the guarantee generally must have received a rating from
an
10
NRSRO in one of the two highest short-term rating categories with respect to a
class of debt obligations (or any debt obligation within that class). The term
"Requisite NRSRO" means (a) any two nationally recognized statistical rating
organizations (NRSROs) that have issued a rating with respect to a security or
class of debt obligations of an issuer, or (b) if only one NRSRO has issued a
rating with respect to such security or issuer at the time the Portfolio
acquires the security, that NRSRO.
AIM Global Income Fund will limit investments in money market
obligations to those which are denominated in U.S. dollars and which at the date
of purchase are "First Tier" securities as defined in Rule 2a-7 under the 1940
Act, as such Rule may be amended form time to time. Briefly, "First Tier"
securities are securities that are rated in the highest rating category for
short-term debt obligations by two NRSROs, or, if only rated by one NRSRO, are
rated in the highest rating category by the NRSRO, or if unrated, are determined
by AIM (under the supervision of and pursuant to guidelines established by the
Board of Directors) to be of comparable quality to a rated security that meets
the foregoing quality standards, as well as securities issued by a registered
investment company that is a money market fund and U.S. Government securities.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-backed securities
are mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, or issued by nongovernment entities.
Mortgage-related securities represent pools of mortgage loans assembled for sale
to investors by various government agencies such as GNMA and government-related
organizations such as FNMA and the Federal Home Loan Mortgage Corporation
("FHLMC"), as well as by nongovernment issuers such as commercial banks, savings
and loan institutions, mortgage bankers and private mortgage insurance
companies. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities they issue. Mortgage-related securities issued by GNMA
include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes")
which are guaranteed as to the timely payment of principal and interest. That
guarantee is backed by the full faith and credit of the U.S. Treasury. GNMA is a
corporation wholly owned by the U.S. Government within the Department of Housing
and Urban Development. Mortgage-related securities issued by FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") and
are guaranteed as to payment of principal and interest by FNMA itself and backed
by a line of credit with the U.S. Treasury. FNMA is a government-sponsored
entity wholly owned by public stockholders. Mortgage-related securities issued
by FHLMC include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs") guaranteed as to payment of principal and interest by FHLMC
itself and backed by a line of credit with the U.S. Treasury. FHLMC is a
government-sponsored entity wholly owned by public stockholders.
Other asset-backed securities are structured like mortgage-backed
securities, but instead of mortgage loans or interests in mortgage loans, the
underlying assets may include such items as motor vehicle installment sales or
installment loan contracts, leases of various types of real and personal
property, and receivables from credit card agreements. Regular payments received
in respect of such securities include both interest and principal. Asset-backed
securities typically have no U.S. Government backing. Additionally, the ability
of an issuer of asset-backed securities to enforce its security interest in the
underlying assets may be limited.
If a Fund purchases a mortgage-backed or other asset-backed security at
a premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in
the underlying collateral. As with other interest-bearing securities, the prices
of such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-backed or other asset-backed security may decline
when interest rates rise, the converse is not necessarily true, since in periods
of declining interest rates the mortgages and loans underlying the securities
are prone to prepayment, thereby shortening the average life of the security and
shortening the period of time over which income at the higher rate is received.
When interest rates are rising, though,
11
the rate of prepayment tends to decrease, thereby lengthening the period of time
over which income at the lower rate is received. For these and other reasons, a
mortgage-backed or other asset-backed security's average maturity may be
shortened or lengthened as a result of interest rate fluctuations and,
therefore, it is not possible to predict accurately the security's return.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in
U.S. dollar-denominated debt obligations issued or guaranteed by U.S.
corporations or U.S. commercial banks, U.S. dollar-denominated obligations of
foreign issuers and debt obligations of foreign issuers denominated in foreign
currencies. Such debt obligations include, among others, bonds, notes,
debentures and variable rate demand notes. In choosing corporate debt securities
on behalf of a Fund, its investment adviser may consider (i) general economic
and financial conditions; (ii) the specific issuer's (a) business and
management, (b) cash flow, (c) earnings coverage of interest and dividends, (d)
ability to operate under adverse economic conditions, (e) fair market value of
assets, and (f) in the case of foreign issuers, unique political, economic or
social conditions applicable to such issuer's country; and, (iii) other
considerations deemed appropriate. The Funds, other than AIM Global Income Fund,
will purchase only investment grade corporate debt securities.
JUNK BONDS. Junk bonds are lower-rated or non-rated debt securities.
Junk bonds are considered speculative with respect to their capacity to pay
interest and repay principal in accordance with the terms of the obligation.
While generally providing greater income and opportunity for gain,
non-investment grade debt securities are subject to greater risks than
higher-rated securities.
Companies that issue junk bonds are often highly leveraged, and may not
have more traditional methods of financing available to them. During an economic
downturn or recession, highly leveraged issuers of high yield securities may
experience financial stress, and may not have sufficient revenues to meet their
interest payment obligations. Economic downturns tend to disrupt the market for
junk bonds, lowering their values, and increasing their price volatility. The
risk of issuer default is higher with respect to junk bonds because such issues
are generally unsecured and are often subordinated to other creditors of the
issuer.
The credit rating of a junk bond 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. The lower the rating of
a junk bond, the more speculative its characteristics.
AIM Global Income Fund may have difficulty selling certain junk bonds
because they may have a thin trading market. The lack of a liquid secondary
market may have an adverse effect on the market price and the Fund's ability to
dispose of particular issues and may also make it more difficult for the Fund to
obtain accurate market quotations of valuing these assets. In the event the Fund
experiences an unexpected level of net redemptions, the Fund could be forced to
sell its junk bonds at an unfavorable price. 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.
Descriptions of debt securities ratings are found in Appendix A.
LIQUID ASSETS. In anticipation of or in response to adverse market or
other conditions, or atypical circumstances such as unusually large cash inflows
or redemptions, the Funds may temporarily hold all or a portion of their assets
in cash or the following liquid assets: money market instruments (such as
certificates of deposit, time deposits, bankers' acceptances from U.S. or
foreign banks, and repurchase agreements), shares of affiliated money market
funds or high-quality debt obligations (such as U.S. Government obligations,
commercial paper, master notes and other short-term corporate instruments,
participation interests in corporate loans, and municipal obligations). For cash
management purposes, the Funds may also hold a portion of their assets in cash
or such liquid assets.
12
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are trusts that 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 consistent with their respective investment objectives
and policies, each Fund may invest up to 15% of its total assets in equity
and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the 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, risks
related to general and local economic conditions, adverse changes in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expenses, 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 an 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.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares
of another investment company, including Affiliated Money Market Funds (defined
below), 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.
The following restrictions apply to investments in other investment
companies other than Affiliated Money Market funds: (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.
DEFAULTED SECURITIES. AIM Global Income Fund may invest in defaulted
securities. In order to enforce its rights in defaulted securities, AIM Global
Income Fund may be required to participate in various legal proceedings or take
possession of and manage assets securing the issuer's obligations on the
defaulted securities. This could increase AIM Global Income Fund's operating
expenses and adversely affect its net asset value. Any investments by AIM Global
Income Fund in defaulted securities will also be considered illiquid securities
subject to the limitations described herein unless AIM determines that such
defaulted securities are liquid under guidelines adopted by the Board of
Directors.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions or forward
commitments, involve commitments by a Fund to dealers or issuers to acquire or
sell securities at a specified future date beyond the customary settlement for
such securities. These commitments may fix the payment price and interest rate
to be received or paid on the investment. A Fund may purchase securities on a
delayed
13
delivery to the extent it can anticipate having available cash on settlement
date. Delayed delivery agreements will not be used as a speculative or leverage
technique.
Investment in securities on a delayed delivery basis may increase a
Fund's exposure to market fluctuation and may increase the possibility that the
Fund will incur short-term gains subject to federal taxation or short-term
losses if the Fund must engage in portfolio transactions in order to honor a
delayed delivery commitment. Until the settlement date, a Fund will segregate
liquid assets of a dollar value sufficient at all times to make payment for the
delayed delivery transactions. Such segregated liquid assets will be
marked-to-market daily, and the amount segregated will be increased if necessary
to maintain adequate coverage of the delayed delivery commitments. No additional
delayed delivery agreements or when-issued commitments (as described below) will
be made by a Fund if, as a result, more than 25% of the Fund's total assets
would become so committed.
The delayed delivery securities, which will not begin to accrue
interest or dividends until the settlement date, will be recorded as an asset of
a Fund and will be subject to the risk of market fluctuation. The purchase price
of the delayed delivery securities is a liability of a Fund until settlement.
Absent extraordinary circumstances, a Fund will not sell or otherwise transfer
the delayed delivery basis securities prior to settlement.
The Funds may enter into buy/sell back transactions (a form of delayed
delivery agreement). In a buy/sell back transaction, the Fund enters a trade to
sell securities at one price and simultaneously enters a trade to buy the same
securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis
means that the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued. The payment
obligation and, if applicable, the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. A Fund
will only make commitments to purchase such securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in
a Fund's portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and, if applicable,
changes in the level of interest rates. Therefore, if a Fund is to remain
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a possibility that the market value of the
Fund's assets will fluctuate to a greater degree. Furthermore, when the time
comes for the Fund to meet its obligations under when-issued commitments, the
Fund will do so by using then available cash flow, by sale of the segregated
liquid assets, by sale of other securities or, although it would not normally
expect to do so, by directing the sale of the when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation).
Investment in securities on a when-issued basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund
will incur short-term gains subject to federal taxation or short-term losses if
the Fund must sell another security in order to honor a when-issued commitment.
If a Fund purchases a when-issued security, the Fund's custodian bank will
segregate liquid assets in an amount equal to the when-issued commitment. If the
market value of such segregated assets declines, additional liquid assets will
be segregated on a daily basis so that the market value of the segregated assets
will equal the amount of the Fund's when-issued commitments. No additional
delayed delivery agreements (as described above) or when-issued commitments will
be made by a Fund if, as a result, more than 25% of the Fund's total assets
would become so committed.
SHORT SALES. In a short sale, a Fund does not immediately deliver the
securities sold and does not receive the proceeds from the sale. A Fund is said
to have a short position in the securities sold until it delivers the securities
sold, at which time it receives the proceeds of the sale. A Fund will make a
short sale, as a hedge, when it believes that the price of a security may
decline, causing a decline in the value of a security owned by the Fund or a
security convertible into or exchangeable for such security, or when
14
the Fund does not want to sell the security it owns, because it wishes to defer
recognition of gain or loss for federal income tax purposes. In such case, any
future losses in a Fund's long position should be reduced by a gain in the short
position. Conversely, any gain in the long position should be reduced by a loss
in the short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount a Fund
owns, either directly or indirectly, and, in the case where the Fund owns
convertible securities, changes in the conversion premium. In determining the
number of shares to be sold short against a Fund's position in a convertible
security, the anticipated fluctuation in the conversion premium is considered. A
Fund may also make short sales to generate additional income from the investment
of the cash proceeds of short sales.
A Fund will only make short sales "against the box," meaning that 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. To secure its obligation to deliver the
securities sold short, a Fund will segregate with its custodian an equal amount
to the securities sold short or securities convertible into or exchangeable for
such securities. A Fund may pledge no more than 10% of its total assets as
collateral for short sales against the box.
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.
SWAP AGREEMENTS. Each Fund may enter into interest rate, index and
currency exchange rate swap agreements for purposes of attempting to obtain a
particular desired return at a lower cost to the Fund than if it had invested
directly in an instrument that yielded that desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Commonly used swap agreements include: (i)
interest rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates exceed a specified
rate, or "cap"; (ii) interest rate floors, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates
fall below a specified level, or "floor"; and (iii) interest rate collars, under
which a party sells a cap and purchases a floor or vice versa in an attempt to
protect itself against interest rate movements exceeding given minimum or
maximum levels.
The "notional amount" of the swap agreement is only a fictitious basis
on which to calculate the obligations that the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by a Fund would calculate
the obligations on a "net basis." Consequently, a Fund's obligations (or rights)
under a swap agreement will generally be equal only to the net amount to be paid
or received under the agreement based on the relative values of the positions
held by each party to the agreement (the "net amount"). Obligations under a swap
agreement will be accrued daily (offset against amounts owing to the Fund) and
any accrued but unpaid net amounts owed to a swap counterparty will be covered
by segregating liquid assets to avoid any potential leveraging of the Fund. A
Fund will not enter into a swap agreement with any single party if the net
amount owed to or to be received under existing contracts with that party would
exceed 5% of the Fund's total assets. For a discussion of the tax considerations
relating to swap agreements, see "Dividends, Distributions and Tax Matters -
Swap Agreements."
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its
net assets to other AIM Funds and each Fund may borrow from other AIM Funds to
the extent permitted under such Fund's investment restrictions. During temporary
or emergency periods, the percentage of a Fund's net assets that may be loaned
to other AIM Funds may be increased as permitted by the SEC. If any interfund
loans
15
are outstanding, a Fund cannot make any additional investments. If a Fund has
borrowed from other AIM Funds and has aggregate borrowings from all sources that
exceed 10% of such Fund's total assets, such Fund will secure all of its loans
from other AIM Funds. The ability of a Fund to lend its securities to other AIM
Funds is subject to certain other terms and conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary
or emergency purposes. If there are unusually heavy redemptions because of
changes in interest rates or for any other reason, a Fund may have to sell a
portion of its investment portfolio at a time when it may be disadvantageous to
do so. Selling fund securities under these circumstances may result in a lower
net asset value per share or decreased dividend income, or both. The Company
believes that, in the event of abnormally heavy redemption requests, the Fund's
borrowing ability would help to mitigate any such effects and could make the
forced sale of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio
securities (principally to broker-dealers) where such loans are callable at any
time and are continuously secured by segregated 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. Each Fund may lend portfolio securities
to the extent of one-third of its total assets.
A Fund 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 any cash collateral. A Fund will not have the right to vote
securities while they are lent, but it can call a loan in anticipation of an
important vote. Any cash collateral pursuant to these loans would be invested in
short-term money market instruments or Affiliated Money Market Funds. Lending
securities entails a risk of loss to a Fund if and to the extent that the market
value of the securities loaned increases and the collateral is not increased
accordingly or in the event of default by the borrower. The Fund could also
experience delays and costs in gaining access to the collateral.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which
a Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which is
higher than the purchase price), thereby determining the yield during the Fund's
holding period. A Fund may, however, enter into a "continuing contract" or
"open" repurchase agreement under which the seller is under a continuing
obligation to repurchase the underlying obligation from the Fund on demand and
the effective interest rate is negotiated on a daily basis. Each of the Funds
may engage in repurchase agreement transactions involving the types of
securities in which it is permitted to invest.
If the seller of a repurchase agreement fails to repurchase the
security in accordance with the terms of the agreement, a Fund might incur
expenses in enforcing its rights, and could experience losses, including a
decline in the value of the underlying security and loss of income. The
securities underlying a repurchase agreement will be marked to market every
business day so that the value of such securities is at least equal to the
investment value of the repurchase agreement, including any accrued interest
thereon.
The Funds have obtained an exemptive order from the SEC allowing them
to invest their cash balances in joint accounts for the purpose of investing in
repurchase agreements with maturities not to exceed 60 days, and in certain
other money market instruments with remaining maturities not to exceed 90 days.
Repurchase agreements are considered loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are
agreements that involve the sale of securities held by a Fund to financial
institutions such as banks and broker-dealers, with an agreement that the Fund
will repurchase the securities at an agreed upon price and date. A 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
16
the investment of the proceeds of the transaction is greater than the interest
expense of the transaction. At the time it enters into a reverse repurchase
agreement, a Fund will segregate liquid assets having a dollar value equal to
the repurchase price, and will subsequently continually monitor the account to
ensure that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of securities to be purchased
by the Fund may decline below the price at which it is obligated to repurchase
the securities, or that the other party may default on its obligation, so that
the Fund is delayed or prevented from completing the transaction. Reverse
repurchase agreements are considered borrowings by a Fund under the 1940 Act.
DOLLAR ROLLS. A dollar roll involves the sale by AIM Global Income Fund
of a mortgage security to a financial institution such as a broker-dealer or a
bank, with an agreement to repurchase a substantially similar security (i.e.,
same type, coupon and maturity) at an agreed upon price and date. The mortgage
securities that are purchased will bear the same interest rate as those sold,
but will generally be collateralized by different pools of mortgages with
different prepayment histories. During the period between the sale and
repurchase, AIM Global Income 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 AIM
Global Income Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by AIM Global Income Fund may decline below the price of the
securities that AIM Global Income 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, AIM Global Income 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
AIM Global Income Fund's obligation to repurchase the securities. At the time
the Fund enters into a dollar roll, it will segregate liquid assets having a
dollar value equal to the repurchase price, and will monitor the account to
ensure that such equivalent value is maintained. The Fund typically enters into
dollar roll transactions to enhance the Fund's return either on an income or
total return basis or mortgage pre-payment risk. Dollar rolls are considered
borrowings by a Fund under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
disposed of within seven days in the normal course of business at the 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 (the "1933 Act"). Restricted securities may, in
certain circumstances, be resold pursuant to Rule 144A, and thus may or may not
constitute illiquid securities.
Each Fund may invest up to 15% of its net assets in securities that are
illiquid. Limitations on the resale of restricted securities may have an adverse
effect on their marketability, which may prevent a Fund from disposing of them
promptly at reasonable prices. A Fund may have to bear the expense of
registering such securities for resale, and the risk of substantial delays in
effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A
under the 1933 Act. This Rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Board of Directors, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the Funds' restriction on investment 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 market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). AIM will also
monitor the liquidity of Rule 144A securities and, if as a result of changed
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM
will review a Fund's holdings of illiquid securities to determine what, if any,
action is required to assure that such Fund
17
complies with its restriction on investment in illiquid securities. Investing in
Rule 144A securities could increase the amount of each Fund's investments in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.
UNSEASONED ISSUERS. Investments in the equity securities of companies
having less than three years' continuous operations (including operations of any
predecessor) involve more risk than investments in the securities of more
established companies because unseasoned issuers have only a brief operating
history and may have more limited markets and financial resources. As a result,
securities of unseasoned issuers tend to be more volatile than securities of
more established companies.
Derivatives
The Funds may each invest in 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. The Funds
may also invest in equity-linked derivative products designed to replicate the
composition and performance of particular indices. 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 a security, currency or an index of securities).
EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a
securities portfolio designed to replicate the composition and performance of a
particular index. Equity-Linked Derivatives are exchange traded. The performance
results of Equity-Linked Derivatives will not replicate exactly the performance
of the pertinent index due to transaction and other expenses, including fees to
service providers, borne by the Equity-Linked Derivatives. Examples of such
products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optimised Portfolios As Listed Securities
("OPALS"). Investments in Equity-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 and, therefore, a Fund
may be subject to the same investment restrictions with Equity-Linked
Derivatives as with other investment companies. See "Other Investment
Companies."
PUT AND CALL OPTIONS. A call option gives the purchaser the right to
buy the underlying security, contract or foreign currency at the stated exercise
price at any time prior to the expiration of the option (or on a specified date
if the option is a European style option), regardless of the market price or
exchange rate of the security, contract or foreign currency, as the case may be
at the time of exercise. If the purchaser exercises the call option, the writer
of a call option is obligated to sell the underlying security, contract or
foreign currency. A put option gives the purchaser the right to sell the
underlying security, contract or foreign currency at the stated exercise price
at any time prior to the expiration date of the option (or on a specified date
if the option is a European style option), regardless of the market price or
exchange rate of the security, contract or foreign currency, as the case may be
at the time of exercise. If the purchaser exercises the put option, the writer
of a put option is obligated to buy the underlying security, contract or foreign
currency. The premium paid to the writer is consideration for undertaking the
obligations under the option contract. Until an option expires or is offset, the
option is said to be "open." When an option expires or is offset, the option is
said to be "closed."
A Fund will not write (sell) 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.
18
Pursuant to federal securities rules and regulations, if a Fund writes
options it may be required to set aside assets to reduce the risks associated
with writing those options. This process is described in more detail below in
the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying security, contract, or foreign currency alone. In
return for the premium received for writing a call option, the Fund foregoes the
opportunity for profit from a price increase in the underlying security,
contract, or foreign currency above the exercise price so long as the option
remains open, but retains the risk of loss should the price of the security,
contract, or foreign currency decline. In return for the premium received for
writing a put option, the Fund assumes the risk that the price of the underlying
security, contract, or foreign currency will decline below the exercise price,
in which case the put would be exercised and the Fund would suffer a loss.
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. A Fund would write a put option
at an exercise price that, reduced by the premium received on the option,
reflects the price it is willing to pay for the underlying security, contract or
currency. The obligation imposed upon the writer of an option is terminated upon
the expiration of the option, or such earlier time at which a Fund effects a
closing purchase transaction by purchasing an option (put or call as the case
may be) identical to that previously sold.
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.
Purchasing Options. A Fund may purchase a call option 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 increase in the market price of the underlying security,
contract or currency. If the market price does not exceed the exercise price,
the Fund could purchase the security on the open market and 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 strike 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."
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 the exercise
of the put 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
19
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."
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. Because purchased OTC options in certain cases may be difficult to dispose
of in a timely manner, the Fund may be required to treat some or all of these
options (i.e., the market value) as illiquid securities. Although a Fund will
enter into OTC options only with dealers that are expected to be capable of
entering into closing transactions with it, there is no assurance that the Fund
will in fact be able to close out an 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.
Index Options. Index options (or options on securities indices) are
similar in many respects to options on securities, except that an index option
gives the holder the right to receive, upon exercise, cash instead of
securities, if the closing level of the securities index upon which the option
is based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. 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.
Pursuant to federal securities rules and regulations, if a Fund writes
index options it may be required to set aside assets to reduce the risks
associated with writing those options. This process is described in more detail
below in the section "Cover".
STRADDLES: The Fund, for hedging purposes, may write straddles
(combinations of put and call options on the same underlying security) to adjust
the risk and return characteristics of the Fund's overall position. A possible
combined position would involve writing a covered call option at one strike
price and buying a call option at a lower price, in order to reduce the risk of
the written covered call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give
the holder the right to purchase a given number of shares of a particular
company at specified prices within certain periods of time. The purchaser of a
warrant expects that the market price of the security will exceed the purchase
price of the warrant plus the exercise price of the warrant, thus giving him a
profit. Since the market price may never exceed the exercise price before the
expiration date of the warrant, the purchaser of the
20
warrant risks the loss of the entire purchase price of the warrant. Warrants
generally trade in the open market and may be sold rather than exercised.
Warrants are sometimes sold in unit form with other securities of an issuer.
Units of warrants and common stock may be employed in financing young,
unseasoned companies. The purchase price of a warrant varies with the exercise
price of the warrant, the current market value of the underlying security, the
life of the warrant and various other investment factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. 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
(collectively, "Futures Contracts"). A stock index Futures Contract provides for
the delivery, at a designated date, time and place, of an amount of cash equal
to a specified dollar amount times the difference between the stock index value
at the close of trading on the contract and the price agreed upon in the Futures
Contract; no physical delivery of stocks comprising the index is made. Brokerage
fees are incurred when a Futures Contract is bought or sold, and margin deposits
must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only;
that is, Futures Contracts will be sold to protect against a decline in the
price of securities or currencies that the Fund owns, or Futures Contracts 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. A Fund's
hedging may include sales of Futures Contracts 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 Contracts as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
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
Investments" in this Statement of Additional Information.
Closing out an open Futures Contract is effected by entering into an
offsetting Futures Contract 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 Futures Contract 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 Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that
must be deposited by a Fund in order to initiate Futures Contracts trading and
maintain its open positions in Futures Contracts. 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
Futures Contract is set by the exchange on which the Futures Contract 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 Contract more or less valuable, a process
known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a
Futures Contract 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
21
margin payments and might be required to maintain the position being hedged by
the Futures Contract 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 Contract 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 Contract margin account.
Limitations on Futures Contracts and Options on Futures Contracts and
on 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 a 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%.
Pursuant to federal securities rules and regulations, a Fund's use of
Futures Contracts and options on Futures Contracts may require that Fund to set
aside assets to reduce the risks associated with using Futures Contracts and
options on Futures Contracts. This process is described in more detail below in
the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward contract is an obligation,
usually arranged with a commercial bank or other currency dealer, to purchase or
sell a currency against another currency at a future date and price as agreed
upon by the parties. A Fund either may accept or make delivery of the currency
at the maturity of the forward contract. A Fund may also, if its contra party
agrees prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract. Forward contracts are traded
over-the-counter, 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 transaction. 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.
Pursuant to federal securities rules and regulations, a Fund's use of
forward contracts may require that Fund to set aside assets to reduce the risks
associated with using forward contracts. This process is described in more
detail below in the section "Cover."
22
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, a 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.
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 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 or option thereon or forward contract at
any particular time.
(5) As described above, 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.
23
(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.
Additional Securities or Investment Techniques
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. AIM European
Development Fund's investments in the securities of privatized enterprises
include: (i) privately negotiated investments in a government- or state-owned or
controlled company or enterprise that has not yet conducted an initial equity
offering; (ii) investments in the initial offering of equity securities of a
state enterprise or former state enterprise; and (iii) investments in the
securities of a state enterprise following its initial equity offering. The
ability of foreign entities, such as AIM European Development Fund, to
participate in privatizations may be limited by local law and there can be no
assurance that privatization programs will be successful or that governments
will not re-nationalize enterprises that have been privatized.
SUPRANATIONAL ORGANIZATION SECURITIES. AIM Global Income Fund will
invest in securities issued by supranational organizations, which 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.
FUND POLICIES
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 AIM Global Income Fund is not
subject to restriction (1). Fundamental restrictions may be changed only by a
vote of the lesser of (i) 67% or 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.
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.
(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 securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions. (This restriction does not apply to AIM Global 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.
24
(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 AIM Global Income Fund is not
subject to restriction (1). They may be changed for any Fund without approval of
that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total assets,
purchase the 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 or 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 AIM Global 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
25
cash management purposes. The Fund may not purchase additional securities when
any borrowings from banks exceed 5% of the Fund's total assets or when any
borrowings from an AIM Advised Fund are outstanding.
(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 331/3% of its total assets and may lend money to
an 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.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market conditions, or
atypical circumstances such as unusually large cash inflows or redemptions, each
of the Funds may temporarily hold all or a portion of its assets in cash or the
following liquid assets: money market instruments, shares of affiliated money
market funds or high-quality debt obligations. As a result, the Funds may not
achieve their investment objectives.
PORTFOLIO TURNOVER
The turnover rate for AIM Global Income Fund decreased for the fiscal
year ended October 31, 2001, as compared to the two prior fiscal years, because
its portfolio at the beginning of year was well constructed for a declining
interest rate environment and a period during which the U. S. dollar was
generally strong, and because of stability in the Fund's sales and redemptions,
did not require the advisor to make any portfolio changes.
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS
The overall management of the business and affairs of the Funds and the
Company is vested in the 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 the Funds. The day-to-day
operations of each Fund are delegated to the officers of the Company and to AIM,
subject always to the objective(s), restrictions and policies of the applicable
Fund and to the general supervision of the 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. All of the Company's
executive officers hold similar offices with some or all of the other AIM Funds.
MANAGEMENT INFORMATION
The directors and officers of the Company, their principal occupations
during the last five years and certain other information concerning them is set
forth in Appendix B.
The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee, the Valuation Committee, the Committee on
Directors/Trustees and the Capitalization Committee.
The members of the Audit Committee are Frank S. Bayley, Bruce L.
Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M.
Fields, Carl Frischling (on leave of absence), Lewis F.
26
Pennock and Louis S. Sklar, Dr. Prema Mathai-Davis and Miss Ruth H. Quigley. 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. During the fiscal year ended October 31, 2001, the
Audit Committee held nine meetings.
The members of the Investments Committee are Messrs. Bayley, Crockett,
Dowden, Dunn, Fields, Frischling, Pennock and Sklar (Chair), Dr. Mathai-Davis
(Vice Chair) and Miss Quigley. 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. During the fiscal year ended October 31, 2001, the
Investments Committee held six meetings.
The members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee is responsible
for: (i) periodically reviewing AIM's Procedures for Valuing Securities
("Procedures"), and making any recommendations to AIM with respect thereto; (ii)
reviewing proposed changes to the Procedures recommended by AIM from time to
time; (iii) periodically reviewing information provided by AIM regarding
industry developments in connection with valuation; (iv) periodically reviewing
information from AIM regarding fair value and liquidity determinations made
pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the Committee
or to the Committee and the full Board simultaneously); and (v) if requested by
AIM, assisting AIM's internal valuation committee and/or the full Board in
resolving particular valuation anomalies. During the fiscal year ended October
31, 2001, the Valuation Committee held no meetings.
The members of the Committee on Directors/Trustees are Messrs. Bayley,
Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and Sklar, Dr.
Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) considering and nominating individuals to stand for
election as dis-interested 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 dis-interested directors; and (iii)
making recommendations to the Board regarding matters related to compensation,
including deferred compensation plans and retirement plans for the
dis-interested directors. During the fiscal year ended October 31, 2001, the
Committee on Directors/Trustees held seven meetings.
The Committee on Directors/Trustees 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 Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
The members of the Capitalization Committee are Messrs. Bayley, 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 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 common stock upon the
terms set forth in the applicable Fund's prospectus, up to the Company's
authorized capital. During the fiscal year ended October 31, 2001, the
Capitalization Committee held no meetings.
27
Director Ownership of Fund Shares
The dollar range of equity securities beneficially owned by each
director (i) in the Funds and (ii) on an aggregate basis, in all registered
investment companies overseen by the director within the AIM Funds complex is
set forth in Appendix B.
Factors Considered in Approving the Investment Advisory Agreement
The advisory agreement with AIM was re-approved by the Funds' Board at
a meeting held on May 8-9, 2001. In evaluating fairness and reasonableness of
the advisory agreement, the Board considered a variety of factors for each Fund,
including: the requirements of each Fund for investment supervisory and
administrative services; the quality of AIM's services, including a review of
each Fund's investment performance and AIM's investment personnel; the size of
the fees in relationship to the extent and quality of the investment advisory
services rendered; fees charged to AIM's other clients; fees charged by
competitive investment advisors; the size of the fees in light of services
provided other than investment advisory services; the expenses borne by each
Fund as a percentage of its assets and in relation to contractual limitations;
any fee waivers (or payments of Fund expenses) by AIM; AIM's profitability; the
benefits received by AIM from its relationship to each Fund, including soft
dollar arrangements, and the extent to which each Fund shares in those benefits;
the organizational capabilities and financial condition of AIM and conditions
and trends prevailing in the economy, the securities markets and the mutual fund
industry; and the historical relationship between each Fund and AIM.
In considering the above factors, the Board also took into account the
fact that univested cash and cash collateral from securities lending
arrangements (collectively, "cash balances") of each Fund may be invested in
money market funds advised by AIM pursuant to the terms of an exemptive order.
The Board found that each Fund may realize certain benefits upon investing cash
balances in AIM advised money market funds, including a higher net return,
increased liquidity, increased diversification or decreased transaction costs.
The Board also found that each Fund will not receive reduced services if they
invest their cash balances in such money market funds. The Board further
determined that the proposed securities lending program and related procedures
with respect to each of the lending Funds is in the best interests of each
lending Fund and its respective shareholders. The Board therefore concluded that
the investment of cash collateral received in connection with the securities
lending program in the money market funds according to the procedures is in the
best interests of each lending Fund and its respective shareholders.
After consideration of these factors, the Board found that: (i) the
services provided to each Fund and its shareholders were adequate; (ii) the
agreements were fair and reasonable under the circumstances; and (iii) the fees
payable under the agreements would have been obtained through arm's length
negotiations. The Board therefore concluded that each Fund's advisory agreement
was in the best interests of such Fund and its shareholders and continued the
agreements for an additional year.
COMPENSATION
Each director who is not affiliated with AIM 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.
Information regarding compensation paid or accrued for each director of
the Company who is not affiliated with AIM during the year ended December 31,
2001 is found in Appendix C.
28
Retirement Plan For Directors
The directors have adopted a retirement plan for the directors of the
Company who are not affiliated with AIM. The retirement plan includes a
retirement policy as well as retirement benefits for the non-AIM-affiliated
directors.
The retirement policy permits each non-AIM-affiliated director to serve
until December 31 of the year in which the director turns 72. A majority of the
directors may extend from time to time the retirement date of a director.
Annual retirement benefits are available to each non-AIM-affiliated
director of the Company and/or the other AIM Funds (each, a "Covered Fund") who
has at least five years of credited service as a director (including service to
a predecessor fund) for a Covered Fund. The retirement benefits will equal 75%
of the director's annual retainer paid or accrued by any Covered Fund to such
director during the twelve-month period prior to retirement, including the
amount of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the director. The annual retirement benefits are
payable in quarterly installments for a number of years equal to the lesser of
(i) ten or (ii) the number of such director's credited years of service. A death
benefit is also available under the plan that provides a surviving spouse with a
quarterly installment of 50% of a deceased director's retirement benefits for
the same length of time that the director would have received based on his or
her service. A director must have attained the age of 65 (55 in the event of
death or disability) to receive any retirement benefit.
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(for purposes of this paragraph only, the "Deferring Directors") have each
executed a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Directors
have the option to 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 have the option to 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 up to ten (10)
years (depending on the Compensation Agreement) beginning on the date selected
under the Compensation Agreement. 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 retirement benefits commence under the Plan. The
Board, in its sole discretion, also 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. 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.
Purchases of Class A Shares of the Funds at Net Asset Value
The directors and other affiliated persons of the Company may purchase
Class A shares of the AIM Funds without paying an initial sales charge. AIM
Distributors permits such purchases because there is a reduced sales effort
involving in sales to such purchasers, thereby resulting in relatively low
expenses of distribution. For a complete description of the persons who will not
pay an initial sales charge on purchases of Class A shares of the AIM Funds, see
"Purchase, Redemption and Pricing of Shares - Purchase and Redemption of Shares
- - Purchases of Class A Shares and AIM Cash Reserve Shares of AIM Money Market
Fund - Purchases of Class A Shares at the Net Asset Value."
29
CODES OF ETHICS
AIM, the Company and A I M Distributors, Inc. ("AIM Distributors") have
each adopted a Code of Ethics governing, as applicable, personal trading
activities of all Directors/Trustees, officers of the Company, persons who, in
connection with their regular functions, play a role in the recommendation of
any purchase or sale of a security by any of the Funds or obtain information
pertaining to such purchase or sale, and certain other employees. The Codes of
Ethics are intended to prohibit conflicts of interest with the Company that may
arise from personal trading. Personal trading, including personal trading
involving securities that may be purchased or held by a Fund, is permitted by
persons covered under the relevant Codes subject to certain restrictions;
however those persons are generally required to pre-clear all security
transactions with the Compliance Officer or his designee and to report all
transactions on a regular basis.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information about the ownership of each class of each Fund's shares by
beneficial or record owners of such Fund and by directors and officers as a
group is found in Appendix D. A shareholder who owns beneficially 25% or more of
the outstanding shares of a Fund is presumed to "control" that Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
AIM, the Funds' investment advisor, was organized in 1976, and along
with its subsidiaries, manages or advises over 150 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. AIM Management is an indirect,
wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are
an independent global investment management group. Certain of the directors and
officers of AIM are also executive officers of the Company and their
affiliations are shown under "Management Information" herein.
As investment advisor, AIM supervises all aspects of the Funds'
operations and provides investment advisory services to the Funds. AIM obtains
and evaluates economic, statistical and financial information to formulate and
implement investment programs for the Funds.
AIM is also responsible for furnishing to the Funds, at AIM's expense,
the services of persons believes to be competent to perform all supervisory and
administrative services required by the Funds, in the judgment of the directors,
to conduct their respective businesses effectively, as well as the offices,
equipment and other facilities necessary for their operations. Such functions
include the maintenance of each Fund's accounts and records, and the preparation
of all requisite corporate documents such as tax returns and reports to the SEC
and shareholders.
The Master Advisory Agreement provides that the Fund will pay or cause
to be paid all expenses of the Fund not assumed by AIM, including, without
limitation: brokerage commissions, taxes, legal, 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 director and shareholder 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 the Funds'
shareholders.
AIM, at its own expense, furnishes to the Company office space and
facilities. AIM furnishes to the Company all personnel for managing the affairs
of the Company and each of its series of shares.
30
Pursuant to its advisory agreement with the Company, AIM receives a
monthly fee from each Fund calculated at the following annual rates, based on
the average daily net assets of each Fund during the year:
<Table>
<Caption>
FUND NAME NET ASSETS ANNUAL RATE
--------- ---------- -----------
AIM Asian Growth Fund First $500 million 0.95%
AIM European Development Fund Amount over $500 million 0.90%
AIM Global Aggressive Growth Fund First $1 billion 0.90%
Amount over $1 billion 0.85%
AIM Global Growth Fund First $1 billion 0.85%
Amount over $1 billion 0.80%
AIM Global Income Fund First $1 billion 0.70%
Amount over $1 billion 0.65%
AIM International Equity Fund First $1 billion 0.95%
Amount over $1 billion 0.90%
</Table>
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
AIM has voluntarily agreed, effective July 1, 2001, to waive a portion
of advisory fees payable by each Fund. The amount of the waiver will equal 25%
of the advisory fee AIM receives from the Affiliated Money Market Funds as a
result of each Fund's investment of uninvested cash in an Affiliated Money
Market Fund. See "Investment Strategies and Risks - Other Investments - Other
Investment Companies."
AIM contractually agreed, effective July 1, 2001 through June 30, 2002,
to waive fees and/or reimburse expenses (excluding interest, taxes, dividends on
short sales, extraordinary items and increases in expenses due to expense offset
arrangements, if any) for AIM Global Income Fund's Class A, Class B and Class C
shares to the extent necessary to limit the total operating expenses of Class A
shares to 1.50% (e.g., if AIM waives 0.16% of Class A expenses, AIM will also
waive 0.16% of Class B and Class C expenses).
AIM contractually agreed, effective July 1, 2001 through June 30, 2002,
to waive advisory fees for AIM International Equity Fund's Class A, Class B and
Class C shares by 0.05% of average daily net assets in excess of $500 million.
PREVIOUS INVESTMENT SUB-ADVISOR
Under a former Master Sub-Advisory Contract terminated effective June
21, 2000, between AIM and INVESCO Global Asset Management Limited ("IGAM") with
respect to AIM Asian Growth Fund and AIM European Development Fund, IGAM was
entitled to receive from AIM with respect to each of AIM
31
Asian Growth Fund and AIM European Development Fund, a fee calculated at the
following annual rates based on the average daily net assets of each Fund:
<Table>
<Caption>
NET ASSETS ANNUAL RATE
- ---------- -----------
First $500 million 0.20%
Amount over $500 million 0.175%
</Table>
Under former Sub-Sub-Advisory contracts terminated effective June 21,
2000, between (i) IGAM and INVESCO Asia Limited ("IAL"), with respect to AIM
Asian Growth Fund, and (ii) IGAM and INVESCO Asset Management Limited ("IAML"),
with respect to AIM European Development Fund, IAL and IAML 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. AIM, IGAM, IAL and IAML are indirect wholly
owned subsidiaries of AMVESCAP PLC.
The management fees payable by each Fund, the amounts waived by AIM and
the net fees paid by each Fund for the last three fiscal years ended October 31,
2001 are found in Appendix E.
SECURITIES LENDING ARRANGEMENTS. If a Fund engages in securities
lending, AIM will provide the Fund investment advisory services and related
administrative services. The 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 fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
SERVICE AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Company have entered
into a Master Administrative Services Agreement ("Administrative Services
Agreement") pursuant to which AIM may perform or arrange for the provision of
certain accounting and other administrative services to each Fund which are not
required to be performed by AIM under the advisory agreement. The Administrative
Services Agreement provides that it will remain in effect and continue from year
to year only if such continuance is specifically approved at least annually by
the Company's Board of Directors, including the independent directors, by votes
cast in person at a meeting called for such purpose. Under the Administrative
Services Agreement, AIM is entitled to receive from the Funds reimbursement of
its costs or such reasonable compensation as may be approved by the Board of
Directors. Currently, AIM is paid a fee for reimbursement for the services of
the Company's principal financial officer and her staff, and any expenses
related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last
three fiscal years ended October 31, 2001 are found in Appendix F.
32
OTHER SERVICE PROVIDERS
TRANSFER AGENT. A I M Fund Services, Inc. ("AFS"), 11 Greenway Plaza,
Suite 100, Houston, Texas 77046, a registered transfer agent and wholly owned
subsidiary of AIM, acts as transfer and dividend disbursing agent for the Funds.
The Transfer Agency and Service Agreement between the Company and AFS
provides that AFS will perform certain shareholder services for the Funds. 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.
AFS may impose certain copying charges for requests for copies of shareholder
account statements and other historical account information older than the
current year and the immediately preceding year.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), 800 Scudders Mill Road, Plainsboro, New Jersey 08536 has entered
into an agreement with the Company (and certain other AIM Funds), PFPC Inc.
(formerly known as First Data Investor Service Group) and Financial Data
Services, Inc., pursuant to which MLPF&S is paid a per account fee to perform
certain shareholder sub-accounting services for its customers who beneficially
own shares of the Fund(s).
CUSTODIAN. State Street Bank and Trust Company (the "Custodian"), 225
Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and
cash of the Funds. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002,
serves as sub-custodian for retail purchases. The Bank of New York, 100 Church
Street, New York, New York 10286, also serves as sub-custodian to facilitate
cash management.
The Custodian is authorized to establish separate accounts in foreign
countries and to cause foreign securities owned by the Funds to be held outside
the United States in branches of U.S. banks and, to the extent permitted by
applicable regulations, in certain foreign banks and securities depositories.
AIM is responsible for selecting eligible foreign securities depositories and
for assessing the risks associated with investing in foreign countries,
including the risk of using eligible foreign securities depositories in a
country; the Custodian is responsible for monitoring eligible foreign securities
depositories.
Under its contract with the Company, the Custodian maintains the
portfolio securities of the Funds, administers the purchases and sales of
portfolio securities, collects interest and dividends and other distributions
made on the securities held in the portfolios of the Funds and performs other
ministerial duties. These services do not include any supervisory function over
management or provide any protection against any possible depreciation of
assets.
AUDITORS. The Funds' independent public accountants are responsible for
auditing the financial statements of the Funds. The Board of Directors has
selected PricewaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas
77002, as the independent public accountants to audit the financial statements
of the Funds.
COUNSEL TO THE COMPANY. Legal matters for the Company have been passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street,
Philadelphia, Pennsylvania 19103.
33
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers, effects the Funds' investment portfolio transactions, allocates
brokerage fees in such transactions and, where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate. While AIM seeks reasonably competitive commission rates, the Funds may not
pay the lowest commission or spread available. See "Brokerage Selection" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. Portfolio transactions placed in such markets may be
effected at either net prices without commissions, but which include
compensation to the broker-dealer in the form of a mark up or mark down, or on
an agency basis, which involves the payment of negotiated brokerage commissions.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas stock
markets have adopted a system of negotiated rates, a number of markets maintain
an established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds during the last three
fiscal years ended October 31, 2001 are found in Appendix G.
COMMISSIONS
During the last three fiscal years ended October 31, 2001, none of the
Funds paid brokerage commissions to brokers affiliated with the Funds, AIM, AIM
Distributors, or any affiliates of such entities.
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 AIM Funds from the SEC are met. In addition, a Fund 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 Boards 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.
BROKERAGE SELECTION
Section 28(e)(1) of the Securities Exchange Act of 1934 provides that
AIM, under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which [it] exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a Fund may pay
a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
34
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 electronic communications of trade information, the providing of
custody services, as well as the providing of equipment used to communicate
research information and the providing of specialized consultations with AIM
personnel with respect to computerized systems and data furnished to AIM as a
component of other research services, the arranging of meetings with management
of companies, and the providing of access to consultants who supply research
information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services provided
to AIM by broker-dealers are available for the benefit of all accounts managed
or advised by AIM or by its affiliates. Some broker-dealers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Funds is not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research services
had they not been provided by broker-dealers, the expenses to AIM could be
considered to have been reduced accordingly.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Funds) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and other mutual funds advised by AIM or A I M
Capital Management, Inc. (collectively, the "AIM Funds") in particular,
including sales of the Funds and of the other AIM Funds. In connection with (3)
above, the Funds' trades may be executed directly by dealers that sell shares of
the AIM Funds or by other broker-dealers with which such dealers have clearing
arrangements, consistent with obtaining best execution. AIM will not use a
specific formula in connection with any of these considerations to determine the
target levels.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during
the last fiscal year ended October 31, 2001 are found in Appendix H.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their
regular brokers or dealers during the last fiscal year ended October 31, 2001 is
found in Appendix H.
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 one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent
35
with the investment policies of the Fund(s) and one or more of these accounts,
and is considered at or about the same time, AIM will fairly allocate
transactions in such securities among the Fund(s) 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 a Fund's ability to obtain or dispose of the full
amount of a security which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM results in transactions which could
have an adverse effect on the price or amount of securities available to a Fund.
In making such allocations, AIM considers the investment objectives and policies
of its advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the judgments of the persons
responsible for recommending the investment. This procedure would apply to
transactions in both equity and fixed income securities.
ALLOCATION OF EQUITY OFFERING TRANSACTIONS
From time to time, certain of the AIM Funds or other accounts managed
by AIM may become interested in participating in equity security distributions
that are available in an equity "offering", which AIM defines as an IPO, a
secondary (follow-on offering), a private placement, a direct placement or a
PIPE (private investment in public equity) 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 offerings for all AIM Funds and accounts participating in purchase
transactions for that offering, 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 offering 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 offerings 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 offerings over the
longer term. Where multiple funds or accounts are eligible, rotational
participation may occur, based on the extent to which an AIM Fund or account has
participated in previous offerings 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 each AIM
Fund's or account's 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 Allocations, or until the
shares are all allocated. Should securities remain after this process, eligible
AIM Funds and accounts will receive their Allocations on a straight pro rata
basis. In addition, Incubator Funds, as described in AIM's Incubator and New
Fund Investment Policy, will each be limited to a 40 basis point allocation
only. Such allocations will be allocated to the nearest share round lot that
approximates 40 basis points.
When any AIM Funds and/or accounts with substantially identical
investment objectives and policies participate in offerings, they will do so in
amounts that are substantially proportionate to each other. In these cases, the
net assets of the largest participating AIM Fund will be used to determine in
which tier, as described in the paragraph above, such group of AIM Funds or
accounts will be placed. If no AIM Fund is participating, then the net assets of
the largest account will be used to determine tier placement. The price per
share of securities purchased in such offering transactions will be the same for
each AIM Fund and account.
36
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE AND REDEMPTION OF SHARES
Purchases of Class A Shares and AIM Cash Reserve Shares of AIM Money Market Fund
INITIAL SALES CHARGES. Each AIM Fund (other than AIM Tax-Exempt Cash
Fund and AIM Money Market Fund) is grouped into one of three categories to
determine the applicable initial sales charge for its Class A Shares. The sales
charge is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of the Funds'
shares. You may also be charged a transaction or other fee by the financial
institution managing your account.
Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares
of AIM Money Market Fund are sold without an initial sales charge.
CATEGORY I FUNDS
AIM Aggressive Growth Fund AIM Large Cap Basic Value Fund
AIM Asian Growth Fund AIM Large Cap Core Equity Fund
AIM Basic Value Fund AIM Large Cap Growth Fund
AIM Blue Chip Fund AIM Large Cap Opportunities Fund
AIM Capital Development Fund AIM Mid Cap Basic Value Fund
AIM Charter Fund AIM Mid Cap Equity Fund
AIM Constellation Fund AIM Mid Cap Growth Fund
AIM Dent Demographic Trends Fund AIM Mid Cap Opportunities Fund
AIM Emerging Growth Fund AIM New Technology Fund
AIM European Development Fund AIM Select Equity Fund
AIM European Small Company Fund AIM Small Cap Equity Fund
AIM Euroland Growth Fund AIM Small Cap Growth Fund
AIM Global Utilities Fund AIM Small Cap Opportunities Fund
AIM International Emerging Growth Fund AIM Value Fund AIM Value II Fund
AIM International Equity Fund AIM Weingarten Fund
AIM International Value Fund AIM Worldwide Spectrum Fund
<Table>
<Caption>
Dealer
Investor's Sales Charge Concession
--------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the 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
</Table>
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
37
CATEGORY II FUNDS
AIM Balanced Fund AIM Global Trends Fund
AIM Basic Balanced Fund AIM High Income Municipal Fund
AIM Developing Markets Fund AIM High Yield Fund
AIM Global Aggressive Growth Fund AIM High Yield Fund II
AIM Global Energy Fund AIM Income Fund
AIM Global Financial Services Fund AIM Intermediate Government Fund
AIM Global Growth Fund AIM Municipal Bond Fund
AIM Global Health Care Fund AIM Real Estate Fund
AIM Global Income Fund AIM Strategic Income Fund
AIM Global Infrastructure Fund AIM Total Return Bond Fund
AIM Global Telecommunications and
Technology Fund
<Table>
<Caption>
Dealer
Investor's Sales Charge Concession
-------------------------- -------------
Percentage Percentage Percentage
of the Public of the Net of the 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
</Table>
CATEGORY III FUNDS
AIM Limited Maturity Treasury Fund
AIM Tax-Free Intermediate Fund
<Table>
<Caption>
Dealer
Investor's Sales Charge Concession
----------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the 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
</Table>
LARGE PURCHASES OF CLASS A SHARES. Investors who purchase $1,000,000 or
more of Class A Shares of a Category I, II or III Fund do not pay an initial
sales charge. In addition, investors who currently own Class A shares of
Category I, II, or III Funds and make additional purchases that result in
account balances of $1,000,000 or more do not pay an initial sales charge on the
additional purchases. The additional purchases, as well as initial purchases of
$1,000,000 or more, are referred to as Large Purchases ("Large Purchases"). If
an investor makes a Large Purchase of Class A shares of a Category I or II Fund,
however, the shares generally will be subject to a contingent deferred sales
charge ("CDSC")
38
if the investor redeems those shares within 18 months after purchase. Large
Purchases of Class A shares of Category III Funds made on or after November 15,
2001 will be subject to a 0.25% CDSC if the investor redeems those shares within
12 months after purchase.
AIM Distributors may pay a dealer concession and/or advance a service
fee on Large Purchases, as set forth below. Exchanges between the AIM Funds may
affect total compensation paid.
For Large Purchases of Class A shares of Category I or II Funds, AIM
Distributors may make the following payments to dealers and institutions that
are dealers of record:
PERCENT OF SUCH PURCHASES
1% of the first $2 million
plus 0.80% of the next $1 million
plus 0.50% of the next $17 million
plus 0.25% of amounts in excess of $20 million
For Large Purchases of Class A shares of Category III Funds, AIM
Distributors may make the following payments to dealers and institutions that
are dealers of record:
Up to 0.10% of purchases of AIM Limited Maturity Treasury Fund; and Up
to 0.25% of purchases of AIM Tax-Free Intermediate Fund
If an investor makes a Large Purchase of Class A shares of a Category
III Fund on and after November 15, 2001 and exchanges those shares for Class A
shares of a Category I or II Fund, AIM Distributors will pay an additional
dealer concession of 0.75% upon exchange.
If an investor makes a Large Purchase of Class A shares of a Category I
or II Fund on and after November 15, 2001 and exchanges those shares for Class A
shares of a Category III Fund, AIM Distributors will not pay any additional
dealer compensation upon the exchange.
If an investor makes a Large Purchase of Class A shares of a Category
III Fund and exchanges those shares for Class A shares of another Category III
Fund, AIM Distributors will not pay any additional dealer concession upon the
exchange.
For annual purchases of Class A shares of Category I and II Funds, AIM
Distributors may make the following payments to investment dealers or other
financial service firms for sales of such shares at net asset value to employee
benefit plans:
PERCENT OF SUCH PURCHASES
1% of the first $2 million
plus 0.80% of the next $1 million
plus 0.50% of the next $17 million
plus 0.25% of amounts in excess of $20 million
For annual purchases of Class A Shares of AIM Limited Maturity Treasury
Fund, AIM Distributors may pay investment dealers or other financial service
firms up to 0.10% of the net asset value of such shares sold at net asset value.
PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown
in the tables above, purchases of certain amounts of AIM Fund shares may reduce
the initial sales charges. These
39
reductions are available to purchasers that meet the qualifications listed
below. We will refer to purchasers that meet these qualifications as "Qualified
Purchasers."
INDIVIDUALS
o an individual (including his or her spouse or domestic partner, and
children)
o any trust established exclusively for the benefit of an individual
o a pension, profit-sharing, or other retirement plan established
exclusively for the benefit of an individual, such as:
a. an IRA
b. a Roth IRA
c. a single-participant money-purchase/profit-sharing plan
d. an individual participant in a 403(b) Plan (unless the 403(b)
plan itself qualifies as the purchaser, as discussed below)
403(b) PLANS
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.
TRUSTEES AND FIDUCIARIES
o a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account
o a trustee or fiduciary purchasing for a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Code
o a trustee or fiduciary purchasing for a 457 plan, even if more than
one beneficiary or participant is involved
LINKED EMPLOYEE PLANS
o Linked Employee Plans where the employer has notified AIM Distributors
in writing that all of its related employee accounts should be linked,
such as:
a. Simplified Employee Pension (SEP) Plans
b. Salary Reduction and other Elective Simplified Employee Pension
account (SAR-SEP) Plans
40
c. Savings Incentive Match Plans for Employees IRA (SIMPLE IRA)
OTHER GROUPS
o any other organized group of persons, whether incorporated or not,
provided that:
a. the organization has been in existence for at least six months;
and
b. the organization has some purpose other than the purchase at a
discount of redeemable securities of a registered investment
company.
HOW TO QUALIFY FOR REDUCTIONS IN INITIAL SALES CHARGES. The following
sections discuss different ways that a purchaser can qualify for a reduction in
the initial sales charges for purchases of Class A shares of the AIM Funds.
LETTERS OF INTENT
A Qualified Purchaser may pay reduced initial sales charges by:
o indicating on the account application that he or she intends to
provide a Letter of Intent ("LOI"); and
o fulfilling the conditions of that LOI.
The LOI confirms the total investment in shares of the AIM Funds that the
Qualified Purchaser intends to make within the next 13 months. By marking the
LOI section on the account application and by signing the account application,
the Qualified Purchaser indicates that he or she understands and agrees to the
terms of the LOI and is bound by the provisions described below:
Calculating the Initial Sales Charge
o 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 (to determine what the applicable public
offering price is, look at the sales charge table in the section on
"Initial Sales Charges" above).
o 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.
o The offering price may be further reduced as described below under
"Rights of Accumulation" if the Transfer Agent is advised of all other
accounts at the time of the investment.
o Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI.
Calculating the Number of Shares to be Purchased
o 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.
o Purchases made more than 90 days before signing an LOI will be applied
toward the completion of the LOI based on the value of the shares
purchased that is calculated at the public offering price on the
effective date of the LOI.
41
o If a purchaser meets the original obligation at any time during the
13-month period, he or she may revise the intended investment amount
upward by submitting a written and signed request. This revision will
not change the original expiration date.
o The Transfer Agent will process necessary adjustments upon the
expiration or completion date of the LOI.
Fulfilling the Intended Investment
o 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 purchaser will have to
pay the increased amount of sales charge.
o To assure compliance with the provisions of the 1940 Act, the Transfer
Agent will escrow in the form of shares an appropriate dollar amount
(computed to the nearest full share) out of the initial purchase (or
subsequent purchases if necessary). 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.
o 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 sales charge on the amount actually
purchased. If the purchaser does not pay such difference within 20
days of the expiration date, he or she 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.
Canceling the LOI
o If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he or she must give written notice to AIM
Distributors.
o 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, the LOI will be automatically canceled. 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.
Other Persons Eligible for the LOI Privilege
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.
LOIs and Contingent Deferred Sales Charges
If an investor enters into an LOI to purchase $1,000,000 or more of
Class A shares of a Category III Fund on and after November 15, 2001, such
shares will be subject to a 12-month, 0.25% CDSC. Purchases of Class A shares of
a Category III Fund made pursuant to an LOI to purchase $1,000,000 or more of
shares entered into prior to November 15, 2001 will not be subject to this CDSC.
All LOIs to purchase $1,000,000 or more of Class A shares of Category I and II
Funds are subject to an 18-month, 1% CDSC.
42
RIGHTS OF ACCUMULATION
A Qualified Purchaser may also qualify for reduced initial sales
charges based upon his or her existing investment in shares of any of the AIM
Funds at the time of the proposed purchase. 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 owned by such
purchaser, calculated at their then current public offering price.
If a purchaser qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money being invested, even if only a
portion of that amount exceeds the breakpoint for the reduced sales charge. 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 the Transfer Agent 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.
Rights of Accumulation are also available to holders of the Connecticut
General Guaranteed Account, established for tax-qualified group annuities, for
contract purchased on or before June 30, 1992.
If an investor's new purchase of Class A shares of a Category I, II or
III Fund is at net asset value, the newly purchased shares will be subject to a
contingent deferred sales charge if the investor redeems them prior to the end
of the applicable holding period (18 months for Category I and II Funds shares
and 12 months for Category III Fund shares). For Class A shares of Category III
Funds, the provisions of this paragraph apply only to new purchases made on and
after November 15, 2001.
OTHER REQUIREMENTS FOR REDUCTIONS IN INITIAL SALES CHARGES. As
discussed above, 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 to the reduced sales charge based on
the definition of a Qualified Purchaser listed above. No person or entity may
distribute shares of the AIM Funds without payment of the applicable sales
charge other than to Qualified Purchasers.
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 AIM
Floating Rate Fund will not be taken into account in determining whether a
purchase qualifies for a reduction in initial sales charges.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE. AIM Distributors
permits certain categories of persons to purchase Class A shares of AIM Funds
without paying an initial sales charge. These are typically categories of
persons whose transactions involve little expense, such as:
o Persons who have a relationship with the funds or with AIM and its
affiliates, and are therefore familiar with the funds, and who place
unsolicited orders directly with AIM Distributors; or
o programs for purchase that involve little expense because of the size
of the transaction and shareholder records required.
AIM Distributors believes that it is appropriate and in the Funds' best
interests that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase shares through
AIM Distributors without payment of a sales charge.
Accordingly, 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:
43
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 PFPC Inc. (formerly known as First Data Investor
Services Group);
o Sales representatives and employees (and members of their immediate family)
of selling group members of financial institutions that have arrangements
with such selling group members;
o Purchases through approved fee-based programs;
o Employee benefit plans that are Qualified Purchasers, as defined above, and
non-qualified plans offered in conjunction with those employee benefit
plans, provided that:
a. the initial investment in the plan(s) is at least $1 million;
b. the sponsor signs a $1 million LOI;
c. the employer-sponsored plan has at least 100 eligible employees;
or
d. all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service
organization has entered into the appropriate agreement 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 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 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 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 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;
44
o Certain former AMA Investment Advisers' shareholders who became
shareholders of 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 Tuition Programs created and maintained in accordance with
Section 529 of the Code; and
o Participants in select brokerage programs for defined contribution
plans and rollover IRAs (including rollover IRAs which accept annual
IRA contributions) 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 or domestic partner, children, parents and parents of spouse or domestic
partner.
In addition, an investor may acquire shares of any of the AIM Funds at
net asset value in connection with:
o the reinvestment of dividends and distributions from a Fund;
o exchanges of shares of certain Funds;
o use of the reinstatement privilege; or
o a merger, consolidation or acquisition of assets of a Fund.
PAYMENTS TO DEALERS. 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 1933 Act.
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, 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.
Purchases of Class B Shares
Class B shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a contingent deferred sales
charge if they redeem their shares within six years after purchase. See the
Prospectus for additional information regarding contingent deferred sales
charges. AIM Distributors may pay sales commissions to dealers and institutions
who sell Class B shares of the
45
AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase
price and will consist of a sales commission equal to 3.75% plus an advance of
the first year service fee of 0.25%.
Purchases of Class C Shares
Class C shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a contingent deferred sales
charge if they redeem their shares within the first year after purchase. See the
Prospectus for additional information regarding this contingent deferred sales
charge (CDSC). 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 will equal 1.00% of the purchase price and will consist of a sales
commission of 0.75% plus an advance of the first year service fee of 0.25%.
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
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to
be acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with
certain dealers and investment advisory firms to accept telephone instructions
to exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by fax, telegraph or use overnight courier services to expedite exchanges by
mail, which will be effective on the business day received by AFS as long as
such request is received prior to the close of the customary trading session of
the NYSE. AFS 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.
Redemptions
GENERAL. 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 Funds at (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 the applicable Fund
next determined after the repurchase order is received. Such an 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 a Fund or by AIM Distributors (other
46
than any applicable contingent deferred sales charge) when shares are redeemed
or repurchased, dealers may charge a fair service fee for handling the
transaction.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or
the date of payment postponed when (a) trading on the New York Stock Exchange
("NYSE") is restricted, as determined by applicable rules and regulations of the
SEC, (b) the NYSE is closed for other than customary weekend and holiday
closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of a Fund not reasonably
practicable.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints AFS as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by AFS in the designated account(s),
present or future, with full power of substitution in the premises. AFS 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 AFS 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. AFS 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.
SYSTEMATIC WITHDRAWAL PLAN. A Systematic Withdrawal Plan permits a
shareholder of an AIM Fund to withdraw on a regular basis at least $50 per
withdrawal. Under a Systematic Withdrawal Plan, all shares are to be held by AFS
and all dividends and distributions are reinvested in shares of the applicable
AIM Fund by AFS. To provide funds for payments made under the Systematic
Withdrawal Plan, AFS 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 Funds), 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.
Contingent Deferred Sales Charges Imposed upon Redemption of Shares
A contingent deferred sales charge (CDSC) may be imposed upon the
redemption of Large Purchases of Class A shares of Category I and II Funds or
upon the redemption of Class B shares or Class C shares. On and after November
15, 2001, a CDSC also may be imposed upon the redemption of Large Purchases of
Class A shares of Category III Funds. See the Prospectus for additional
information regarding CDSCs.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF
CLASS A SHARES. An investor who has made a Large Purchase of Class A shares of a
Category I or II Fund will not be subject to a CDSC upon the redemption of those
shares in the following situations:
o Redemptions of shares of Category I or II Funds held more than 18
months;
47
o Redemptions of shares of Category III Funds purchased prior to
November 15, 2001;
o Redemptions of shares of Category III Funds purchased on or after
November 15, 2001 and held for more than 12 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 Redemptions from private foundations or endowment funds;
o Redemptions 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;
o Redemptions of shares of Category I, II or III Funds or AIM Cash
Reserve Shares of AIM Money Market Fund acquired by exchange from
Class A shares of a Category I or II Fund, unless the shares
acquired by exchange are redeemed within 18 months of the
original purchase or the exchange of Category I or II Fund
shares;
o Redemptions of shares of Category III Funds, shares of AIM
Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money
Market Fund acquired by exchange from Class A shares of a
Category III Fund purchased prior to November 15, 2001;
o Redemptions of shares of Category I or II Funds acquired by
exchange from Class A shares of a Category III Fund purchased on
and after November 15, 2001, unless the shares acquired by
exchange are redeemed within 18 months of the original purchase
of the exchanged Category III Fund shares;
o Redemption of shares of Category III Funds, shares of AIM
Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money
Market Fund acquired by exchange from Class A shares of a
Category III Fund purchased on and after November 15, 2001,
unless the shares acquired by exchange are redeemed within 12
months of the original purchase of the exchanged Category III
Fund shares; and
o Redemptions of shares of Category I or II Funds acquired by
exchange on and after November 15, 2001 from AIM Cash Reserve
Shares of AIM Money Market Fund if the AIM Cash Reserve Shares
were acquired by exchange from a Category I or II Fund, unless
the Category I or II Fund shares acquired by exchange are
redeemed within 18 months of the original purchase of the
exchanged Category I or II Funds shares.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B AND C SHARES.
Investors who purchased former GT Global funds Class B shares before June 1,
1998 are subject to the following waivers from the CDSC otherwise due upon
redemption:
o total or partial redemptions resulting from a distribution
following retirement in the case of a tax-qualified
employer-sponsored retirement;
48
o 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;
o 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;
o redemptions made in connection with participant-directed
exchanges between options in an employer-sponsored benefit plan;
o redemptions made for the purpose of providing cash to fund a loan
to a participant in a tax-qualified retirement plan;
o 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;
o 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));
o 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 redemptions of Class B or Class
C shares, as applicable:
o Additional purchases of Class C shares of AIM International Value
Fund and AIM Real Estate Fund by shareholders of record on April
30, 1995, of these Funds, except that shareholders whose
broker-dealers maintain a single omnibus account with AFS on
behalf of those shareholders, perform sub-accounting functions
with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995, from shareholders
whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor of
a living trust, of shares held in the account at the time of
death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70 1/2 or older,
and only with respect to that portion of such distributions that
does not exceed 12% annually of the participant's or
beneficiary's account value in a particular AIM Fund; (ii) in
kind transfers of assets where the participant or beneficiary
notifies the distributor of the transfer no later than the time
the transfer occurs; (iii) tax-free rollovers or transfers of
assets to another plan of the type described above invested in
Class B or Class C shares of one or more of the AIM Funds; (iv)
tax-free returns of excess contributions or returns of excess
deferral amounts; and (v) distributions on the death or
disability (as defined in the Code) of the participant or
beneficiary;
49
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 AIM Fund when the account value falls below
the minimum required account size of $500;
o Investment account(s) of AIM;
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; and
o Redemptions of Class C shares, where such redemptions are in
connection with employee terminations or withdrawals from (i) a
pension, profit-sharing or other employee benefit trust created
pursuant to a plan qualified under Section 401 of the Code; and
(ii) a 457 plan, even if more than one beneficiary or participant
is involved.
General Information Regarding Purchases, Exchanges and Redemptions
GOOD ORDER. Purchase, exchange and redemption orders must be received
in good order. To be in good order, an investor must supply AFS with all
required information and documentation, including signature guarantees when
required. In addition, if a purchase of shares is made by check, the check must
be received in good order. This means that the check must be properly completed
and signed, and legible to AFS in its sole discretion.
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer or
other financial intermediary to ensure that all orders are transmitted on a
timely basis to AFS. Any loss resulting from the failure of the dealer or
financial intermediary to submit an order within the prescribed time frame will
be borne by that dealer or financial intermediary. 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.
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 $250,000 or the proceeds are to be sent to the address of
record. 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 AFS' current Signature Guarantee Standards and
Procedures, such as certain domestic banks, credit unions, securities dealers,
or securities exchanges. AFS 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 TELEPHONE. By signing an account application form, an
investor appoints AFS as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by AFS 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
50
premises. AFS 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 AFS 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. AFS 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.
INTERNET TRANSACTIONS. 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 AFS 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 Connect option, he
will notify AFS in writing, and (2) the AIM Internet Connect option may be
terminated at any time by the AIM Funds.
OFFERING PRICE
The following formula may be used to determine the public offering
price per Class A share of an investor's investment:
<Table>
Net Asset Value/(1 - Sales Charge as % of Offering Price) = Offering Price.
</Table>
For example, at the close of business on October 31, 2001, AIM Asian
Growth Fund - Class A shares had a net asset value per share of $8.59. The
offering price, assuming an initial sales charge of 5.50%, therefore was $9.09.
Calculation of Net Asset Value
Each Fund determines its net asset value per share 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, each Fund determines
its net asset value per share as of the close of the NYSE on such day. For
purposes of determining net asset value per share, the Fund will generally use
futures and options contract closing prices which are available fifteen (15)
minutes after the close of the customary trading session of the NYSE. The Funds
determine net asset value per share by dividing the value of a Fund's
securities, cash and other assets (including interest accrued but not collected)
attributable to a particular class, less all its liabilities (including accrued
expenses and dividends payable) attributable to that class, by the total number
of shares outstanding of that class. Determination of a Fund's net asset value
per share is made in accordance with generally accepted accounting principles.
Each security (excluding convertible bonds) held by a Fund is valued at
its last sales price on the exchange where the security is principally traded
or, lacking any sales on a particular day, the security is valued at the closing
bid price on that day. Each security traded in the over-the-counter market (but
not
51
including securities reported on the NASDAQ National Market System) is valued at
the closing bid price furnished by independent pricing services or market
makers. Each security reported on the NASDAQ National Market System is valued at
the last sales price on the valuation date or absent a last sales price, at the
closing bid price 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 securities
(including convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. 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 ask 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. Short-term investments are
valued at amortized cost when the security has 60 days or less to maturity.
Foreign securities are converted into U.S. dollars using exchange rates
as of the close of the NYSE. Generally, trading in foreign securities, corporate
bonds, U.S. Government securities and money market instruments is substantially
completed each day at various times prior to the close of the customary trading
session of the NYSE. The values of such securities used in computing the net
asset value of each Fund's shares are determined as of the close of the
respective markets. Occasionally, events affecting the values of such securities
may occur between the times at which such values are determined and the close of
the customary trading session of the NYSE which will not be reflected in the
computation of a Fund's net asset value. If a development/event has actually
caused that closing price to no longer reflect actual value, the closing prices,
as of the close of the applicable market, may be adjusted to reflect the fair
value of the affected securities as of the close of the NYSE 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 cannot exchange or redeem shares of the Fund.
REDEMPTION IN KIND
AIM intends to redeem all shares of the Funds in cash. It is possible
that future conditions may make it undesirable for a Fund to pay for redeemed
shares in cash. In such cases, the Fund may make payment in securities or other
property if the Fund has made an election under Rule 18f-1 under the 1940 Act.
Rule 18f-1 obligates a Fund to redeem for cash all shares presented to such Fund
for redemption by any one shareholder in an amount up to the lesser of $250,000
or 1% of that Fund's net assets in any 90-day period. Securities delivered in
payment of redemptions are valued at the same value assigned to them in
computing the applicable Fund's net asset value per share. Shareholders
receiving such securities are likely to incur brokerage costs on their
subsequent sales of such securities.
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, generally must withhold as of January
1, 2002, 30% 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
52
subject to backup withholding; however, the backup withholding rate decreases in
phases to 28% for distributions made in the year 2006 and thereafter.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund, or
2. the IRS notifies the Fund that the investor furnished an
incorrect TIN, or
3. the investor or the Fund is notified by the IRS that the
investor is subject to backup withholding because the investor
failed to report all of the interest and dividends on such
investor's tax return (for reportable interest and dividends
only), or
4. the investor fails to certify to the Fund that the investor is
not subject to backup withholding under (3) above (for
reportable interest and dividend accounts opened after 1983
only), or
5. the investor does not certify his TIN. This applies only to
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
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. AIM or AFS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning
withholding.
IRS PENALTIES - Investors who do not supply the AIM Funds with a
correct TIN will be subject to a $50 penalty imposed by the IRS unless such
failure is due to reasonable cause and not willful neglect. If an investor
falsifies information on this form or makes any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, such investor may be subject to a $500 penalty imposed by the IRS
and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities
are not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
generally remains in effect for a period starting on the date the Form is signed
and ending on the last day of the third succeeding calendar year. Such
shareholders may, however, be subject to federal income tax withholding at a 30%
rate on ordinary income dividends and other distributions. Under applicable
treaty law, residents of treaty countries may qualify for a reduced rate of
withholding or a withholding exemption.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare and pay annually net
investment income dividends and capital gain distributions, except for AIM
Global Income Fund which will pay monthly net investment income dividends as
described below. It is each Fund's intention to distribute substantially all of
its net investment income and realized net capital gains by the end of each
taxable year. In determining the amount of capital gains, if any, available for
distribution, capital gains will be offset against available net capital loss,
if any, carried forward from previous fiscal periods. All dividends and
distributions will be automatically reinvested in additional shares of the same
class of each Fund unless the shareholder has requested in writing to receive
such dividends and distributions in cash or that they be invested in shares of
another AIM Fund, subject to the terms and conditions set forth in the
Prospectus under the caption "Special Plans - Automatic Dividend Investment".
Such dividends and distributions will be reinvested at
53
the net asset value per share determined on the ex-dividend date. In the case of
AIM Global Income Fund, dividends and distributions will be reinvested at the
net asset value per share determined on the reinvestment date. If a
shareholder's account does not have any shares in it on a dividend or capital
gain 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.
In the case of AIM Global Income Fund, it is the policy to declare
daily and pay monthly net investment income dividends and declare and pay
annually any capital gain distributions. Dividends begin accruing on the first
business day of the Fund on which a purchase order for shares of the Fund is
effective (settle date), and accrue through the day prior to which a redemption
order is effective (settle date). Distributions are declared to shareholders of
record immediately prior to the determination of the net asset value of the
Fund. Thus, if a purchase order is effective on Friday, dividends will begin
accruing on Friday (unless such day is not a business day of the Fund).
A dividend or distribution paid by a Fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares because of higher distribution fees paid by Class B and
Class C shares. Other class-specific expenses may also affect dividends on
shares of those classes. Expenses attributable to a particular class ("Class
Expenses") include distribution plan expenses, which must be allocated to the
class for which they are incurred. Other expenses may be allocated as Class
Expenses, consistent with applicable legal principals under the 1940 Act and the
Code.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected
to be taxed as a regulated investment company under Subchapter M of the Code. As
a regulated investment company, each Fund is not subject to federal income tax
on the portion of its net investment income (i.e., taxable interest, dividends
and other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes (i) at least 90% of its investment
company taxable income (i.e., 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 (ii) at least 90% of the excess of its tax-exempt
interest income under Code Section 103(a) over its deductions disallowed under
Code Sections 265 and 171(a)(2) for the taxable year (the "Distribution
Requirement"), and satisfies certain other requirements of the Code that are
described below. Distributions by a Fund made during the taxable year or, under
specified circumstances, within twelve months after the close of the taxable
year, will be considered distributions of income and gain of the taxable year
and can therefore satisfy the Distribution Requirement.
Each Fund may use "equalization accounting" in determining the portion
of its net investment income and capital gain net income that has been
distributed. A Fund that elects to use equalization accounting will allocate a
portion of its realized investment income and capital gain to redemptions of
Fund shares and will reduce the amount of such income and gain that it
distributes in cash. However, each Fund intends to make cash distributions for
each taxable year in an aggregate amount that is sufficient to satisfy the
Distribution Requirement without taking into account its use of equalization
accounting. The Internal Revenue Service has not published any guidance
concerning the methods to be used in allocating investment income and capital
gain to redemptions of shares. In the event that the
54
Internal Revenue Service determines that a Fund is using an improper method of
allocation and has underdistributed its net investment income and capital gain
net income for any taxable year, such Fund may be liable for additional federal
income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gain from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gain are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gain from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement").
In addition to satisfying the requirements described above, each Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company (the "Asset Diversification Test"). Under this test, at the
close of each quarter of each Fund's taxable year, at least 50% of the value of
the 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 the Fund's 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.
For purposes of the Asset Diversification Test, the IRS has ruled that
the issuer of a purchased listed call option on stock is the issuer of the stock
underlying the option. The IRS has also informally ruled that, in general, the
issuers of purchased or written call and put options on securities, of long and
short positions on futures contracts on securities and of options on such future
contracts are the issuers of the securities underlying such financial
instruments where the instruments are traded on an exchange.
Where the writer of a listed call option owns the underlying
securities, the IRS has ruled that the Asset Diversification Test will be
applied solely to such securities and not to the value of the option itself.
With respect to options on securities indexes, futures contracts on securities
indexes and options on such futures contracts, the IRS has informally ruled that
the issuers of such options and futures contracts are the separate entities
whose securities are listed on the index, in proportion to the weighing of
securities in the computation of the index. It is unclear under present law who
should be treated as the issuer of forward foreign currency exchange contracts,
of options on foreign currencies, or of foreign currency futures and related
options. It has been suggested that the issuer in each case may be the foreign
central bank or the foreign government backing the particular currency. Due to
this uncertainty and because the Funds may not rely on informal rulings of the
IRS, the Funds may find it necessary to seek a ruling from the IRS as to the
application of the Asset Diversification Test to certain of the foregoing types
of financial instruments or to limit its holdings of some or all such
instruments in order to stay within the limits of such test.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
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 such Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction in the case of corporate shareholders.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY. In
general, gain or loss recognized by a Fund on the disposition of an asset will
be a capital gain or loss. However, gain recognized on the disposition of a debt
obligation purchased by a Fund at a market discount (generally, at a price less
than its principal amount) will be treated as ordinary income to the extent of
the portion of the market discount which accrued during the period of time the
Fund held the debt obligation unless the Fund made an election to accrue market
discount into income. If a Fund purchases a debt obligation that was originally
issued at a discount, the Fund is generally required to include in gross income
each year
55
the portion of the original issue discount which accrues during such year. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract or of foreign currency itself, will generally
be treated as ordinary income or loss.
Certain hedging transactions that may be engaged in by certain of the
Funds (such as short sales "against the box") may be subject to special tax
treatment as "constructive sales" under Section 1259 of the Code if a Fund holds
certain "appreciated financial positions" (defined generally as any interest
(including a futures or forward contract, short sale or option) with respect to
stock, certain debt instruments, or partnership interests if there would be a
gain were such interest sold, assigned, or otherwise terminated at its fair
market value). Upon entering into a constructive sales transaction with respect
to an appreciated financial position, a Fund will generally be deemed to have
constructively sold such appreciated financial position and will recognize gain
as if such position were sold, assigned, or otherwise terminated at its fair
market value on the date of such constructive sale (and will take into account
any gain for the taxable year which includes such date).
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into will be subject to
special tax treatment as "Section 1256 contracts." Section 1256 contracts that a
Fund holds 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 and 40% short-term gain or loss.
However, in the case of Section 1256 contracts that are forward foreign currency
exchange contracts, the net gain or loss is separately determined and (as
discussed above) generally treated as ordinary income or loss. If such a future
or option is held as an offsetting position and can be considered a straddle
under Section 1092 of the Code, such a straddle will constitute a mixed
straddle. A mixed straddle will be subject to both Section 1256 and Section 1092
unless certain elections are made by the Fund.
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.
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 taxable income of a Fund may exceed its book income. Accordingly,
the amount which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may also differ from
the book income of the Fund and may be increased or decreased as compared to a
fund that did not engage in such transactions.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible
excise tax is imposed on a regulated investment company that fails to distribute
in each calendar year an amount equal to 98% of ordinary taxable income for the
calendar year and 98% of capital gain net income (excess of capital gains over
capital losses) for the one-year period ended on October 31 of such calendar
year (or, at the
56
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). 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) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (2) exclude
Section 988 foreign currency gains and losses incurred after October 31 (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
Each Fund generally intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
in the event that the Internal Revenue Service determines that a Fund is using
an improper method of allocation for purposes of equalization accounting (as
discussed above), such Fund may be liable for excise tax. Moreover, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability. In addition, under certain circumstances, a Fund may elect to pay a
minimal amount of excise tax.
PFIC INVESTMENTS. The Funds 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.
The application of the PFIC rules may affect, among other things, the
character of gain, 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. For these reasons the amount that 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 substantially as
compared to a fund that did not invest in PFIC stock.
SWAP AGREEMENTS. Each Fund may enter into swap agreements. The rules
governing the tax aspects of swap agreements are in a developing stage and are
not entirely clear in certain respects. Accordingly, while a Fund intends to
account for such transactions in a manner deemed to be appropriate, the IRS
might not accept such treatment. If it did not, the status of a Fund as a
regulated investment company might be affected. Each Fund intends to monitor
developments in this area. Certain requirements that must be met under the Code
in order for a Fund to qualify as a regulated investment company may limit the
extent to which the Fund will be able to engage in swap agreements.
FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially
all of its investment company taxable income for each taxable year. Such
distributions will be taxable to shareholders as ordinary income and treated as
dividends for federal income tax purposes, but they will qualify for the 70%
dividends received deduction for corporations only to the extent discussed
below.
A Fund may either retain or distribute to shareholders its net capital
gain (net long-term capital gain over net short-term capital loss) for each
taxable year. Each Fund currently intends to distribute any such amounts. If net
capital gain is distributed and designated as a capital gain dividend, it will
be taxable to shareholders as long-term capital gain (currently taxable at a
maximum rate of 20% for noncorporate shareholders) regardless of the length of
time the shareholder has held his shares or whether such gain was recognized by
the Fund prior to the date on which the shareholder acquired his shares.
Conversely, if a Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carry
forwards) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
treated as if each received a
57
distribution of its pro rata share of such gain, with the result that each
shareholder will be required to report its pro rata share of such gain on its
tax return as long-term capital gain, will receive a refundable tax credit for
its pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for its shares by an amount equal to the deemed distribution less the
tax credit.
Legislation enacted in 1997 lowers the maximum capital gain tax rate
from 20% to 18% with respect to capital assets 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 elections to treat any readily tradable
stock it holds on January 1, 2001 as having been sold and reacquired on January
2, 2001 at its closing market price on that date and to treat any other security
in its portfolio as having been sold and reacquired on January 1 for an amount
equal to its fair market value on that date. If a Fund makes any such election
(when it files its tax return), it will recognize gain, but not loss, on the
deemed sale, which may cause a Fund to increase the amount of distributions that
the Fund will make in comparison to a fund that did not make such an election.
The Funds have not yet determined whether they will make this election with
respect to any stock or securities in their respective portfolios.
Ordinary income dividends paid by a Fund with respect to a taxable year
will qualify for the 70% dividends received deduction generally available to
corporations (other than corporations, such as "S" corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
The corporate dividends received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise disallowed
in determining a corporation's AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from the
Fund into account (without a dividend received deduction) in determining their
adjusted current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMTI net operating loss deduction)) that is includable in AMTI. However, certain
small corporations are wholly exempt from the AMT.
Distributions by a Fund that do not constitute earnings and profits
will be treated as a return of capital to the extent of (and in reduction of)
the shareholder's tax basis in his shares; any excess will be treated as gain
from the sale of his shares, as discussed below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by a Fund, such distribution generally will be
taxable even though it represents a return of invested
58
capital. Investors should be careful to consider the tax implications of buying
shares of a Fund just prior to a distribution. The price of shares purchased at
this time may reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a distribution which
generally will be taxable to them.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss
on the sale or redemption of shares of a Fund in an amount equal to the
difference between the proceeds of the sale or redemption and the shareholder's
adjusted tax basis in the shares. All or a portion of any loss so recognized may
be deferred if the shareholder purchases other shares of the Fund within thirty
(30) days before or after the sale or redemption. In general, any gain or loss
arising from (or treated as arising from) the sale or redemption of shares of a
Fund will be considered capital gain or loss and will be long-term capital gain
or loss if the shares were held for longer than one year. Currently, any
long-term capital gain recognized by a non-corporate shareholder will be subject
to tax at a maximum rate of 20%. However, any capital loss arising from the sale
or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on such shares. Capital losses in any year are deductible only to the
extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of
ordinary income.
If a shareholder (a) incurs a sales load in acquiring shares of a Fund,
(b) disposes of such shares less than 91 days after they are acquired, and (c)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of, but shall be treated as incurred on the
acquisition of the shares subsequently acquired. The wash sale rules may also
limit the amount of loss that may be taken into account.
BACKUP WITHHOLDING. The Funds may be required to withhold as of January
1, 2002, 30% of distributions and/or redemption payments; however, this rate is
reduced in phases to 28% for distributions made in the year 2006 and thereafter.
For more information refer to "Purchase, Redemption and Pricing of Shares -
Backup Withholding".
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder"), depends on whether
the income from a Fund is "effectively connected" with a U.S. trade or business
carried on by such shareholder. If the income from a Fund is not effectively
connected with a U.S. trade or business carried on by a foreign shareholder,
distributions (other than distributions of long-term capital gain) will be
subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon
the gross amount of the distribution. Such a foreign shareholder would generally
be exempt from U.S. federal income tax on gain realized on the redemption of
shares of a Fund, capital gain dividends and amounts retained by a Fund that are
designated as undistributed net capital gain.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale or redemption of
shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 30% on distributions
made on or after January 1, 2002 that are otherwise exempt from withholding tax
(or taxable at a reduced treaty rate) unless such shareholders furnish the Fund
with proper notification of their foreign status; however, this rate is reduced
in phases to 28% for distributions made in the year 2006 and thereafter.
Foreign shareholders may be subject to U.S. withholding tax at a rate
of 30% on the income resulting from a Fund's election to treat any foreign
income tax paid by it as paid by its shareholders, but
59
may not be able to claim a credit or deduction with respect to the withholding
tax for the foreign tax treated as having been paid by them.
Foreign persons who file a United States tax return to obtain a U.S.
tax refund and who are not eligible to obtain a social security number must
apply to the IRS for an individual taxpayer identification number, using IRS
Form W-7. For a copy of the IRS Form W-7 and accompanying instructions, please
contact your tax advisor or the IRS.
Transfers by gift of shares of a Fund by a foreign shareholder who is a
nonresident alien individual will not be subject to U.S. federal gift tax. An
individual who, at the time of death, is a foreign shareholder will nevertheless
be subject to U.S. federal estate tax with respect to shares at the graduated
rates applicable to U.S. citizens and residents, unless a treaty exception
applies. In the absence of a treaty, there is a $13,000 statutory estate tax
credit.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign tax.
FOREIGN INCOME TAX. Investment income received by each Fund from
sources within foreign countries may be subject to foreign income tax 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, tax
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 tax 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 tax paid by the Fund that are attributable to any
distributions they receive; and (ii) either to deduct their pro-rata share of
foreign tax 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 tax 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 tax 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 gain from the sale of stock and
securities and certain currency fluctuation gain and loss 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. Individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign tax included on Form 1099 and
whose foreign source income is all "qualified passive income" may elect each
year to be exempt from the foreign tax credit limitation and will be able to
claim a foreign tax credit without filing Form 1116 with its corresponding
requirement to report income and tax by country. Moreover, no foreign tax credit
will be allowable to any shareholder who has not held his shares of the Fund for
at least 16 days during the 30-day period beginning 15 days before the day such
shares become ex-dividend with respect to any Fund distribution to which foreign
income taxes are attributed (taking into account certain holding period
reduction requirements of the Code). Because of these limitations, shareholders
may be unable to claim a credit for the full amount of their proportionate
shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing
general discussion of U.S. federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on the date of this Statement
of Additional Information. Future legislative or administrative changes
60
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 for ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Distributions may also
be subject to additional state, local and foreign taxes depending on each
shareholder's particular situation. Non-U.S. shareholders may be subject to U.S.
tax rules that differ significantly from those summarized above. Shareholders
are urged to consult their tax advisers as to the consequences of these and
other state and local tax rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTION PLANS
The Company has adopted distribution plans pursuant to Rule 12b-1 under
the 1940 Act with respect to each Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). Each Fund, pursuant to the Plans,
pays AIM Distributors compensation at the annual rate, shown immediately below,
of the Fund's average daily net assets of Class A shares. Each Fund pays 1.00%
of the average daily net assets of Class B shares and of Class C shares.
<Table>
<Caption>
FUND CLASS A
---- -------
AIM Asian Growth Fund 0.35%
AIM European Development Fund 0.35
AIM Global Aggressive Growth Fund 0.50
AIM Global Growth Fund 0.50
AIM Global Income Fund 0.50
AIM International Equity Fund 0.30
</Table>
All of the Plans compensate AIM Distributors for the purpose of
financing any activity which is primarily intended to result in the sale of
shares of the Funds. Such activities 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 each
Plan.
Amounts payable by a Fund under the Plans need not be directly related
to the expenses actually incurred by AIM Distributors on behalf of each Fund.
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 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.
AIM Distributors may from time to time waive or reduce any portion of
its 12b-1 fee for Class A shares 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.
The Funds may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares attributable to the customers
of selected dealers and financial institutions to such dealers and financial
institutions, including AIM Distributors, acting as principal, who furnish
continuing personal shareholder services to their customers who purchase and own
the applicable class of shares of
61
the Fund. Under the terms of a shareholder service agreement, such personal
shareholder services include responding to customer inquiries and providing
customers with information about their investments. Any amounts not paid as a
service fee under each Plan would constitute an asset-based sales charge.
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 will be calculated at the end of each payment period for each
business day of the Funds during such period at the annual rate specified in
each agreement based on the average daily net asset value of the Funds' shares
purchased or acquired through exchange. Fees 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 such Fund's shares are held.
Selected dealers and other institutions entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another. 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 Funds and not of AIM Distributors.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD").
See Appendix I for a list of the amounts paid by each class of shares
of each Fund to AIM Distributors pursuant to the Plans for the year ended
October 31, 2001 and Appendix J for an estimate by category of the allocation of
actual fees paid by each class of shares of each Fund pursuant to its respective
distribution plan for the year ended October 31, 2001.
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 (the "Rule
12b-1 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 its respective shareholders.
The anticipated benefits that may result from the Plans with respect to
each Fund and/or the classes of each Fund and its shareholders include but are
not limited to the following: (1) rapid account access; (2) relatively
predictable flow of cash; and (3) a well-developed, dependable network of
shareholder service agents to help to curb sharp fluctuations in rates of
redemptions and sales, thereby reducing the chance that an unanticipated
increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans
continue from year to year as long as such continuance is specifically approved,
in person, at least annually by the Board of Directors, including a majority of
the Rule 12b-1 Directors. A Plan may be terminated as to any Fund or class by
the vote of a majority of the Rule 12b-1 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,
the Plans may be amended by the directors, including a majority of the Rule
12b-1 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 Independent Directors is committed to the discretion of the
Independent Directors.
62
The Class B Plan obligates 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 or its predecessors, unless there has
been a complete termination of the Class B Plan (as defined in such Plan) and
the Class B Plan expressly authorizes AIM Distributors to assign, transfer or
pledge its rights to payments pursuant to the Class B Plan.
DISTRIBUTOR
The Company has entered into master distribution agreements, as
amended, relating to the Funds (the "Distribution Agreements") with AIM
Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM,
pursuant to which AIM Distributors acts as the distributor of shares of the
Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas
77210-4739. Certain directors and officers of the Company are affiliated with
AIM Distributors. See "Management of the Company."
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds on a continuous basis directly and
through institutions with whom AIM Distributors has entered into selected dealer
agreements. AIM Distributors has not undertaken to sell any specified number of
shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of the
Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.0% of the purchase
price of the Class B shares sold by the dealer or institution, and will consist
of a sales commission equal to 3.75% of the purchase price of the Class B shares
sold plus an advance of the first year service fee of 0.25% with respect to such
shares. The portion of the payments to AIM Distributors under the Class B Plan
which constitutes an asset-based sales charge (0.75%) is intended in part to
permit AIM Distributors to recoup a portion of such sales commissions plus
financing costs. 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 any Fund) 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 or its
predecessors; 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 the Distribution Agreement for Class B shares
would not affect the obligation of Class B shareholders to pay contingent
deferred sales charges.
63
Total sales charges (front end and contingent deferred sales charges)
paid in connection with the sale of shares of each class of each Fund, if
applicable, for the last three fiscal years ending October 31, 2001 are found in
Appendix K.
CALCULATION OF PERFORMANCE DATA
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.
Average Annual Total Return Quotation
The standard formula for calculating average annual total return is as
follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the
applicable maximum sales load is deducted at the
beginning of the 1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods
(or fractional portion of such period).
The average annual total returns for each Fund, with respect to its
Class A, Class B and Class C shares, for the one, five and ten year periods (or
since inception if applicable) ended October 31, 2001 are found in Appendix L.
Total returns quoted in advertising reflect all aspects of a Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value per share over the
period. Cumulative total return reflects the performance of a Fund over a stated
period of time. Average annual total returns are calculated by determining the
growth or decline in value of a hypothetical investment in a 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.
Each Fund's total return is calculated in accordance with a
standardized formula for computation of annualized total return. Standardized
total return for Class A shares reflects the deduction of a Fund's maximum
front-end sales charge at the time of purchase. Standardized total return for
Class B and Class C shares reflects the deduction of the maximum applicable
contingent deferred sales charge on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including
changes in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. Because average annual returns tend to even out
variations in the Fund's return, investors should recognize that such returns
are not the same as actual year-by-year results. To illustrate the components of
overall performance, a Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
64
Alternative Total Return Quotations
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
n
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of
only a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
Cumulative total return across a stated period may be calculated as
follows:
P(1+V)=ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of,
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
The cumulative total returns for each Fund, with respect to its Class
A, Class B and Class C shares, for the one, five and ten year periods (or since
inception if applicable) ended October 31, 2001 are found in Appendix L.
Average Annual Total Return (After Taxes on Distributions) Quotations
A Fund's average annual total return (after taxes on distributions)
shows its overall change in value, including changes in share price and assuming
all the Fund's dividends and capital gain distributions are reinvested. It
reflects the deduction of federal income taxes on distributions, but not on
redemption proceeds. Average annual total returns (after taxes on distributions)
are calculated by determining the after-tax growth or decline in value of a
hypothetical investment in a 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. Because average annual total returns (after taxes on distributions) tend
to even out variations in the Fund's return, investors should recognize that
such returns are not the same as actual year-by-year results. To illustrate the
components of overall performance, the Fund may separate its average annual
total returns (after taxes on distributions) into income results and capital
gains or losses.
The standard formula for calculating average annual total return (after
taxes on distributions) is:
n
P(1+T) =ATV
D
where P = a hypothetical initial payment of $1,000 ;
T = average annual total return (after taxes on
distributions);
N = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at
D the beginning of the 1-, 5-, or 10-year periods (or
since inception, if applicable) at the end of the 1-,
5-, or 10-year periods (or since inception, if
applicable), after taxes on fund distributions but not
after taxes on redemption.
65
Standardized average total return (after taxes on distributions) for
Class A shares reflects the deduction of a Fund's maximum front-end sales charge
at the time of purchase.
The after-tax returns assume all distributions by the Fund, less the
taxes due on such distributions, are reinvested at the price calculated as
stated in the prospectus on the reinvestment dates during the period. Taxes on
the Fund's distributions are calculated by applying to each component of the
distribution (e.g., ordinary income and long-term capital gain) the highest
corresponding individual marginal federal income tax rates in effect on the
reinvestment date. The taxable amount and tax character of each distribution is
as specified by the Fund on the dividend declaration date, but reflects any
subsequent recharacterizations of distributions. The effect of applicable tax
credits, such as the foreign tax credit, are also taken into account. The
calculations only reflect federal taxes, and thus do not reflect state and local
taxes or the impact of the federal alternative minimum tax.
The average annual total returns (after taxes on distributions) for
each Fund, with respect to its Class A, Class B and Class C shares, for the one,
five, and ten year periods (or since inception if applicable) ended October 31,
2001 are found in Appendix L.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund
Shares) Quotation
The Fund's average annual total return (after taxes on distributions
and sale of Fund shares) shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. It reflects the deduction of federal income taxes on both
distributions and proceeds. Average annual total returns (after taxes on
distributions and redemption) are calculated by determining the after-tax growth
or decline in value of a hypothetical investment in a 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. Because average annual total returns (after taxes on
distributions and redemption) tend to even out variations in the Fund's return,
investors should recognize that such returns are not the same as actual
year-by-year results. To illustrate the components of overall performance, a
Fund may separate its average annual total returns (after taxes on distributions
and redemption) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after
taxes on distributions and redemption) is:
n
P(1+T) =ATV
DR
where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions and redemption);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at
DR the beginning of the 1-, 5-, or 10-year periods (or
since inception, if applicable) at the end of the 1-,
5-, or 10-year periods (or since inception, if
applicable), after taxes on fund distributions and
redemption.
Standardized average annual total return (after taxes on distributions
and redemption) for Class A shares reflects the deduction of a Fund's maximum
front-end sales charge at the time of purchase.
The after-tax returns assume all distributions by a Fund, less the
taxes due on such distributions, are reinvested at the price calculated as
stated in the prospectus on the reinvestment dates during the period. Taxes due
on the Fund's distributions are calculated by applying to each component of the
distribution (e.g., ordinary income and long-term capital gain) the highest
corresponding individual marginal federal income tax rates in effect on the
reinvestment date. The taxable amount and tax character of each distribution is
as specified by the Fund on the dividend declaration date, but reflects any
subsequent recharacterizations of distributions. The effect of applicable tax
credits, such as the foreign
66
tax credit, are also taken into account. The calculations only reflect federal
taxes, and thus do not reflect state and local taxes or the impact of the
federal alternative minimum tax.
The ending values for each period assume a complete liquidation of all
shares. The ending values for each period are determined by subtracting capital
gains taxes resulting from the sale of Fund shares and adding the tax benefit
from capital losses resulting form the sale of Fund shares. The capital gain or
loss upon sale of Fund shares is calculated by subtracting the tax basis from
the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are
calculated using the highest federal individual capital gains tax rate for gains
of the appropriate character (e.g., ordinary income or long-term) in effect on
the date of the sale of Fund shares and in accordance with federal tax law
applicable on that date. The calculations assume that a shareholder may deduct
all capital losses in full.
The basis of shares acquired through the $1,000 initial investment are
tracked separately from subsequent purchases through reinvested distributions.
The basis for a reinvested distribution is the distribution net of taxes paid on
the distribution. Tax basis is adjusted for any distributions representing
returns of capital and for any other tax basis adjustments that would apply to
an individual taxpayer.
The amount and character (i.e., short-term or long-term) of capital
gain or loss upon sale of Fund shares is determined separately for shares
acquired through the $1,000 initial investment and each subsequent purchase
through reinvested distributions. The tax character is determined by the length
of the measurement period in the case of the initial $1,000 investment and the
length of the period between reinvestment and the end of the measurement period
in the case of reinvested distributions.
The average annual total returns (after taxes on distributions and
redemption) for each fund, with respect to its Class A, Class B and Class C
shares, for the one, five, and ten year periods (or since inception if
applicable) ended October 31, 2001 are found in Appendix L.
Yield Quotation
Yield is a function of the type and quality of a Fund's investments,
the maturity of the securities held in a Fund's portfolio and the operating
expense ratio of the Fund. Yield is computed in accordance with standardized
formulas 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.
A Fund's tax equivalent yield is the rate an investor would have to
earn from a fully taxable investment in order to equal the Fund's yield after
taxes. Tax equivalent yields are calculated by dividing the Fund's yield by one
minus a stated tax rate (if only a portion of the Fund's yield was tax-exempt,
only that portion would be adjusted in the calculation).
A Fund also may quote its distribution rate, which expresses the
historical amount of income the Fund paid as dividends to its shareholders as a
percentage of the Fund's offering price.
Income calculated for purposes of calculating a Fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for a Fund may differ from the rate of
distributions from the Fund paid over the same period or the rate of income
reported in the Fund's financial statements.
67
The standard formula for calculating yield for AIM Global Income Fund
is as follows:
6
YIELD = 2[((a-b)/(c x d)+1) -1]
Where a = dividends and interest earned during a stated 30-day
period. For purposes of this calculation, dividends are
accrued rather than recorded on the ex-dividend date.
Interest earned under this formula must generally be
calculated based on the yield to maturity of each
obligation (or, if more appropriate, based on yield to
call date).
b = expenses accrued during period (net of reimbursements).
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 AIM Global Income Fund are found in Appendix L.
Performance Information
All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of a Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. Further information regarding
each Fund's performance is contained in that Fund's annual report to
shareholders, which is available upon request and without charge.
From time to time, AIM or its affiliates may waive all or a portion of
their fees and/or assume certain expenses of any Fund. Fee waivers or reductions
or commitments to reduce expenses will have the effect of increasing that Fund's
yield and total return.
Certain Funds may participate in the initial public offering (IPO)
market in some market cycles. Because of these Funds' small asset bases, any
investment the Funds may make in IPOs may significantly increase these Funds'
total returns. As the Funds' assets grow, the impact of IPO investments will
decline, which may decrease the Funds' total returns.
The performance of each Fund will vary from time to time and past
results are not necessarily indicative of future results.
Total return and yield figures for the Funds are neither fixed nor
guaranteed. The Funds may provide performance information in reports, sales
literature and advertisements. The Funds may also, from time to time, quote
information about the Funds published or aired by publications or other media
entities which contain articles or segments relating to investment results or
other data about one or more of the Funds. The following is a list of such
publications or media entities:
<Table>
Advertising Age Forbes Nation's Business
Barron's Fortune New York Times
Best's Review Hartford Courant Pension World
Broker World Inc. Pensions & Investments
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Business Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
Financial World
</Table>
68
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
<Table>
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper, Inc.
</Table>
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the following:
<Table>
Bond Buyer Index MSCI EAFE Growth Index
COFI MSCI Europe Growth Index
Consumer Price Index MSCI World Free Index
Dow Jones Industrial Average MSCI World Growth Index
First Boston High Yield Index NASDAQ
Lehman World Government Bond Fund Russell 2000 Stock Index
Lipper European Funds Index Salomon Bros. World Gov't Bond Index
Lipper Global Fund Index Standard & Poor's Composite Index
Lipper Global Income Fund Index of 500 Stocks
Lipper Global Small Cap Category Standard & Poor's 400 Midcap Index
Lipper International Fund Index The Financial Times - Actuaries World Indices
Lipper Pacific Ex-Japan Index (a wide range of comprehensive measures
Morgan Stanley Capital International Indices of stock price performance for the world's
Including: major stock markets and regional areas
AC Asia Pacific Free Ex-Japan
AC World Index
EAFE Index
Europe Index
</Table>
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of
general economic conditions and interest rates. Advertising for such Funds may
also include references to the use of those Funds as part of an individual's
overall retirement investment program. From time to time, sales literature
and/or advertisements for any of the Funds may disclose: (i) the largest
holdings in the Funds' portfolios; (ii) certain selling group members; (iii)
certain institutional shareholders; (iv) measurements of risk, including
standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector
analyses of holdings in the Funds' portfolios.
From time to time, the Funds' 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, discussions regarding investment styles, such as the growth, value
or GARP (growth at a reasonable price) styles of investing, variable annuities,
dollar-cost averaging, stocks, bonds, money markets, certificates of deposit,
retirement, retirement plans, asset allocation, tax-free investing, college
planning and inflation.
69
APPENDIX A
RATINGS OF DEBT SECURITIES
The following is a description of the factors underlying the debt
ratings of Moody's, S&P and Fitch:
MOODY'S BOND RATINGS
Moody's describes its ratings for corporate bonds 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.
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 each generic
rating classification from Aa through Caa in its corporate bond rating system.
The modifier 1 indicates that the security ranks in
A-1
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.
MOODY'S MUNICIPAL BOND RATINGS
Aaa: Bonds 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 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. They 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 risks appear somewhat larger than in Aaa securities.
A: Bonds 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 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 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 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.
Caa: Bonds 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 rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds 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: Bonds in the Aa group which Moody's believes possess the
strongest investment attributes are designated by the symbol Aa1.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa to B. The modifier indicates that the
issue 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 category.
A-2
MOODY'S DUAL RATINGS
In the case of securities with a demand feature, two ratings are
assigned: one representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the other representing an
evaluation of the degree of risk associated with the demand feature.
MOODY'S SHORT-TERM LOAN RATINGS
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature variable rate demand obligation (VRDO). Such ratings will be designated
as VMIG or, if the demand feature is not rated, as NR. Short-term ratings on
issues with demand features are differentiated by the use of the VMIG symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
A VMIG rating may also be assigned to commercial paper programs. Such
programs are characterized as having variable short-term maturities but having
neither a variable rate nor demand feature.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4.
Gradations of investment quality are indicated by rating symbols, with
each symbol representing a group in which the quality characteristics are
broadly the same.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months.
PRIME-1: Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and
A-3
ample asset protection; broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and well-established access to a
range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or related supported institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Note: A Moody's commercial paper rating may also be assigned as an
evaluation of the demand feature of a short-term or long-term security with a
put option.
S&P BOND RATINGS
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by 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 highest 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 is 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 rated categories.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposure
to adverse conditions.
S&P MUNICIPAL BOND RATINGS
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based, in varying degrees, on the following
considerations: likelihood of default - capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in accordance
with the terms of the obligation; nature of and provisions of the obligation;
and protection
A-4
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by 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 highest rated issues only in a small degree.
Note: Ratings within the AA and A major rating categories may be
modified by the addition of a plus (+) sign or minus (-) sign to show relative
standing.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, AAA/A-1+). With short-term demand debt, the note rating symbols are
used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment: amortization schedule (the larger the final maturity relative to
other maturities, the more likely the issue will be treated as a note); and
source of payment (the more the issue depends on the market for its refinancing,
the more likely it is to be treated as a note).
Note rating symbols and definitions are as follows:
SP-1: Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A-5
Rating categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues with this rating are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt with this rating is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless it is believed that such
payments will be made during such grace period.
FITCH INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.
Bonds carrying the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
of taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
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-6
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.
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" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.
RATINGS OUTLOOK
An outlook is used to describe the most likely direction of any rating
change over the intermediate term. It is described as "Positive" or "Negative."
The absence of a designation indicates a stable outlook.
FITCH SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization of liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and
political environment that might affect the issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.
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.
A-7
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 that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
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 "DDD," "DD," or "D" categories.
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
A-8
APPENDIX B
DIRECTORS AND OFFICERS
As of December 31, 2001
The address of each director and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046. Each director oversees 86 portfolios in the AIM Funds
complex. Column two below includes length of time served with any predecessor
entities.
<Table>
<Caption>
- ------------------------------- ---------- -------------------------------------------------- ---------------------
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR DIRECTORSHIP(S)
COMPANY OFFICER HELD BY TRUSTEE
SINCE
- ------------------------------- ---------- -------------------------------------------------- ---------------------
INTERESTED PERSON
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Robert H. Graham** -- 1946 1991 Chairman, President and Chief Executive Officer, None
Director, Chairman and A I M Management Group Inc. (financial services
President holding company); Chairman and President, A I M
Advisors, Inc. (registered investment advisor);
Chairman, A I M Capital Management, Inc.
(registered investment advisor), A I M
Distributors, Inc. (registered broker dealer),
A I M Fund Services, Inc., (registered transfer
agent) and Fund Management Company (registered
broker dealer); and Director and Vice Chairman,
AMVESCAP PLC (parent of AIM and a global
investment management firm)
- ------------------------------- ---------- -------------------------------------------------- ---------------------
INDEPENDENT DIRECTORS
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Badgley Funds, Inc.
Director (registered
investment company)
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited
Director (technology consulting company) (insurance
company); and
Captaris, Inc.
(unified messaging
provider)
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Albert R. Dowden -- 1941 2000 Chairman, Cortland Trust, Inc. (registered None
Director investment company) and DHJ Media, Inc.;
Director, Magellan Insurance Company; Member of
Advisory Board of Rotary Power International
(designer, manufacturer, and seller of rotary
power engines); formerly, Director, President
and CEO, Volvo Group North America, Inc. and
director of various affiliated Volvo companies
- ------------------------------- ---------- -------------------------------------------------- ---------------------
</Table>
- --------
* Mr. Graham is considered an interested person of the fund because he is
an officer and a director of the advisor to, and a director of, the
Company.
B-1
<Table>
<Caption>
- ------------------------------- ---------- -------------------------------------------------- ---------------------
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR DIRECTORSHIP(S)
COMPANY OFFICER HELD BY TRUSTEE
SINCE
- ------------------------------- ---------- -------------------------------------------------- ---------------------
INDEPENDENT DIRECTORS
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Edward K. Dunn, Jr. -- 1935 1998 Formerly, Chairman, Mercantile Mortgage Corp.; None
Director Vice Chairman, President and Chief Operating
Officer, Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Corp.
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Administaff
Director Group, Inc. (government affairs company)
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Carl Frischling** -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Cortland Trust,
Director Frankel LLP Inc. (registered
investment company)
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Prema Mathai-Davis -- 1950 1998 Formerly, Chief Executive Officer, YWCA of the None
Director USA
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None
Director
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Ruth H. Quigley -- 1935 2001 Retired None
Director
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Louis S. Sklar -- 1939 1991 Executive Vice President, Development and None
Director Operations, Hines Interests Limited Partnership
(real estate development company)
- ------------------------------- ---------- -------------------------------------------------- ---------------------
OTHER OFFICERS
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Gary T. Crum -- 1947 1991 Director, Chief Executive Officer and Director N/A
Senior Vice President of Investments, A I M Capital Management, Inc.;
Director and Executive Vice President, A I M
Management Group Inc.; Director and Senior Vice
President, A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP PLC
- ------------------------------- ---------- -------------------------------------------------- ---------------------
</Table>
- ----------
** The law firm in which Mr. Frischling is a partner is counsel to the
independent directors/trustees of the AIM Funds and the AIM Funds pay
such firm's fees. The AIM Funds believe that Mr. Frischling is not an
interested person of the AIM Funds solely as a result of this
relationship and are currently communicating with the SEC to confirm
their view.
B-2
<Table>
<Caption>
- ------------------------------- ---------- -------------------------------------------------- ---------------------
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR DIRECTORSHIP(S)
COMPANY OFFICER HELD BY TRUSTEE
SINCE
- ------------------------------- ---------- -------------------------------------------------- ---------------------
OTHER OFFICERS
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Carol F. Relihan -- 1954 1991 Director, Senior Vice President, General Counsel N/A
Senior Vice President and and Secretary, A I M Advisors, Inc. and A I M
Secretary Management Group Inc.; Director, Vice President
and General Counsel, Fund Management Company;
and Vice President, A I M Fund Services, Inc.,
A I M Capital Management, Inc. and A I M
Distributors, Inc.
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Robert G. Alley -- 1948 1994 Managing Director and Chief Fixed Income N/A
Vice President Officer, A I M Capital Management, Inc. and Vice
President, A I M Advisors, Inc.
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Melville B. Cox -- 1943 1992 Vice President and Chief Compliance Officer, N/A
Vice President A I M Advisors, Inc. and A I M Capital
Management, Inc.; and Vice President, A I M
Fund Services, Inc.
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Edgar M. Larsen -- 1940 1999 Vice President, A I M Advisors, Inc.; and N/A
Vice President President and Chief Investment Officer, A I M
Capital Management, Inc.
- ------------------------------- ---------- -------------------------------------------------- ---------------------
Dana R. Sutton -- 1959 1991 Vice President and Fund Treasurer, A I M N/A
Vice President and Treasurer Advisors, Inc.
- ------------------------------- ---------- -------------------------------------------------- ---------------------
</Table>
B-3
OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2001
<Table>
<Caption>
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Name of Director Dollar Range of Equity Securities Aggregate Dollar Range of Equity
Per Fund Securities in All Registered
Investment Companies Overseen by
Director in The AIM Family
of Funds--Registered Trademark--
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Robert H. Graham AIM Asian Growth Fund $50,001 - $100,000
AIM European Development Fund Over $100,000
Over $100,000
AIM Global Aggressive Growth Fund Over $100,000
AIM International Equity Fund Over $100,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Frank S. Bayley AIM Global Growth Fund $10,001 - $50,000 $10,001 - $50,000
AIM Global Income Fund $1 - $10,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Bruce L. Crockett AIM International Equity Fund $1 - $10,000 $1 - $10,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Owen Daly II AIM International Equity Fund $10,001 - $50,000 Over $100,000(1)
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Albert R. Dowden -0- Over $100,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Edward K. Dunn, Jr. AIM Global Aggressive Growth Fund $10,001 - $50,000
Over $100,000(1)
AIM International Equity Fund $10,001 - $50,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Jack M. Fields -0- Over $100,000(1)
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Carl Frischling -0- Over $100,000(1)
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Prema Mathai-Davis European Development $10,001 - $50,000 Over $100,000(1)
Global Aggressive Growth $10,001 - $50,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Lewis F. Pennock -0- $10,001 - $50,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Ruth H. Quigley -0- $1 - $10,000
- ---------------------------- ------------------------------------------------------------- -------------------------------------
Louis S. Sklar International Equity Over $100,000 Over $100,000(1)
- ---------------------------- ------------------------------------------------------------- -------------------------------------
</Table>
- ----------
(1) Includes the total amount of compensation deferred by the
director at his or her election pursuant to a deferred
compensation plan. Such deferred compensation is placed in a
deferral account and deemed to be invested in one or more of
the AIM Funds.
B-4
APPENDIX C
DIRECTOR COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued
for each director of the Company who was not affiliated with AIM during the year
ended December 31, 2001:
<Table>
<Caption>
RETIREMENT ESTIMATED
AGGREGATE BENEFITS ANNUAL TOTAL
COMPENSATION ACCRUED BENEFITS COMPENSATION
FROM THE BY ALL UPON FROM ALL AIM
DIRECTOR COMPANY(1) AIM FUNDS(2) RETIREMENT(3) FUNDS(4)(5)
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Frank S. Bayley(6) $ 667 $ -0- $ 75,000 $ 112,000
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Bruce L. Crockett 8,558 36,312 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Owen Daly II(7) 8,558 33,318 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Albert R. Dowden 7,609 3,193 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Edward K. Dunn, Jr. 8,558 8,174 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Jack M. Fields 8,458 19,015 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Carl Frischling(8) 8,530 54,394 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Prema Mathai-Davis 8,558 21,056 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Lewis F. Pennock 8,558 37,044 75,000 126,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Ruth H. Quigley(6) 695 -0- 75,000 112,500
- ------------------------------------ ---------------- ---------------- ---------------- ----------------
Louis S. Sklar 8,316 53,911 75,000 123,000
==================================== ================ ================ ================ ================
</Table>
(1) The total amount of compensation deferred by all directors of the
Company during the fiscal year ended October 31, 2001, including
earnings, was $74,462.
(2) During the fiscal year ended October 31, 2001, the total amount of
expenses allocated to the Company in respect of such retirement
benefits was $17,470.
(3) Amounts shown assume each director serves until his or her normal
retirement date.
(4) All directors currently serve as directors or trustees of sixteen
registered investment companies advised by AIM.
(5) During the fiscal year ended October 31, 2001, the Company received
reimbursement for compensation paid to the directors of $2,276. During
the year ended December 31, 2001, all AIM Funds received reimbursement
of total compensation paid to the directors of $31,500.
(6) Mr. Bayley and Miss Quigley were elected to serve as directors on
September 28, 2001.
(7) Mr. Daly retired as director on December 31, 2001.
(8) During the fiscal year ended October 31, 2001 the Company paid $28,988
in legal fees to Kramer Levin Naftalis & Frankel LLP for services
rendered by such firm as counsel to the independent directors of the
Company. Mr. Frischling is a partner of such firm. The AIM Funds
believe that Mr. Frischling is not an interested person of the AIM
Funds solely as a result of this relationship and are currently
communicating with the SEC to confirm their view.
C-1
APPENDIX D
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Company, the names and addresses of the
record and beneficial holders of 5% or more of the outstanding shares of each
class of the Company's equity securities and the percentage of the outstanding
shares held by such holders are set forth below. Unless otherwise indicated
below, the Company has no knowledge as to whether all or any portion of the
shares owned of record are also owned beneficially.
A shareholder who owns beneficially 25% or more of the outstanding
securities of a Fund is presumed to "control" that Fund as defined in the 1940
Act. Such control may affect the voting rights of other shareholders.
All information listed below is as of February 1, 2002.
AIM ASIAN GROWTH FUND
<Table>
<Caption>
- ---------------------------------------- ------------------------- -------------------------- -------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
- ---------------------------------------- ------------------------- -------------------------- -------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
- ---------------------------------------- ------------------------- -------------------------- -------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration -0- -0- 11.12%
4800 Deer Lake Dr East 2nd Floor
Jacksonville FL, 32246
- ---------------------------------------- ------------------------- -------------------------- -------------------------
</Table>
AIM EUROPEAN DEVELOPMENT FUND
<Table>
<Caption>
- ---------------------------------------- ------------------------- -------------------------- -------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
- ---------------------------------------- ------------------------- -------------------------- -------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
- ---------------------------------------- ------------------------- -------------------------- -------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 6.13% 7.70% 21.41%
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
- ---------------------------------------- ------------------------- -------------------------- -------------------------
Charles Schwab & Co. Inc.
Reinvestment Account
101 Montgomery St. -0- -0- 6.91%
San Francisco, CA 94104
- ---------------------------------------- ------------------------- -------------------------- -------------------------
</Table>
D-1
AIM GLOBAL AGGRESSIVE GROWTH FUND
<Table>
<Caption>
- ---------------------------------------- ------------------------- -------------------------- -------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
- ---------------------------------------- ------------------------- -------------------------- -------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
- ---------------------------------------- ------------------------- -------------------------- -------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 8.93% 18.35% 23.93%
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
- ---------------------------------------- ------------------------- -------------------------- -------------------------
</Table>
AIM GLOBAL GROWTH FUND
<Table>
<Caption>
- ---------------------------------------- ------------------------- -------------------------- -------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
- ---------------------------------------- ------------------------- -------------------------- -------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
- ---------------------------------------- ------------------------- -------------------------- -------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 6.32% 11.75% 25.43%
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
- ---------------------------------------- ------------------------- -------------------------- -------------------------
</Table>
AIM GLOBAL INCOME FUND
<Table>
<Caption>
- ---------------------------------------- ------------------------- -------------------------- -------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
- ---------------------------------------- ------------------------- -------------------------- -------------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
- ---------------------------------------- ------------------------- -------------------------- -------------------------
Charles Schwab & Co Inc.
Reinvestment Account
101 Montgomery St 9.74% -0- -0-
San Francisco, CA 94104-0000
- ---------------------------------------- ------------------------- -------------------------- -------------------------
</Table>
D-2
AIM INTERNATIONAL EQUITY FUND
<Table>
<Caption>
- -------------------------------------- --------------------- -------------------- ------------------ ------------------
CLASS A CLASS B CLASS C INSTITUTIONAL
SHARES SHARES SHARES CLASS SHARES
- -------------------------------------- --------------------- -------------------- ------------------ ------------------
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF OF OF OF
RECORD RECORD RECORD RECORD
- -------------------------------------- --------------------- -------------------- ------------------ ------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 23.66% 28.27% 48.70% N/A*
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
- -------------------------------------- --------------------- -------------------- ------------------ ------------------
</Table>
* As of the date of this SAI, Institutional Class shares of the Fund had not yet
commenced operations.
MANAGEMENT OWNERSHIP
As of February 1, 2002, the directors and officers as a group owned
less than 1% of the shares outstanding of each class of each Fund.
D-3
APPENDIX E
MANAGEMENT FEES
For the last three fiscal years ended October 31, the management fees
payable by each Fund, the amounts waived by AIM and the net fees paid by each
Fund were as follows:
<Table>
<Caption>
FUND NAME 2001 2000
- -------------------- ---------------------------------------------- ----------------------------------------------
MANAGEMENT MANAGEMENT FEE NET MANAGEMENT MANAGEMENT MANAGEMENT FEE NET MANAGEMENT
FEE PAYABLE WAIVERS FEE PAID FEE PAYABLE WAIVERS FEE PAID
- -------------------- -------------- -------------- -------------- -------------- -------------- --------------
AIM Asian Growth
Fund $ 1,142,549 $ 418,664 $ 723,885 $ 985,987 $ 92,285 $ 893,672
- -------------------- -------------- -------------- -------------- -------------- -------------- --------------
AIM European
Development Fund 3,723,648 741 3,722,907 4,248,118 -0- 4,248,118
- -------------------- -------------- -------------- -------------- -------------- -------------- --------------
AIM Global
Aggressive Growth
Fund 14,440,026 4,957 14,435,069 22,245,857 -0- 22,245,857
- -------------------- -------------- -------------- -------------- -------------- -------------- --------------
AIM Global Growth
Fund 10,072,947 1,367,253 8,705,694 11,431,836 125,000 11,306,836
- -------------------- -------------- -------------- -------------- -------------- -------------- --------------
AIM Global Income
Fund 1,138,755 662,056 476,699 818,240 531,491 286,749
- -------------------- -------------- -------------- -------------- -------------- -------------- --------------
AIM International
Equity Fund 26,188,064 1,184,439 25,003,625 35,553,208 1,697,400 33,855,808
- -------------------- -------------- -------------- -------------- -------------- -------------- --------------
<Caption>
FUND NAME 1999
- -------------------- ----------------------------------------------
MANAGEMENT MANAGEMENT FEE NET MANAGEMENT
FEE PAYABLE WAIVERS FEE PAID
- -------------------- -------------- -------------- --------------
AIM Asian Growth
Fund $ 246,413 $ 207,130 $ 39,283
- -------------------- -------------- -------------- --------------
AIM European
Development Fund 1,607,698 -0- 1,607,698
- -------------------- -------------- -------------- --------------
AIM Global
Aggressive Growth
Fund 15,416,368 -0- 15,416,368
- -------------------- -------------- -------------- --------------
AIM Global Growth
Fund 5,898,665 -0- 5,898,665
- -------------------- -------------- -------------- --------------
AIM Global Income
Fund 703,524 423,180 280,344
- -------------------- -------------- -------------- --------------
AIM International
Equity Fund 25,205,776 1,122,543 24,083,233
- -------------------- -------------- -------------- --------------
</Table>
E-1
APPENDIX F
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services
for the last three fiscal years ended October 31:
<Table>
<Caption>
FUND NAME 2001 2000 1999
- ----------------------------------- -------------- -------------- --------------
AIM Asian Growth Fund $ 50,000 $ 50,000 $ 74,007
- ----------------------------------- -------------- -------------- --------------
AIM European Development Fund 98,393 109,571 75,332
- ----------------------------------- -------------- -------------- --------------
AIM Global Aggressive Growth Fund 173,416 182,264 127,117
- ----------------------------------- -------------- -------------- --------------
AIM Global Growth Fund 151,718 145,994 97,142
- ----------------------------------- -------------- -------------- --------------
AIM Global Income Fund 50,000 50,000 66,799
- ----------------------------------- -------------- -------------- --------------
AIM International Equity Fund 239,396 222,616 150,312
- ----------------------------------- -------------- -------------- --------------
</Table>
F-1
APPENDIX G
BROKERAGE COMMISSIONS
Brokerage commissions paid by each of the Funds during the last three
fiscal years were as follows:
<Table>
<Caption>
FUND 2001 2000 1999
---- ------------ ------------ ------------
AIM Asian Growth Fund $ 639,860 $ 399,380 $ 327,148
AIM European Development Fund 1,659,105 2,421,258 915,158
AIM Global Aggressive Growth Fund 4,823,156 4,389,277 4,648,141
AIM Global Growth Fund 3,878,451 3,310,002 1,919,718
AIM Global Income Fund 1,713 -0- 813
AIM International Equity Fund 9,379,067 12,585,724 9,975,166
</Table>
The variation in the brokerage commissions paid by AIM Asian Growth
Fund for the fiscal year ended October 31, 2001, as compared to the two prior
fiscal years, was due to fluctuations in asset levels, increased portfolio
turnover and record market volatility.
G-1
APPENDIX H
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended October 31, 2001, each Fund allocated
the following amount of transactions to broker-dealers that provided AIM with
certain research, statistics and other information:
<Table>
<Caption>
Related
Fund Transactions Brokerage Commissions
- ---- ------------ ---------------------
AIM Asian Growth Fund $ 727,389 $ 1,539
AIM European Development Fund 29,735,193 53,409
AIM Global Aggressive Growth Fund 146,271,124 219,801
AIM Global Growth Fund 222,470,023 262,203
AIM Global Income Fund -0- -0-
AIM International Equity Fund 105,774,615 178,024
</Table>
During the last fiscal year ended October 31, 2001, the Funds held
securities issued by the following companies, which are "regular" brokers or
dealers of one or more of the Funds identified below:
<Table>
<Caption>
Fund Security Market Value
---- -------- ------------
AIM European Development Fund Man Group PLC
Common Stock $ 6,979,913
AIM Global Growth Fund Morgan Stanley Dean Witter & Co.
Common Stock 10,028,600
Goldman Sachs Group, Inc. (The)
Common Stock 10,160,800
Lehman Brothers Holdings Inc.
Common Stock 9,056,700
AIM International Equity Fund Man Group PLC
Common Stock 11,367,149
</Table>
<Table>
<Caption>
Fund Bonds/Notes Market Value
---- ----------- ------------
AIM Global Income Fund Morgan Stanley Dean Witter & Co.
Bond $ 630,342
Lehman Brothers Holdings Inc.
Note 147,675
Salomon Smith Barney Holdings Inc.
Note 1,104,280
</Table>
H-1
APPENDIX I
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS
A list of amounts paid by each class of shares to AIM Distributors
pursuant to the Plans for the fiscal year ended October 31, 2001 follows:
<Table>
<Caption>
CLASS A CLASS B CLASS C
FUND SHARES SHARES SHARES
- ---- ------------ -------------- -----------
AIM Asian Growth Fund $ 279,427 $ 341,091 $ 63,229
AIM European Development Fund 744,355 1,362,388 430,512
AIM Global Aggressive Growth Fund 3,928,551 8,163,001 379,927
AIM Global Growth Fund 2,878,873 5,513,030 695,408
AIM Global Income Fund 534,690 536,152 21,261
AIM International Equity Fund 5,554,261 7,879,400 2,148,690
</Table>
I-1
APPENDIX J
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS
An estimate by category of the allocation of actual fees paid by Class
A Shares of the Funds during the year ended October 31, 2001, follows:
<Table>
<Caption>
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
------------ ------------ ------------ ------------ ------------
AIM Asian Growth Fund $ 29,613 $ 2,263 $ 9,066 $ -0- $ 238,485
AIM European Development Fund 88,679 6,726 28,224 -0- 620,726
AIM Global Aggressive Growth Fund 21,978 1,542 6,033 -0- 3,898,998
AIM Global Growth Fund 36,809 2,359 8,595 -0- 2,831,110
AIM Global Income Fund 11,246 751 2,608 -0- 520,085
AIM International Equity Fund 300,816 21,613 86,349 -0- 5,145,483
</Table>
An estimate by category of the allocation of actual fees paid by Class
B Shares of the Funds during the year ended October 31, 2001, follows:
<Table>
<Caption>
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
-------------- -------------- -------------- -------------- --------------
AIM Asian Growth Fund $ 5,345 $ -0- $ 2,138 $ 255,818 $ 77,790
AIM European Development Fund 47,499 3,124 14,464 1,021,791 275,511
AIM Global Aggressive Growth Fund 98,510 6,536 25,937 6,122,251 1,909,767
AIM Global Growth Fund 92,165 6,084 22,794 4,134,773 1,257,214
AIM Global Income Fund 4,340 323 1,076 402,114 128,299
AIM International Equity Fund 138,118 9,089 35,946 5,909,550 1,786,697
</Table>
An estimate by category of the allocation of actual fees paid by Class
C shares of the Funds during the year ended October 31, 2001, follows:
<Table>
<Caption>
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
-------------- -------------- -------------- -------------- --------------
AIM Asian Growth Fund $ 2,476 $ 134 $ 1,118 $ 19,165 $ 40,336
AIM European Development Fund 25,322 2,013 7,455 148,501 247,222
AIM Global Aggressive Growth Fund 16,977 1,250 4,340 97,704 262,656
AIM Global Growth Fund 36,038 2,459 8,693 199,739 448,478
AIM Global Income Fund 1,345 295 -0- 4,921 14,700
AIM International Equity Fund 76,649 5,519 22,144 507,760 1,533,618
</Table>
J-1
APPENDIX K
TOTAL SALES CHARGES
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 last three fiscal years ending October 31:
<Table>
<Caption>
2001 2000 1999
----------------------- ----------------------- -----------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
---------- ---------- ---------- ---------- ---------- ----------
AIM Asian Growth Fund $ 169,938 $ 28,223 $ 403,908 $ 64,327 $ 251,652 $ 43,007
AIM European Development Fund 770,414 123,615 2,672,361 432,931 870,792 143,067
AIM Global Aggressive Growth Fund 1,290,767 235,749 3,762,517 667,333 1,335,400 267,534
AIM Global Growth Fund 1,282,262 219,358 3,448,542 619,969 1,035,250 195,571
AIM Global Income Fund 78,200 13,996 141,875 26,727 159,748 28,250
AIM International Equity Fund 1,798,293 291,152 5,026,625 735,919 2,222,910 446,482
</Table>
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 last three fiscal years ended October 31:
<Table>
<Caption>
2001 2000 1999
------------ ------------ ------------
AIM Asian Growth Fund $ 61,331 $ 10,620 $ 240,319
AIM European Development Fund 142,050 117,258 50,219
AIM Global Aggressive Growth Fund 114,760 72,714 101,594
AIM Global Growth Fund 74,887 44,181 24,812
AIM Global Income Fund 3,017 6,061 3,743
AIM International Equity Fund 315,479 263,758 157,129
</Table>
K-1
APPENDIX L
PERFORMANCE DATA
The average annual total returns (including sales load) for each Fund,
with respect to its Class A shares, for the periods ended October 31, 2001, are
as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -23.87% N/A -4.88% 11/03/97
AIM European Development Fund -33.84% N/A 11.84% 11/03/97
AIM Global Aggressive Growth Fund -41.77% 0.15% 6.76% 09/15/94
AIM Global Growth Fund -43.96% 1.69% 6.55% 09/15/94
AIM Global Income Fund 3.53% 2.55% 5.50% 09/15/94
AIM International Equity Fund -31.93% 0.87% 7.34% 04/07/92
</Table>
The average annual total returns (including maximum applicable
contingent deferred sales charge) for each Fund, with respect to its Class B
shares, for the periods ended October 31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -23.91% N/A -4.95% 11/03/97
AIM European Development Fund -33.97% N/A 12.09% 11/03/97
AIM Global Aggressive Growth Fund -41.59% 0.28% 6.91% 09/15/94
AIM Global Growth Fund -44.42% 1.76% 6.70% 09/15/94
AIM Global Income Fund 3.08% 2.72% 5.68% 09/15/94
AIM International Equity Fund -31.79% 0.90% 3.55% 09/15/94
</Table>
The average annual total returns (including maximum applicable
contingent deferred sales charge) for each Fund, with respect to its Class C
shares, for the periods ended October 31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
-------------------------------------------------
INCEPTION
CLASS C SHARES: 1 YEAR SINCE INCEPTION DATE
-------------- ------ --------------- ---------
AIM Asian Growth Fund -20.74% -4.25% 11/03/97
AIM European Development Fund -31.16% 12.65% 11/03/97
AIM Global Aggressive Growth Fund -39.65% -3.15% 08/04/97
AIM Global Growth Fund -42.04% -2.50% 08/04/97
AIM Global Income Fund 7.08% 2.31% 08/04/97
AIM International Equity Fund -29.13% -2.77% 08/04/97
</Table>
L-1
The cumulative total returns (including sales load) for each Fund, with
respect to its Class A shares, for the periods ended October 31, 2001, are as
follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
--------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -23.87% N/A -18.11% 11/03/97
AIM European Development Fund -33.84% N/A 56.29% 11/03/97
AIM Global Aggressive Growth Fund -41.77% 0.76% 59.39% 09/15/94
AIM Global Growth Fund -43.96% 8.72% 57.13% 09/15/94
AIM Global Income Fund 3.53% 13.44% 46.47% 09/15/94
AIM International Equity Fund -31.93% 4.43% 96.93% 04/07/92
</Table>
The cumulative returns (including maximum applicable contingent
deferred sales charge) for each Fund, with respect to its Class B shares, for
the periods ended October 31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
---------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -23.91% N/A -18.33% 11/03/97
AIM European Development Fund -33.97% N/A 57.70% 11/03/97
AIM Global Aggressive Growth Fund -41.59% 1.43% 61.00% 09/15/94
AIM Global Growth Fund -44.42% 9.09% 58.80% 09/15/94
AIM Global Income Fund 3.08% 14.37% 48.21% 09/15/94
AIM International Equity Fund -31.79% 4.57% 28.21% 09/15/94
</Table>
The cumulative total returns (including maximum applicable contingent
deferred sales charge) for each Fund, with respect to its Class C shares, for
the periods ended October 31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
--------------------------------------------------
INCEPTION
CLASS C SHARES: 1 YEAR SINCE INCEPTION DATE
-------------- ------ --------------- ---------
AIM Asian Growth Fund -20.74% -15.91% 11/03/97
AIM European Development Fund -31.16% 60.90% 11/03/97
AIM Global Aggressive Growth Fund -39.65% -12.71% 08/04/97
AIM Global Growth Fund -42.04% -10.19% 08/04/97
AIM Global Income Fund 7.08% 10.18% 08/04/97
AIM International Equity Fund -29.13% -11.23% 08/04/97
</Table>
L-2
The average annual total returns (after taxes on distributions and
including sales loads) for each Fund, with respect to its Class A shares, for
the periods ended October 31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
----------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -23.92% N/A -4.95% 11/03/97
AIM European Development Fund -33.84% N/A 11.83% 11/03/97
AIM Global Aggressive Growth Fund -44.15% -0.89% 5.96% 09/15/94
AIM Global Growth Fund -43.99% 1.20% 6.09% 09/15/94
AIM Global Income Fund 0.89% 0.34% 2.90% 09/15/94
AIM International Equity Fund -32.90% 0.15% 6.72% 04/07/92
</Table>
The average annual total returns (after taxes on distributions and
including maximum applicable contingent deferred sales charge) for each Fund,
with respect to its Class B shares, for the periods ended October 31, 2001, are
as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
-----------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -23.97% N/A -4.97% 11/03/97
AIM European Development Fund -33.97% N/A 12.09% 11/03/97
AIM Global Aggressive Growth Fund -44.17% -0.81% 6.08% 09/15/94
AIM Global Growth Fund -44.44% 1.25% 6.24% 09/15/94
AIM Global Income Fund 0.53% 0.68% 3.27% 09/15/94
AIM International Equity Fund -32.85% 0.23% 2.81% 09/15/94
</Table>
The average annual total returns (after taxes on distributions and
including maximum applicable contingent deferred sales charge) for each Fund,
with respect to its Class C shares, for the periods ended October 31, 2001, are
as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
-----------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR INCEPTION DATE
-------------- ------ --------- ---------
AIM Asian Growth Fund -20.79% -4.28% 11/03/97
AIM European Development Fund -31.16% 12.65% 11/03/97
AIM Global Aggressive Growth Fund -42.23% -4.38% 08/04/97
AIM Global Growth Fund -42.07% -3.06% 08/04/97
AIM Global Income Fund 4.53% 0.49% 08/04/97
AIM International Equity Fund -30.19% -3.34% 08/04/97
</Table>
L-3
The average annual total returns (after taxes on distributions and
redemption and including sales load) for each Fund, with respect to its Class A
shares, for the periods ended October 31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
-----------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -14.47% N/A -3.86% 11/03/97
AIM European Development Fund -20.61% N/A 9.76% 11/03/97
AIM Global Aggressive Growth Fund -21.43% 0.80% 5.91% 09/15/94
AIM Global Growth Fund -26.73% 1.44% 5.43% 09/15/94
AIM Global Income Fund 2.09% 0.94% 3.11% 09/15/94
AIM International Equity Fund -18.01% 0.83% 6.12% 04/07/92
</Table>
The average annual total returns (after taxes on distributions and
redemption and including maximum applicable contingent deferred sales charge)
for each Fund, with respect to its Class B shares, for the periods ended October
31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
-----------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ---------
AIM Asian Growth Fund -14.49% N/A -3.89% 11/03/97
AIM European Development Fund -20.69% N/A 9.97% 11/03/97
AIM Global Aggressive Growth Fund -20.96% 0.95% 6.05% 09/15/94
AIM Global Growth Fund -27.01% 1.51% 5.57% 09/15/94
AIM Global Income Fund 1.82% 1.17% 3.38% 09/15/94
AIM International Equity Fund -17.78% 0.91% 2.91% 09/15/94
</Table>
The average annual total returns (after taxes on distributions and
redemption and including maximum applicable contingent deferred sales charge)
for each Fund, with respect to its Class C shares, for the periods ended October
31, 2001, are as follows:
<Table>
<Caption>
PERIODS ENDED
OCTOBER 31, 2001
--------------------------------------------------
INCEPTION
CLASS C SHARES: 1 YEAR SINCE INCEPTION DATE
-------------- ------ --------------- ---------
AIM Asian Growth Fund -12.56% -3.35% 11/03/97
AIM European Development Fund -18.98% 10.45% 11/03/97
AIM Global Aggressive Growth Fund -19.79% -1.70% 08/04/97
AIM Global Growth Fund -25.56% -1.88% 08/04/97
AIM Global Income Fund 4.26% 0.96% 08/04/97
AIM International Equity Fund -16.15% -1.93% 08/04/97
</Table>
L-4
FINANCIAL STATEMENTS
FS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of AIM Asian 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 the AIM Asian Growth Fund (one of
the funds constituting AIM International Funds, Inc.; hereinafter referred to as
the "Fund") at October 31, 2001, and the results of its operations, the changes
in its net assets, and the financial highlights for the year then ended, 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 audit. We conducted our audit 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 audit, which included
confirmation of securities at October 31, 2001 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion. The
statement of changes in net assets of the Fund for the year ended October 31,
2000 and the financial highlights for each of the periods ended on or before
October 31, 2000 were audited by other independent accountants whose report,
dated December 6, 2000, expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
/s/ PRICEWATERHOUSECOOPERS LLP
December 12, 2001
Houston, Texas
FS-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of changes in net assets of AIM Asian
Growth Fund (a portfolio of AIM International Funds, Inc.) for the year ended
October 31, 2000 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. This financial statement and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on this financial statement 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 statement and financial highlights referred to
above present fairly, in all material respects, the changes in net assets of AIM
Asian Growth Fund for the year ended October 31, 2000 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-2
SCHEDULE OF INVESTMENTS
October 31, 2001
<Table>
<Caption>
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-96.85%
AUSTRALIA-17.76%
Billabong International Ltd. (Movies &
Entertainment) 338,300 $ 1,348,180
- -----------------------------------------------------------------------
BRL Hardy Ltd. (Distillers & Vintners) 374,100 2,023,618
- -----------------------------------------------------------------------
Computershare Ltd. (Data Processing Services) 550,500 1,393,230
- -----------------------------------------------------------------------
CSL Ltd. (Pharmaceuticals) (Acquired
06/09/00-09/27/01; Cost $2,020,189)(a) 119,500 3,024,900
- -----------------------------------------------------------------------
ERG Ltd. (Electronic Equipment & Instruments) 1,146,200 380,553
- -----------------------------------------------------------------------
Ramsay Health Care Ltd. (Health Care
Facilities) 616,000 1,535,140
- -----------------------------------------------------------------------
ResMed Inc. (Health Care Equipment)(b) 94,900 558,599
- -----------------------------------------------------------------------
Securenet Ltd. (Internet Software &
Services)(b) 394,800 329,683
- -----------------------------------------------------------------------
Sonic Health Care Ltd. (Health Care
Distributors & Services) 254,300 1,097,602
- -----------------------------------------------------------------------
St. George Bank Ltd. (Banks) 296,000 2,431,583
- -----------------------------------------------------------------------
Woolworths Ltd. (Food Retail) 385,400 2,198,548
=======================================================================
16,321,636
=======================================================================
CHINA-3.59%
AsiaInfo Holdings, Inc. (Internet Software &
Services)(b) 107,900 1,440,465
- -----------------------------------------------------------------------
Travelsky Technology Ltd. (Diversified
Commercial Services) (Acquired 02/01/01;
Cost $1,317,422)(a)(b) 2,481,000 1,860,786
=======================================================================
3,301,251
=======================================================================
HONG KONG-25.53%
Asia Satellite Telecommunications Holdings
Ltd. (Alternative Carriers) 539,000 691,039
- -----------------------------------------------------------------------
Cheung Kong Holdings Ltd. (Real Estate
Management & Development) 256,000 2,166,195
- -----------------------------------------------------------------------
China Mobile Ltd. (Wireless Telecommunication
Services)(b) 191,000 579,133
- -----------------------------------------------------------------------
CNOOC Ltd.-ADR (Oil & Gas Exploration &
Production) 79,600 1,562,548
- -----------------------------------------------------------------------
Convenience Retail Asia Ltd. (Food Retail)
(Acquired 03/16/01-03/28/01; Cost
$503,075)(a)(b) 3,274,000 1,028,392
- -----------------------------------------------------------------------
Dah Sing Financial Group (Banks) 537,600 2,329,645
- -----------------------------------------------------------------------
Denway Motors Ltd. (Automobile Manufacturers) 8,513,600 2,837,921
- -----------------------------------------------------------------------
Esprit Holdings Ltd. (Apparel Retail) 3,178,000 3,341,039
- -----------------------------------------------------------------------
Giordano International Ltd. (Apparel Retail) 5,203,000 2,201,312
- -----------------------------------------------------------------------
Global Bio-Chem Technology Group Co. Ltd.
(Agricultural Products) 3,672,000 1,071,021
- -----------------------------------------------------------------------
Johnson Electric Holdings Ltd. (Electrical
Components & Equipment) 449,000 391,443
- -----------------------------------------------------------------------
Legend Holdings Ltd. (Computer Hardware) 1,512,000 634,858
- -----------------------------------------------------------------------
Li & Fung Ltd. (Distributors) 2,816,000 2,689,693
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
HONG KONG-(CONTINUED)
Texwinca Holdings Ltd. (Textiles) 3,940,000 $ 1,439,643
- -----------------------------------------------------------------------
Tingyi Holding Corp. (Packaged Foods) 3,392,000 500,112
=======================================================================
23,463,994
=======================================================================
INDIA-16.05%
Cipla Ltd. (Pharmaceuticals) 89,000 1,971,112
- -----------------------------------------------------------------------
Dr. Reddy's Laboratories Ltd.
(Pharmaceuticals) 200,000 4,355,907
- -----------------------------------------------------------------------
HDFC Bank Ltd.-ADR (Banks)(b) 143,300 2,181,026
- -----------------------------------------------------------------------
Infosys Technologies Ltd. (IT Consulting &
Services) 35,969 2,184,298
- -----------------------------------------------------------------------
ITC Ltd. (Tobacco) 70,000 1,002,084
- -----------------------------------------------------------------------
Nestle India Ltd. (Packaged Foods) 231,000 2,401,216
- -----------------------------------------------------------------------
Satyam Computer Services Ltd. (IT Consulting
& Services) 149,000 435,605
- -----------------------------------------------------------------------
Satyam Computer Services Ltd.-ADR (IT
Consulting & Services) 33,200 222,440
=======================================================================
14,753,688
=======================================================================
NEW ZEALAND-1.41%
Sky Network Television Ltd. (Broadcasting &
Cable TV)(b) 855,000 1,213,675
- -----------------------------------------------------------------------
Sky Network Television Ltd.-ADR (Broadcasting
& Cable TV)(b) 5,400 76,922
=======================================================================
1,290,597
=======================================================================
PHILIPPINES-2.29%
Bank of the Philippine Islands (Banks) 789,987 615,871
- -----------------------------------------------------------------------
SM Prime Holdings, Inc. (Real Estate
Management & Development) 13,790,900 1,486,603
=======================================================================
2,102,474
=======================================================================
SINGAPORE-7.97%
Datacraft Asia Ltd. (Networking Equipment) 957,384 3,101,924
- -----------------------------------------------------------------------
Sembcorp Logistics Ltd. (Marine Ports &
Services) 2,532,000 2,193,891
- -----------------------------------------------------------------------
United Overseas Bank Ltd. (Banks) 362,000 2,024,897
=======================================================================
7,320,712
=======================================================================
SOUTH KOREA-12.46%
Hite Brewery Co., Ltd. (Brewers) 22,000 800,929
- -----------------------------------------------------------------------
Kook Soon Dang Co., Ltd. (Brewers) 42,000 863,749
- -----------------------------------------------------------------------
Kookmin Credit Card Co., Ltd. (Consumer
Finance) 90,700 2,430,844
- -----------------------------------------------------------------------
Korea Telecom Corp.-ADR (Integrated
Telecommunication Services) 56,884 1,185,463
- -----------------------------------------------------------------------
Pacific Corp. (Personal Products) 13,000 906,274
- -----------------------------------------------------------------------
Samsung Electronics Co., Ltd.
(Semiconductors) 19,514 2,622,524
- -----------------------------------------------------------------------
Samsung Fire & Marine Ins. Co. Ltd. (Property
& Casualty Insurance) 40,000 1,254,841
- -----------------------------------------------------------------------
</Table>
FS-3
<Table>
<Caption>
MARKET
SHARES VALUE
SOUTH KOREA-(CONTINUED)
Shinsegae Co., Ltd. (Department Stores) 13,000 $ 925,407
- -----------------------------------------------------------------------
SK Telecom Co., Ltd.-ADR (Wireless
Telecommunication Services) 22,000 463,760
=======================================================================
11,453,791
=======================================================================
TAIWAN-8.80%
Ambit Microsystems Corp. (Computer Storage &
Peripherals) 587,800 2,359,719
- -----------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.
(Electronics-Component Distributors) 69,000 255,990
- -----------------------------------------------------------------------
MediaTeK Inc. (Semiconductors)(b) 315,000 2,711,739
- -----------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)(b) 1,558,064 2,754,838
=======================================================================
8,082,286
=======================================================================
THAILAND-0.99%
Advanced Info Service Public Co. Ltd.
(Wireless Telecommunication Services) 980,000 909,640
=======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $89,270,250) 89,000,069
=======================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
MONEY MARKET FUNDS-3.08%
STIC Liquid Assets Portfolio(c) $1,417,288 $ 1,417,288
- -----------------------------------------------------------------------
STIC Prime Portfolio(c) 1,417,288 1,417,288
=======================================================================
Total Money Market Funds (Cost
$2,834,576) 2,834,576
=======================================================================
TOTAL INVESTMENTS-99.93% (Cost $92,104,826) 91,834,645
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.07% 65,057
=======================================================================
NET ASSETS-100.00% $91,899,702
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
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
10/31/01 was $5,914,078 which represented 6.44% of the Fund's net assets.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-4
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2001
<Table>
ASSETS:
Investments, at market value (cost
$92,104,826)* $ 91,834,645
- ------------------------------------------------------------
Foreign currencies, at value (cost $2,186,768) 2,186,866
- ------------------------------------------------------------
Cash 1,620,000
- ------------------------------------------------------------
Receivables for:
Investments sold 292,619
- ------------------------------------------------------------
Capital stock sold 896,856
- ------------------------------------------------------------
Dividends 99,871
- ------------------------------------------------------------
Investment for deferred compensation plan 20,030
- ------------------------------------------------------------
Collateral for securities loaned 1,308,800
- ------------------------------------------------------------
Other assets 34,226
============================================================
Total assets 98,293,913
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,646,286
- ------------------------------------------------------------
Capital stock reacquired 3,182,059
- ------------------------------------------------------------
Deferred compensation plan 20,030
- ------------------------------------------------------------
Collateral upon return of securities loaned 1,308,800
- ------------------------------------------------------------
Accrued distribution fees 70,263
- ------------------------------------------------------------
Accrued directors' fees 861
- ------------------------------------------------------------
Accrued transfer agent fees 79,257
- ------------------------------------------------------------
Accrued operating expenses 86,655
============================================================
Total liabilities 6,394,211
============================================================
Net assets applicable to shares outstanding $ 91,899,702
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 61,729,156
____________________________________________________________
============================================================
Class B $ 25,478,569
____________________________________________________________
============================================================
Class C $ 4,691,977
____________________________________________________________
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 7,185,304
____________________________________________________________
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 3,041,301
____________________________________________________________
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 560,347
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 8.59
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $8.59 divided by
94.50%) $ 9.09
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 8.38
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 8.37
____________________________________________________________
============================================================
</Table>
* At October 31, 2001, securities with an aggregate market value of $1,686,183
were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended October 31, 2001
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$146,079) $ 1,864,534
- ------------------------------------------------------------
Dividends from affiliated money market funds 416,305
- ------------------------------------------------------------
Interest 24,212
- ------------------------------------------------------------
Security lending income 41,370
============================================================
Total investment income 2,346,421
============================================================
EXPENSES:
Advisory fees 1,142,549
- ------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------
Custodian fees 198,947
- ------------------------------------------------------------
Distribution fees -- Class A 279,427
- ------------------------------------------------------------
Distribution fees -- Class B 341,091
- ------------------------------------------------------------
Distribution fees -- Class C 63,229
- ------------------------------------------------------------
Transfer agent fees -- Class A 523,159
- ------------------------------------------------------------
Transfer agent fees -- Class B 225,236
- ------------------------------------------------------------
Transfer agent fees -- Class C 41,753
- ------------------------------------------------------------
Directors' fees 9,028
- ------------------------------------------------------------
Other 235,009
============================================================
Total expenses 3,109,428
============================================================
Less: Fees waived (418,664)
- ------------------------------------------------------------
Expenses paid indirectly (2,982)
============================================================
Net expenses 2,687,782
============================================================
Net investment income (loss) (341,361)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (28,317,468)
- ------------------------------------------------------------
Foreign currencies (376,108)
============================================================
(28,693,576)
============================================================
Change in net unrealized appreciation of:
Investment securities 9,842,734
- ------------------------------------------------------------
Foreign currencies 9,165
============================================================
9,851,899
============================================================
Net gain (loss) from investment securities and
foreign currencies (18,841,677)
============================================================
Net increase (decrease) in net assets
resulting from operations $(19,183,038)
____________________________________________________________
============================================================
</Table>
See Notes to Financial Statements.
FS-5
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2001 and 2000
<Table>
<Caption>
2001 2000
------------ ------------
OPERATIONS:
Net investment income (loss) $ (341,361) $ (871,076)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (28,693,576) 880,704
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 9,851,899 (29,176,045)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations (19,183,038) (29,166,417)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A (295,141) --
- ------------------------------------------------------------------------------------------
Class B (131,925) --
- ------------------------------------------------------------------------------------------
Class C (21,688) --
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A (20,355,876) 87,843,677
- ------------------------------------------------------------------------------------------
Class B (7,313,094) 36,793,037
- ------------------------------------------------------------------------------------------
Class C (1,204,078) 2,437,146
==========================================================================================
Net increase (decrease) in net assets (48,504,840) 97,907,443
==========================================================================================
NET ASSETS:
Beginning of year 140,404,542 42,497,099
- ------------------------------------------------------------------------------------------
End of year $ 91,899,702 $140,404,542
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $175,659,752 $205,259,013
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (20,881) (27,256)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (83,470,141) (54,706,288)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (269,028) (10,120,927)
==========================================================================================
$ 91,899,702 $140,404,542
__________________________________________________________________________________________
==========================================================================================
</Table>
See Notes to Financial Statements.
FS-6
NOTES TO FINANCIAL STATEMENTS
October 31, 2001
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").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the 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 the close of the respective
markets. Occasionally, events affecting the values of such foreign securities
may occur between the times at which the particular foreign market closes 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 a
development/event is so significant that there is a reasonably high degree of
certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer reflect
actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE 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, 2001, undistributed net investment income (loss) was
increased by $347,736, undistributed net realized gains increased by $378,477
and paid in capital decreased by $726,213 as a result of book/tax differences
due to 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.
FS-7
The Fund's capital loss carryforward of $82,261,705 is broken down by
expiration date as follows:
<Table>
<Caption>
CAPITAL LOSS
CARRYFORWARD EXPIRATION
------------ ----------
$54,943,768 October 31, 2005
-----------------------------------------
27,317,937 October 31, 2009
=========================================
$82,261,705
_________________________________________
=========================================
</Table>
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.
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 based on relative net assets.
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. Effective July 1, 2001, AIM
has voluntarily agreed to waive advisory fees of the Fund in the amount of 25%
of the advisory fee AIM receives from the affiliated money market fund of which
the Fund has invested. For the year ended October 31, 2001, AIM waived fees of
$418,664.
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, 2001, 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 October 31, 2001, AFS
was paid $495,708 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. For the year ended October 31, 2001,
the Class A, Class B and Class C shares paid AIM Distributors $279,427, $341,091
and $63,229 respectively, as compensation under the Plans.
AIM Distributors received commissions of $28,223 from sales of the Class A
shares of the Fund during the year ended October 31, 2001. 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, 2001,
AIM Distributors received $61,331 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, 2001, the Fund paid legal fees of $3,419 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, 2001, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $2,088 and reductions in custodian
fees of $894 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $2,982.
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
FS-8
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, 2001, 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. 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 October 31, 2001, securities with an aggregate value of $1,686,183 were on
loan to brokers. The loans were secured by cash collateral of $1,308,800
received by the Fund and invested in affiliated money market funds as follows:
$654,400 in STIC Liquid Assets Portfolio and $654,400 in STIC Prime Portfolio.
For the year ended October 31, 2001, the Fund received fees of $41,370 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, 2001 was
$80,913,851 and $98,341,154, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 2001 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 11,138,150
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (12,616,767)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $ (1,478,617)
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $93,313,262.
</Table>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 2001 and
2000 were as follows:
<Table>
<Caption>
2001 2000
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
Sold:
Class A 32,846,773 $ 319,396,653 8,636,312 $109,857,994
- ------------------------------------------------------------------------------------------------------------------------
Class B 1,885,559 18,458,316 1,506,797 19,210,223
- ------------------------------------------------------------------------------------------------------------------------
Class C 3,690,569 33,967,064 844,431 10,972,106
========================================================================================================================
Issued as reinvestment of dividends:
Class A 23,853 260,234 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class B 11,036 117,979 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class C 1,947 20,815 -- --
========================================================================================================================
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 (34,450,943) (340,012,763) (7,649,919) (98,534,489)
- ------------------------------------------------------------------------------------------------------------------------
Class B (2,651,836) (25,889,389) (1,065,606) (13,305,105)
- ------------------------------------------------------------------------------------------------------------------------
Class C (3,780,014) (35,191,957) (703,160) (9,027,398)
========================================================================================================================
(2,423,056) $ (28,873,048) 9,244,311 $127,073,860
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
* As of the close of business on June 9, 2000, the Fund acquired all the net
assets of AIM New Pacific Growth Fund pursuant to a plan of reorganization
approved by AIM 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 AIM New Pacific Growth Fund outstanding as of
the close of business on June 9, 2000. AIM 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-9
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31,} COMMENCED) TO
------------------------------ OCTOBER 31,
2001(a) 2000(a) 1999(a) 1998
------- ------- ------- ---------------
Net asset value, beginning of period $ 10.70 $ 10.76 $ 7.69 $ 10.00
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.07) (0.03) 0.05
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (2.06) 0.01 3.14 (2.36)
===============================================================================================================
Total from investment operations (2.07) (0.06) 3.11 (2.31)
===============================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.04) --
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.04) -- -- --
===============================================================================================================
Net asset value, end of period $ 8.59 $ 10.70 $ 10.76 $ 7.69
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) (19.46)% (0.56)% 40.66% (23.10)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $61,729 $93,755 $25,420 $ 7,716
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.02%(c) 1.92% 1.92% 1.92%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers 2.37%(c) 2.06% 2.72% 4.88%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (0.06)%(c) (0.57)% (0.50)% 0.70%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 73% 64% 142% 79%
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(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 $79,836,318.
(d) Annualized.
<Table>
<Caption>
CLASS B
-------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------ OCTOBER 31,
2001(a) 2000(a) 1999(a) 1998
------- ------- ------- ---------------
Net asset value, beginning of period $ 10.50 $ 10.65 $ 7.63 $ 10.00
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.17) (0.13) (0.01)
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (2.01) 0.02 3.16 (2.36)
===============================================================================================================
Total from investment operations (2.08) (0.15) 3.03 (2.37)
===============================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.01) --
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.04) -- -- --
===============================================================================================================
Net asset value, end of period $ 8.38 $ 10.50 $ 10.65 $ 7.63
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) (19.92)% (1.41)% 39.76% (23.70)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,479 $39,852 $12,070 $ 3,030
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.67%(c) 2.67% 2.79% 2.80%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers 3.02%(c) 2.76% 3.59% 5.75%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (0.72)%(c) (1.32)% (1.37)% (0.18)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 73% 64% 142% 79%
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(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 $34,109,098.
(d) Annualized.
FS-10
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
--------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------ OCTOBER 31,
2001(a) 2000(a) 1999(a) 1998
------- ------- ------- ----------------
Net asset value, beginning of period $ 10.49 $ 10.63 $ 7.61 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.17) (0.13) (0.01)
- ----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (2.01) 0.03 3.16 (2.38)
================================================================================================================
Total from investment operations (2.08) (0.14) 3.03 (2.39)
================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.01) --
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.04) -- -- --
================================================================================================================
Net asset value, end of period $ 8.37 $ 10.49 $10.63 $ 7.61
________________________________________________________________________________________________________________
================================================================================================================
Total return(b) (19.94)% (1.32)% 39.86% (23.90)%
________________________________________________________________________________________________________________
================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,692 $ 6,797 $5,008 $ 686
________________________________________________________________________________________________________________
================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.67%(c) 2.67% 2.79% 2.80%(d)
- ----------------------------------------------------------------------------------------------------------------
Without fee waivers 3.02%(c) 2.76% 3.59% 5.75%(d)
================================================================================================================
Ratio of net investment income (loss) to average net assets (0.72)%(c) (1.32)% (1.37)% (0.18)%(d)
________________________________________________________________________________________________________________
================================================================================================================
Portfolio turnover rate 73% 64% 142% 79%
________________________________________________________________________________________________________________
================================================================================================================
</Table>
(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 $6,322,879.
(d) Annualized.
FS-11
EUROPEAN DEVELOPMENT FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of AIM
European Development 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 the AIM European Development
Fund (one of the funds constituting the AIM
International Funds, Inc.; hereafter referred to as
the "Fund") at October 31, 2001, and the results of
its operations, the changes in its net assets, and the
financial highlights for the year then ended, 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 audit. We conducted
our audit 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
audit, which included confirmation of securities at
October 31, 2001 by correspondence with the custodian
and brokers, provides a reasonable basis for our
opinion. The statement of changes in net assets of the
Fund for the year ended October 31, 2000 and the
financial highlights for each of the periods ended on
or before October 31, 2000 were audited by other
independent accountants whose report dated December 6,
2000, expressed an unqualified opinion on those
statements.
PRICEWATERHOUSECOOPERS LLP
December 12, 2001
Houston, Texas
FS-12
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of changes in net assets of AIM
European Development Fund (a portfolio of AIM International Funds, Inc.) for the
year ended October 31, 2000 and the financial highlights for each of the periods
in the two-year period ended October 31, 2000 and the period November 3, 1997
(date operations commenced) through October 31, 1998. This financial statement
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement 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 statement and financial highlights referred to
above present fairly, in all material respects, the changes in net assets of AIM
European Development Fund for the year ended October 31, 2000 and the financial
highlights for each of the periods in the two-year period ended October 31, 2000
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-13
SCHEDULE OF INVESTMENTS
October 31, 2001
<Table>
<Caption>
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-92.11%
BELGIUM-3.73%
Omega Pharma S.A. (Health Care Supplies) 164,800 $ 6,905,447
- ------------------------------------------------------------------------
UCB S.A. (Pharmaceuticals)(a) 108,492 4,132,932
========================================================================
11,038,379
========================================================================
DENMARK-5.65%
Coloplast A.S. (Health Care Supplies)(a) 59,500 4,353,597
- ------------------------------------------------------------------------
Danske Bank A.S. (Banks) 32,850 3,480,867
- ------------------------------------------------------------------------
H. Lundbeck A.S. (Pharmaceuticals) 77,200 1,970,043
- ------------------------------------------------------------------------
Novo Nordisk A.S.-Class B (Pharmaceuticals) 136,869 5,553,586
- ------------------------------------------------------------------------
Vestas Wind Systems A.S. (Heavy Electrical
Equipment) 43,200 1,358,417
========================================================================
16,716,510
========================================================================
FRANCE-18.28%
Altran Technologies S.A. (IT Consulting &
Services) 107,800 4,948,845
- ------------------------------------------------------------------------
Assurances Generales de France (Multi-Line
Insurance) 47,700 2,202,676
- ------------------------------------------------------------------------
Aventis S.A. (Pharmaceuticals) 82,700 6,085,667
- ------------------------------------------------------------------------
Beneteau (Leisure Products) 24,800 1,360,631
- ------------------------------------------------------------------------
BNP Paribas S.A. (Banks) 77,700 6,462,609
- ------------------------------------------------------------------------
Hermes International (Apparel & Accessories) 6,220 790,569
- ------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Department
Stores) 6,500 748,340
- ------------------------------------------------------------------------
PSA Peugeot Citroen (Automobile
Manufacturers) 140,100 5,693,912
- ------------------------------------------------------------------------
Sanofi-Synthelabo S.A. (Pharmaceuticals) 116,250 7,665,059
- ------------------------------------------------------------------------
Silicon-On-Insulator Technologies (Electronic
Equipment & Instruments)(a) 262,600 3,498,415
- ------------------------------------------------------------------------
Sodexho Alliance S.A. (Restaurants)(a) 54,100 2,546,911
- ------------------------------------------------------------------------
TotalFinaElf S.A. (Integrated Oil & Gas) 38,237 5,369,370
- ------------------------------------------------------------------------
Vinci S.A. (Construction & Engineering) 57,700 3,479,890
- ------------------------------------------------------------------------
Vivendi Environnement (Multi-Utilities) 82,400 3,167,901
========================================================================
54,020,795
========================================================================
GERMANY-9.99%
Allianz A.G. (Multi-Line Insurance) 4,850 1,139,018
- ------------------------------------------------------------------------
Altana A.G. (Pharmaceuticals) 176,800 8,275,619
- ------------------------------------------------------------------------
AMB Aachener & Muenchener Beteiligungs A.G.
(Multi-Line Insurance) 38,300 4,154,327
- ------------------------------------------------------------------------
Bayerisch Motoren Werke A.G. (Automobile
Manufacturers) 25,937 770,457
- ------------------------------------------------------------------------
ELMOS Semiconductor A.G. (Electronic
Equipment & Instruments)(a) 82,300 977,887
- ------------------------------------------------------------------------
Hugo Boss A.G.-Pfd. (Apparel & Accessories) 159,100 2,795,535
- ------------------------------------------------------------------------
Medion A.G. (Distributors) 101,800 3,564,612
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
GERMANY-(CONTINUED)
Muenchener Rueckversicherungs-Gesellschaft
A.G. (Reinsurance) 16,900 $ 4,470,964
- ------------------------------------------------------------------------
Suess MicroTec A.G. (Semiconductor
Equipment)(a) 74,000 1,645,294
- ------------------------------------------------------------------------
Wella A.G.-Pfd. (Personal Products) 37,900 1,722,842
========================================================================
29,516,555
========================================================================
IRELAND-4.60%
Anglo Irish Bank Corp. PLC (Banks) 1,597,850 4,847,087
- ------------------------------------------------------------------------
Bank of Ireland PLC (Banks) 371,000 3,316,180
- ------------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(a) 116,200 5,431,188
========================================================================
13,594,455
========================================================================
ITALY-3.16%
Autostrade-Concessioni e Costruzioni
Autostrade S.p.A (Highways & Railtracks) 430,000 2,701,710
- ------------------------------------------------------------------------
Bulgari S.p.A. (Apparel & Accessories) 193,100 1,477,461
- ------------------------------------------------------------------------
ENI S.p.A. (Integrated Oil & Gas) 274,414 3,438,432
- ------------------------------------------------------------------------
Recordati S.p.A (Pharmaceuticals) 92,600 1,732,094
========================================================================
9,349,697
========================================================================
NETHERLANDS-5.40%
Fugro N.V. (Oil & Gas Equipment & Services) 59,500 3,039,469
- ------------------------------------------------------------------------
Koninklijke Ahold N.V. (Food Retail) 183,400 5,160,636
- ------------------------------------------------------------------------
Nutreco Holding N.V. (Agricultural Products) 141,400 5,161,253
- ------------------------------------------------------------------------
Van der Moolen Holding N.V. (Diversified
Financial Services) 76,600 1,844,452
- ------------------------------------------------------------------------
Wolters Kluwer N.V. (Publishing & Printing) 36,200 759,892
========================================================================
15,965,702
========================================================================
NORWAY-1.37%
Tandberg A.S.A. (Electrical Equipment &
Instruments)(a) 146,000 2,618,253
- ------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A (Oil & Gas
Equipment & Services)(a) 101,700 1,429,318
========================================================================
4,047,571
========================================================================
PORTUGAL-0.18%
Portugal Telecom, SGPS, S.A. (Integrated
Telecommunications Services) 66,650 531,867
========================================================================
SPAIN-8.52%
Aurea Concesiones des Infrastructuras S.A./
Concesionaria del Estado S.A. (Highways &
Railtracks) 65,050 1,285,277
- ------------------------------------------------------------------------
Banco Bilbao Vizcaya Argentaria, S.A. (Banks) 63,300 708,255
- ------------------------------------------------------------------------
Banco Popular Espanol S.A. (Banks) 108,600 3,646,310
- ------------------------------------------------------------------------
Grupo Dragados, S.A. (Construction &
Engineering) 585,800 7,113,383
- ------------------------------------------------------------------------
</Table>
FS-14
<Table>
<Caption>
MARKET
SHARES VALUE
SPAIN-(CONTINUED)
Grupo Ferrovial, S.A. (Construction &
Engineering) 299,600 $ 5,555,510
- ------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a)(b) 146,100 2,722,297
- ------------------------------------------------------------------------
Prosegur, CIA de Seguridad S.A. (Diversified
Commercial Services) 87,700 1,073,627
- ------------------------------------------------------------------------
Telefonica, S.A. (Integrated
Telecommunication Services)(a) 256,650 3,081,853
========================================================================
25,186,512
========================================================================
SWEDEN-5.31%
Biacore International A.B. (Health Care
Equipment)(a) 77,950 2,126,786
- ------------------------------------------------------------------------
Hennes & Mauritz A.B.-Class B (Apparel
Retail)(a) 89,500 1,565,008
- ------------------------------------------------------------------------
Nobel Biocare A.B. (Health Care Supplies) 50,800 1,929,005
- ------------------------------------------------------------------------
Q-Med A.B. (Biotechnology)(a) 280,250 4,151,618
- ------------------------------------------------------------------------
Securitas A.B.-Class B (Diversified
Commercial Services)(a) 175,600 2,922,386
- ------------------------------------------------------------------------
Swedish Match A.B. (Tobacco) 581,800 3,000,206
========================================================================
15,695,009
========================================================================
SWITZERLAND-3.65%
Nestle S.A.-Class B (Packaged Foods) 26,700 5,539,351
- ------------------------------------------------------------------------
Serono S.A.-Class B (Biotechnology) 1,700 1,343,146
- ------------------------------------------------------------------------
Synthes Stratec, Inc. (Health Care Equipment) 5,940 3,896,989
========================================================================
10,779,486
========================================================================
UNITED KINGDOM-22.27%
Amey PLC (Diversified Commercial Services) 400,200 1,794,926
- ------------------------------------------------------------------------
BP PLC (Integrated Oil & Gas) 641,100 5,177,754
- ------------------------------------------------------------------------
Capita Group PLC (Employment Services) 712,800 4,512,110
- ------------------------------------------------------------------------
easyJet PLC (Airlines)(a)(b)(c) 157,900 870,851
- ------------------------------------------------------------------------
easyJet PLC (Airlines)-Rts., expiring
11/20/01(d) 11,842 0
- ------------------------------------------------------------------------
Electronics Boutique PLC (Computer &
Electronics Retail)(b) 1,476,100 2,427,263
- ------------------------------------------------------------------------
Galen Holdings PLC (Pharmaceuticals) 161,600 1,739,770
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
UNITED KINGDOM-(CONTINUED)
Jardine Lloyd Thompson Group PLC (Insurance
Brokers) 330,400 $ 2,811,265
- ------------------------------------------------------------------------
JJB Sports PLC (Apparel Retail) 395,400 2,571,976
- ------------------------------------------------------------------------
Luminar PLC (Restaurants) 250,800 2,987,232
- ------------------------------------------------------------------------
Man Group PLC (Diversified Financial
Services) 432,900 6,979,913
- ------------------------------------------------------------------------
Matalan PLC (Apparel Retail)(a) 81,140 427,488
- ------------------------------------------------------------------------
Morrison (William) Supermarkets PLC (Food
Retail) 987,400 2,902,466
- ------------------------------------------------------------------------
Next PLC (Department Stores) 263,800 3,335,932
- ------------------------------------------------------------------------
PizzaExpress PLC (Restaurants) 132,900 1,493,764
- ------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products) 301,100 4,206,343
- ------------------------------------------------------------------------
Rentokil Initial PLC (Diversified Commercial
Services) 1,005,400 3,621,069
- ------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Banks) 269,300 6,446,514
- ------------------------------------------------------------------------
Shell Transport & Trading Co. PLC (Integrated
Oil & Gas) 617,800 4,629,966
- ------------------------------------------------------------------------
Smith & Nephew PLC (Health Care Supplies) 377,700 2,125,690
- ------------------------------------------------------------------------
St. James's Place Capital PLC (Life & Health
Insurance) 330,700 1,535,139
- ------------------------------------------------------------------------
Tesco PLC (Food Retail)(a) 562,500 1,984,984
- ------------------------------------------------------------------------
Willis Group Holdings Ltd. (Insurance
Brokers) 53,000 1,234,370
========================================================================
65,816,785
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $270,046,108) 272,259,323
========================================================================
MONEY MARKET FUNDS-8.06%
STIC Liquid Assets Portfolio(e) 11,910,798 11,910,798
- ------------------------------------------------------------------------
STIC Prime Portfolio(e) 11,910,798 11,910,798
========================================================================
Total Money Market Funds (Cost
$23,821,596) 23,821,596
========================================================================
TOTAL INVESTMENTS-100.17%
(Cost $293,867,704) 296,080,919
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.17%) (502,270)
========================================================================
NET ASSETS-100.00% $295,578,649
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
Rts. - Rights
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(c) Security fair valued in accordance with the procedures established by the
Board of Directors.
(d) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-15
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2001
<Table>
ASSETS:
Investments, at market value (cost
$293,867,704)* $296,080,919
- ------------------------------------------------------------
Foreign currencies, at value (cost $162,897) 160,937
- ------------------------------------------------------------
Receivables for:
Investments sold 4,699,779
- ------------------------------------------------------------
Capital stock sold 296,676
- ------------------------------------------------------------
Dividends and interest 362,875
- ------------------------------------------------------------
Investment for deferred compensation plan 21,892
- ------------------------------------------------------------
Collateral for securities loaned 12,778,726
- ------------------------------------------------------------
Other assets 22,943
============================================================
Total assets 314,424,747
============================================================
LIABILITIES:
Payables for:
Investments purchased 3,259,819
- ------------------------------------------------------------
Capital stock reacquired 2,237,548
- ------------------------------------------------------------
Deferred compensation plan 21,892
- ------------------------------------------------------------
Collateral upon return of securities loaned 12,778,726
- ------------------------------------------------------------
Accrued distribution fees 251,204
- ------------------------------------------------------------
Accrued directors' fees 1,028
- ------------------------------------------------------------
Accrued transfer agent fees 160,159
- ------------------------------------------------------------
Accrued operating expenses 135,722
============================================================
Total liabilities 18,846,098
============================================================
Net assets applicable to shares outstanding $295,578,649
____________________________________________________________
============================================================
NET ASSETS:
Class A $157,650,544
____________________________________________________________
============================================================
Class B $105,324,387
____________________________________________________________
============================================================
Class C $ 32,603,718
____________________________________________________________
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 9,543,012
____________________________________________________________
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,553,435
____________________________________________________________
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 2,026,798
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 16.52
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $16.52 divided by
94.50%) $ 17.48
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 16.07
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 16.09
____________________________________________________________
============================================================
</Table>
* At October 31, 2001, securities with an aggregate market value of $12,179,487
were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended October 31, 2001
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$542,472) $ 4,556,503
- ------------------------------------------------------------
Dividends from affiliated money market funds 1,075,182
- ------------------------------------------------------------
Interest 24,311
- ------------------------------------------------------------
Security lending income 278,960
============================================================
Total investment income 5,934,956
============================================================
EXPENSES:
Advisory fees 3,723,648
- ------------------------------------------------------------
Administrative services fees 98,393
- ------------------------------------------------------------
Custodian fees 414,424
- ------------------------------------------------------------
Distribution fees -- Class A 744,355
- ------------------------------------------------------------
Distribution fees -- Class B 1,362,388
- ------------------------------------------------------------
Distribution fees -- Class C 430,512
- ------------------------------------------------------------
Transfer agent fees -- Class A 666,646
- ------------------------------------------------------------
Transfer agent fees -- Class B 444,874
- ------------------------------------------------------------
Transfer agent fees -- Class C 140,580
- ------------------------------------------------------------
Directors' fees 8,584
- ------------------------------------------------------------
Other 341,905
============================================================
Total expenses 8,376,309
============================================================
Less: Fees waived (741)
- ------------------------------------------------------------
Expenses paid indirectly (6,908)
============================================================
Net expenses 8,368,660
============================================================
Net investment income (loss) (2,433,704)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (67,671,590)
- ------------------------------------------------------------
Foreign currencies (222,638)
============================================================
(67,894,228)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (72,137,054)
- ------------------------------------------------------------
Foreign currencies 51,324
============================================================
(72,085,730)
============================================================
Net gain (loss) from investment securities
and foreign currencies: (139,979,958)
============================================================
Net increase (decrease) in net assets
resulting from operations $(142,413,662)
____________________________________________________________
============================================================
</Table>
See Notes to Financial Statements.
FS-16
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2001 and 2000
<Table>
<Caption>
2001 2000
------------- ------------
OPERATIONS:
Net investment income (loss) $ (2,433,704) $ (5,079,875)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (67,894,228) 7,766,214
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (72,085,730) 36,243,757
===========================================================================================
Net increase (decrease) in net assets resulting from
operations (142,413,662) 38,930,096
===========================================================================================
Share transactions-net:
Class A (41,056,861) 149,580,238
- -------------------------------------------------------------------------------------------
Class B (12,747,860) 88,697,953
- -------------------------------------------------------------------------------------------
Class C (5,586,293) 42,014,471
===========================================================================================
Net increase (decrease) in net assets (201,804,676) 319,222,758
===========================================================================================
NET ASSETS:
Beginning of year 497,383,325 178,160,567
===========================================================================================
End of year $ 295,578,649 $497,383,325
___________________________________________________________________________________________
===========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 362,926,197 $424,964,898
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (25,992) (17,336)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (69,526,117) (1,854,528)
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 2,204,561 74,290,291
===========================================================================================
$ 295,578,649 $497,383,325
___________________________________________________________________________________________
===========================================================================================
</Table>
See Notes to Financial Statements.
FS-17
NOTES TO FINANCIAL STATEMENTS
October 31, 2001
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 -- 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").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the 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 the close of the respective
markets. Occasionally, events affecting the values of such foreign securities
may occur between the times at which the particular foreign market closes 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 a
development/event is so significant that there is a reasonably high degree of
certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer reflect
actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE 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, 2001, undistributed net investment income was increased by
$2,425,048, undistributed net realized gains increased by $222,639 and paid
in capital decreased by $2,647,687 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.
FS-18
The Fund's capital loss carryforward of $67,736,406 is broken down by
expiration date as follows:
<Table>
<Caption>
CAPITAL LOSS
CARRYFORWARD EXPIRATION
------------ ----------
$ 1,620,590 October 31, 2007
------------------------------
66,115,816 October 31, 2009
==============================
$67,736,406
______________________________
==============================
</Table>
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.
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 based on relative net assets.
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. Effective July 1, 2001, AIM
has voluntarily agreed to waive advisory fees of the Fund in the amount of 25%
of the advisory fee AIM receives from the affiliated money market fund of which
the Fund has invested. For the year ended October 31, 2001, AIM waived fees of
$741.
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, 2001, AIM was
paid $98,393 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 2001, AFS
was paid $730,064 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. For the year ended October 31, 2001,
the Class A, Class B and Class C shares paid AIM Distributors $744,355,
$1,362,388, and $430,512, respectively, as compensation under the Plans.
AIM Distributors received commissions of $123,615 from sales of the Class A
shares of the Fund during the year ended October 31, 2001. 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, 2001,
AIM Distributors received $142,050 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, 2001, the Fund paid legal fees of $3,843 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, 2001, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $6,908 under an expense offset
arrangement which resulted in a reduction of the Fund's total expenses of
$6,908.
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,
2001,
FS-19
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. 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 October 31, 2001, securities with an aggregate value of $12,179,487 were on
loan to brokers. The loans were secured by cash collateral of $12,778,726
received by the Fund and invested in STIC Liquid Assets Portfolio, an affiliated
money market fund. For the year ended October 31, 2001, the Fund received fees
of $278,960 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, 2001 was
$364,378,537 and $409,478,913, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2001 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 23,087,397
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (22,663,893)
=========================================================
Net unrealized appreciation of investment
securities $ 423,504
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $295,657,415.
</Table>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 2001 and
2000 were as follows:
<Table>
<Caption>
2001 2000
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- -------------
Sold:
Class A 27,843,689 $ 529,552,845 14,973,472 $ 398,349,739
- -------------------------------------------------------------------------------------------------------------------------
Class B 1,368,578 27,057,594 5,164,473 138,279,616
- -------------------------------------------------------------------------------------------------------------------------
Class C 2,006,444 38,243,286 2,755,179 71,725,762
=========================================================================================================================
Reacquired:
Class A (29,896,871) (570,609,706) (9,417,238) (248,769,501)
- -------------------------------------------------------------------------------------------------------------------------
Class B (2,153,110) (39,805,454) (1,967,360) (49,581,663)
- -------------------------------------------------------------------------------------------------------------------------
Class C (2,321,360) (43,829,579) (1,150,167) (29,711,291)
=========================================================================================================================
(3,152,630) $ (59,391,014) 10,358,359 $ 280,292,662
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
FS-20
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------
NOVEMBER 3, 1997
YEAR ENDED OCTOBER 31, (DATE OPERATIONS
--------------------------------- COMMENCED) TO
2001(a) 2000(a) 1999 OCTOBER 31, 1998(a)
-------- -------- ------- -------------------
Net asset value, beginning of period $ 23.59 $ 16.42 $ 12.96 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment gain (loss) (0.06) (0.21) (0.11) (0.08)
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (7.01) 7.38 3.58 3.04
======================================================================================================================
Total from investment operations (7.07) 7.17 3.47 2.96
======================================================================================================================
Less dividends from net investment income -- -- (0.01) --
======================================================================================================================
Net asset value, end of period $ 16.52 $ 23.59 $ 16.42 $ 12.96
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (29.97)% 43.67% 26.81% 29.60%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $157,651 $273,605 $99,148 $76,686
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets 1.83%(c) 1.69% 1.88% 1.98%(d)(e)
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.32)%(c) (0.82)% (0.69)% (0.58)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 99% 112% 122% 93%
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(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 $212,672,819.
(d) Ratio of expenses to average net assets prior to fee waivers and /or
expense reimbursements was 2.15%.
(e) Annualized.
<Table>
<Caption>
CLASS B
-------------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------- OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
-------- -------- ------- ------------------
Net asset value, beginning of period $ 23.11 $ 16.20 $ 12.87 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19) (0.38) (0.22) (0.18)
- ---------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.85) 7.29 3.55 3.05
=====================================================================================================================
Total from investment operations (7.04) 6.91 3.33 2.87
=====================================================================================================================
Net asset value, end of period $ 16.07 $ 23.11 $ 16.20 $ 12.87
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) (30.46)% 42.65% 25.87% 28.70%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $105,324 $169,614 $67,074 $50,121
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets 2.50%(c) 2.39% 2.63% 2.72%(d)(e)
=====================================================================================================================
Ratio of net investment income (loss) to average net assets (0.98)%(c) (1.52)% (1.44)% (1.32)%(e)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate 99% 112% 122% 93%
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
(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 $136,238,861.
(d) Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.89%.
(e) Annualized.
FS-21
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
-----------------------------------------------------
NOVEMBER 3, 1997
(DATE OPERATIONS
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------- OCTOBER 31,
2001(a) 2000(a) 1999 1998(a)
------- ------- ------- ------------------
Net asset value, beginning of period $ 23.13 $ 16.21 $ 12.88 $10.00
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19) (0.38) (0.23) (0.18)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.85) 7.30 3.56 3.06
===================================================================================================================
Total from investment operations (7.04) 6.92 3.33 2.88
===================================================================================================================
Net asset value, end of period $ 16.09 $ 23.13 $ 16.21 $12.88
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (30.44)% 42.69% 25.85% 28.80%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,604 $54,164 $11,938 $9,639
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets 2.50%(c) 2.39% 2.63% 2.72%(d)(e)
===================================================================================================================
Ratio of net investment income (loss) to average net assets (0.98)%(c) (1.52)% (1.44)% (1.32)%(e)
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 99% 112% 122% 93%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(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 $43,051,257.
(d) Ratio of expenses to average net assets prior to fee waivers and/or expense
reimbursements was 2.89%.
(e) Annualized.
FS-22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of AIM Global
Aggressive 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 the
AIM Global Aggressive Growth Fund (one of the funds
constituting AIM International Funds, Inc.; hereafter
referred to as the "Fund") at October 31, 2001, and the
results of its operations, the changes in its net assets,
and the financial highlights for the year then ended, 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
audit. We conducted our audit 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
audit, which included confirmation of securities at
October 31, 2001 by correspondence with the custodian and
brokers, provides a reasonable basis for our opinion. The
statement of changes in net assets of the Fund for the
year ended October 31, 2000 and the financial highlights
for each of the periods ended on or before October 31,
2000 were audited by other independent accountants whose
report, dated December 6, 2000, expressed an unqualified
opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
December 12, 2001
Houston, Texas
FS-23
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of changes in net assets of AIM
Global Aggressive Growth Fund (a portfolio of AIM International Funds, Inc.) for
the year ended October 31, 2000 and the financial highlights for each of the
periods in the four-year period then ended. This financial statement and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement 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 statement and financial highlights referred to
above present fairly, in all material respects, the changes in net assets of AIM
Global Aggressive Growth Fund for the year ended October 31, 2000 and the
financial highlights for each of the periods in the four-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-24
SCHEDULE OF INVESTMENTS
October 31, 2001
<Table>
<Caption>
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS-35.32%
APPAREL RETAIL-1.62%
American Eagle Outfitters, Inc.(a) 228,300 $ 6,255,420
- ---------------------------------------------------------------------------
Genesco, Inc.(a) 166,600 3,040,450
- ---------------------------------------------------------------------------
Too Inc.(a) 365,000 9,712,650
===========================================================================
19,008,520
===========================================================================
APPLICATION SOFTWARE-2.38%
Activision, Inc.(a) 91,200 3,296,880
- ---------------------------------------------------------------------------
Aspen Technology, Inc.(a) 204,300 2,706,975
- ---------------------------------------------------------------------------
Citrix Systems, Inc.(a) 51,700 1,209,780
- ---------------------------------------------------------------------------
Henry (Jack) & Associates, Inc. 600,000 14,796,000
- ---------------------------------------------------------------------------
National Instruments Corp.(a) 208,500 6,006,885
===========================================================================
28,016,520
===========================================================================
BANKS-1.29%
Investors Financial Services Corp. 160,000 8,464,000
- ---------------------------------------------------------------------------
Southwest Bancorp. of Texas, Inc.(a) 231,800 6,650,342
===========================================================================
15,114,342
===========================================================================
BROADCASTING & CABLE TV-0.29%
Hispanic Broadcasting Corp.(a) 205,300 3,440,828
===========================================================================
CASINOS & GAMING-0.43%
International Game Technology(a) 100,000 5,105,000
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.35%
CDW Computer Centers, Inc.(a) 90,000 4,144,500
===========================================================================
CONSTRUCTION & ENGINEERING-1.03%
Jacobs Engineering Group Inc.(a) 89,900 5,892,046
- ---------------------------------------------------------------------------
Shaw Group Inc. (The)(a) 225,000 6,187,500
===========================================================================
12,079,546
===========================================================================
CONSUMER FINANCE-0.36%
AmeriCredit Corp.(a) 274,000 4,247,000
===========================================================================
DATA PROCESSING SERVICES-1.32%
Concord EFS, Inc.(a) 216,614 5,928,725
- ---------------------------------------------------------------------------
Fiserv, Inc.(a) 180,000 6,694,200
- ---------------------------------------------------------------------------
Paychex, Inc. 90,900 2,914,254
===========================================================================
15,537,179
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.67%
Apollo Group, Inc.-Class A(a) 220,200 8,951,130
- ---------------------------------------------------------------------------
IMS Health Inc. 223,300 4,771,921
- ---------------------------------------------------------------------------
Iron Mountain Inc.(a) 150,000 5,857,500
===========================================================================
19,580,551
===========================================================================
DIVERSIFIED FINANCIAL SERVICES-1.48%
Eaton Vance Corp. 252,500 7,095,250
- ---------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Legg Mason, Inc. 150,000 $ 6,316,500
- ---------------------------------------------------------------------------
SEI Investments Co. 130,000 3,997,500
===========================================================================
17,409,250
===========================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-1.04%
Jabil Circuit, Inc.(a) 135,100 2,864,120
- ---------------------------------------------------------------------------
Tektronix, Inc.(a) 164,500 3,240,650
- ---------------------------------------------------------------------------
Waters Corp.(a) 174,200 6,182,358
===========================================================================
12,287,128
===========================================================================
EMPLOYMENT SERVICES-0.81%
Robert Half International Inc.(a) 464,100 9,574,383
===========================================================================
ENVIRONMENTAL SERVICES-0.88%
Tetra Tech, Inc.(a) 400,000 10,352,000
===========================================================================
FOOTWEAR-0.27%
Vans, Inc.(a) 219,100 3,146,276
===========================================================================
GAS UTILITIES-0.51%
Kinder Morgan, Inc. 120,000 5,955,600
===========================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-3.26%
Express Scripts, Inc.(a) 267,200 10,939,168
- ---------------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 142,400 12,274,880
- ---------------------------------------------------------------------------
Lincare Holdings Inc.(a) 316,200 8,126,340
- ---------------------------------------------------------------------------
McKesson Corp. 190,100 7,031,799
===========================================================================
38,372,187
===========================================================================
HEALTH CARE FACILITIES-1.22%
Health Management Associates, Inc.-Class A(a) 452,500 8,819,225
- ---------------------------------------------------------------------------
Province Healthcare Co.(a) 200,000 5,510,000
===========================================================================
14,329,225
===========================================================================
INDUSTRIAL MACHINERY-0.25%
Danaher Corp.(a) 52,700 2,937,498
===========================================================================
INSURANCE BROKERS-0.04%
Brown & Brown, Inc. 7,500 430,500
===========================================================================
IT CONSULTING & SERVICES-1.20%
SunGard Data Systems Inc.(a) 560,200 14,117,040
===========================================================================
MANAGED HEALTH CARE-1.15%
First Health Group Corp.(a) 500,000 13,500,000
===========================================================================
MOVIES & ENTERTAINMENT-0.31%
Macrovision Corp.(a) 150,000 3,691,500
===========================================================================
MULTI-LINE INSURANCE-0.53%
HCC Insurance Holdings, Inc. 225,000 6,185,250
===========================================================================
</Table>
FS-25
<Table>
<Caption>
MARKET
SHARES VALUE
OIL & GAS DRILLING-0.93%
Patterson-UTI Energy, Inc.(a) 500,000 $ 9,010,000
- ---------------------------------------------------------------------------
Pride International, Inc.(a) 147,700 1,899,422
===========================================================================
10,909,422
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.64%
Hanover Compressor Co.(a) 262,400 7,236,992
- ---------------------------------------------------------------------------
National-Oilwell, Inc.(a) 500,000 9,260,000
- ---------------------------------------------------------------------------
Varco International, Inc.(a) 189,000 2,835,000
===========================================================================
19,331,992
===========================================================================
PHARMACEUTICALS-0.79%
Medicis Pharmaceutical Corp.-Class A(a) 160,100 9,236,169
===========================================================================
RESTAURANTS-1.13%
CEC Entertainment Inc.(a) 261,600 10,134,384
- ---------------------------------------------------------------------------
Starbucks Corp.(a) 185,000 3,167,200
===========================================================================
13,301,584
===========================================================================
SEMICONDUCTOR EQUIPMENT-0.36%
Lam Research Corp.(a) 225,000 4,266,000
===========================================================================
SEMICONDUCTORS-2.57%
Alpha Industries, Inc.(a) 310,200 7,221,456
- ---------------------------------------------------------------------------
Micrel, Inc.(a) 216,100 5,434,915
- ---------------------------------------------------------------------------
Microchip Technology Inc.(a) 201,500 6,290,830
- ---------------------------------------------------------------------------
RF Micro Devices, Inc.(a) 130,000 2,657,200
- ---------------------------------------------------------------------------
Semtech Corp.(a) 229,500 8,663,625
===========================================================================
30,268,026
===========================================================================
SPECIALTY CHEMICALS-0.60%
OM Group, Inc. 115,700 7,005,635
===========================================================================
SPECIALTY STORES-1.35%
AutoZone, Inc.(a) 110,000 6,438,300
- ---------------------------------------------------------------------------
Bed Bath and Beyond, Inc. 117,200 2,937,032
- ---------------------------------------------------------------------------
Venator Group, Inc.(a) 450,000 6,525,000
===========================================================================
15,900,332
===========================================================================
TELECOMMUNICATIONS EQUIPMENT-1.63%
Comverse Technology, Inc.(a) 135,500 2,548,755
- ---------------------------------------------------------------------------
Polycom, Inc.(a) 356,900 10,699,862
- ---------------------------------------------------------------------------
Scientific-Atlanta, Inc. 285,800 5,964,646
===========================================================================
19,213,263
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.25%
Fastenal Co. 50,100 2,958,405
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.38%
American Tower Corp.-Class A(a) 400,000 4,408,000
===========================================================================
Total Domestic Common Stocks (Cost
$425,273,731) 415,360,651
===========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-53.93%
AUSTRALIA-0.32%
ERG Ltd. (Electronic Equipment & Instruments) 11,378,000 $ 3,777,644
===========================================================================
BELGIUM-1.98%
Omega Pharma S.A. (Health Care Supplies) 166,700 6,985,060
- ---------------------------------------------------------------------------
UCB S.A. (Pharmaceuticals)(a) 427,600 16,289,143
===========================================================================
23,274,203
===========================================================================
BRAZIL-1.18%
Companhia de Bebidas das Americas-ADR
(Brewers) 388,600 6,310,864
- ---------------------------------------------------------------------------
Petroleo Brasileiro S.A.-Petrobras-Pfd.
(Integrated Oil & Gas) 393,300 7,571,317
===========================================================================
13,882,181
===========================================================================
CANADA-1.76%
CAE, Inc. (Aerospace/Defense) 386,300 1,864,997
- ---------------------------------------------------------------------------
Onex Corp. (Electronic Equipment &
Instruments) 872,700 11,233,534
- ---------------------------------------------------------------------------
Precision Drilling Corp. (Oil & Gas
Drilling)(a) 300,100 7,655,978
===========================================================================
20,754,509
===========================================================================
DENMARK-3.14%
Coloplast A.S.-Class B (Health Care
Supplies)(a) 238,800 17,472,924
- ---------------------------------------------------------------------------
H. Lundbeck A.S. (Pharmaceuticals) 509,200 12,994,116
- ---------------------------------------------------------------------------
Vestas Wind Systems A.S. (Heavy Electrical
Equipment) 204,700 6,436,757
===========================================================================
36,903,797
===========================================================================
FRANCE-1.95%
Altran Technologies S.A. (IT Consulting &
Services) 426,900 19,597,976
- ---------------------------------------------------------------------------
Silicon-On-Insulator Technologies (Electronic
Equipment & Instruments)(a) 250,000 3,330,555
===========================================================================
22,928,531
===========================================================================
GERMANY-2.55%
Hugo Boss A.G.-Pfd. (Apparel & Accessories) 566,000 9,945,145
- ---------------------------------------------------------------------------
Medion A.G. (Distributors) 256,200 8,971,057
- ---------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobile Manufacturers) 11,400 3,181,130
- ---------------------------------------------------------------------------
Wella A.G.-Pfd. (Personal Products) 174,400 7,927,801
===========================================================================
30,025,133
===========================================================================
HONG KONG-1.76%
China Mobile Ltd. (Wireless Telecommunication
Services)(a) 1,452,500 4,404,139
- ---------------------------------------------------------------------------
Esprit Holdings Ltd. (Apparel Retail) 7,482,000 7,865,844
- ---------------------------------------------------------------------------
Legend Holdings Ltd. (Computer Hardware) 8,866,000 3,722,655
- ---------------------------------------------------------------------------
</Table>
FS-26
<Table>
<Caption>
MARKET
SHARES VALUE
HONG KONG-(CONTINUED)
Li & Fung Ltd. (Distributors) 4,894,000 $ 4,674,487
===========================================================================
20,667,125
===========================================================================
INDIA-2.47%
Dr. Reddy's Laboratories Ltd.-ADR
(Pharmaceuticals)(a) 790,200 19,675,980
- ---------------------------------------------------------------------------
Infosy Technologies Ltd. (IT Consulting &
Services)(b) 90,024 5,466,909
- ---------------------------------------------------------------------------
Satyam Computer Services Ltd. (IT Consulting
& Services) 617,000 1,803,815
- ---------------------------------------------------------------------------
Satyam Computer Services Ltd.-ADR (IT
Consulting & Services) 322,900 2,163,430
===========================================================================
29,110,134
===========================================================================
IRELAND-1.18%
Anglo Irish Bank Corp. PLC (Banks) 2,254,800 6,839,948
- ---------------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(a) 150,000 7,011,000
===========================================================================
13,850,948
===========================================================================
ISRAEL-1.43%
Lumenis Ltd. (Health Care Equipment)(a) 300,200 5,973,980
- ---------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Pharmaceuticals)(a) 256,660 10,805,386
===========================================================================
16,779,366
===========================================================================
ITALY-0.45%
Bulgari S.p.A. (Apparel & Accessories) 696,900 5,332,174
===========================================================================
JAPAN-6.72%
Bellsystem24, Inc. (Diversified Commercial
Services) 57,000 23,369,814
- ---------------------------------------------------------------------------
C & S Co., Ltd. (Food Retail) 377,520 10,421,575
- ---------------------------------------------------------------------------
Crayfish Co., Ltd.-ADR (Internet Software &
Services)(a) 37,390 354,831
- ---------------------------------------------------------------------------
Hokuto Corp. (Agricultural Products) 346,550 15,000,939
- ---------------------------------------------------------------------------
Net One Systems Co., Ltd. (IT Consulting &
Services)(a) 574 8,719,699
- ---------------------------------------------------------------------------
Trend Micro Inc. (Application Software)(a) 534,100 11,472,419
- ---------------------------------------------------------------------------
Yahoo Japan Corp. (Internet Software &
Services)(a) 346 9,636,230
===========================================================================
78,975,507
===========================================================================
MEXICO-4.04%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 474,600 7,119,000
- ---------------------------------------------------------------------------
Cemex S.A. de C.V.-ADR Wts., expiring
12/13/02 (Construction Materials)(c) 16,212 21,076
- ---------------------------------------------------------------------------
Grupo Financiero BBVA Bancomer, S.A. de
C.V.-Class O (Banks)(a) 11,940,000 9,037,067
- ---------------------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series C (Brewers) 3,161,000 7,259,224
- ---------------------------------------------------------------------------
Telefonos de Mexico S.A. de C.V.- Class L-ADR
(Integrated Telecommunication Services) 198,600 6,764,316
- ---------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
MEXICO-(CONTINUED)
Tubos de Acero de Mexico S.A.-ADR (Oil & Gas
Equipment & Services)(a) 541,800 $ 5,092,920
- ---------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series C
(General Merchandise Stores) 5,637,400 12,168,275
===========================================================================
47,461,878
===========================================================================
NETHERLANDS-2.46%
Fugro N.V. (Oil & Gas Equipment & Services) 116,500 5,951,229
- ---------------------------------------------------------------------------
Nutreco Holding N.V. (Agricultural Products) 432,000 15,768,468
- ---------------------------------------------------------------------------
Van der Moolen Holding N.V. (Diversified
Financial Services) 301,500 7,259,822
===========================================================================
28,979,519
===========================================================================
NORWAY-0.77%
Tandberg A.S.A. (Electronic Equipment &
Instruments)(a) 288,900 5,180,912
- ---------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A (Oil & Gas
Equipment & Services)(a) 274,000 3,850,867
===========================================================================
9,031,779
===========================================================================
PHILIPPINES-0.26%
SM Prime Holdings, Inc. (Real Estate
Management & Development) 28,033,600 3,021,909
===========================================================================
SINGAPORE-0.74%
Datacraft Asia Ltd. (Networking Equipment) 2,688,880 8,711,971
===========================================================================
SOUTH KOREA-1.11%
Korea Telecom Corp.-ADR (Integrated
Telecommunication Services) 274,500 5,720,580
- ---------------------------------------------------------------------------
Samsung Electronics Co., Ltd.
(Semiconductors) 54,900 7,378,118
===========================================================================
13,098,698
===========================================================================
SPAIN-4.39%
Grupo Dragados, S.A. (Construction &
Engineering) 1,837,700 22,315,234
- ---------------------------------------------------------------------------
Grupo Ferrovial, S.A. (Construction &
Engineering) 1,006,200 18,658,057
- ---------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 572,600 10,669,316
===========================================================================
51,642,607
===========================================================================
SWEDEN-1.74%
Biacore International A.B. (Health Care
Equipment)(a) 113,850 3,106,281
- ---------------------------------------------------------------------------
Getinge Industrier A.B.-Class B (Health Care
Equipment) 899,911 12,403,139
- ---------------------------------------------------------------------------
Swedish Match A.B. (Tobacco) 958,800 4,944,308
===========================================================================
20,453,728
===========================================================================
SWITZERLAND-1.52%
Disetronic Holding AG (Health Care Equipment) 2,115 1,598,546
- ---------------------------------------------------------------------------
</Table>
FS-27
<Table>
<Caption>
MARKET
SHARES VALUE
SWITZERLAND-(CONTINUED)
Synthes-Stratec Inc. (Health Care Equipment) 24,800 $ 16,270,257
===========================================================================
17,868,803
===========================================================================
TAIWAN-0.88%
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)(a) 5,830,592 10,309,163
===========================================================================
THAILAND-0.26%
Advanced Info Service Public Company Ltd.
(Wireless Telecommunication Services) 3,240,000 3,007,381
===========================================================================
UNITED KINGDOM-8.87%
Aggreko PLC (Diversified Commercial Services) 2,051,800 10,271,081
- ---------------------------------------------------------------------------
Amey PLC (Diversified Commercial Services) 1,708,400 7,662,297
- ---------------------------------------------------------------------------
Galen Holdings PLC (Pharmaceuticals) 1,750,900 12,185,927
- ---------------------------------------------------------------------------
Man Group PLC (Diversified Financial
Services) 1,658,500 26,741,017
- ---------------------------------------------------------------------------
Matalan PLC (Apparel Retail)(a) 361,600 1,904,851
- ---------------------------------------------------------------------------
Morrison (William) Supermarkets PLC (Food
Retail) 4,711,100 13,848,297
- ---------------------------------------------------------------------------
PizzaExpress PLC (Restaurants) 273,500 3,074,075
- ---------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
UNITED KINGDOM-(CONTINUED)
Serco Group PLC (Diversified Commercial
Services)(a) 582,800 $ 3,093,987
- ---------------------------------------------------------------------------
Smith & Nephew PLC (Health Care Supplies) 2,767,900 15,577,702
- ---------------------------------------------------------------------------
St. James's Place Capital PLC (Life & Health
Insurance) 1,117,700 5,188,462
- ---------------------------------------------------------------------------
Willis Group Holdings Ltd. (Insurance
Brokers) 205,600 4,788,424
===========================================================================
104,336,120
===========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $648,630,642) 634,184,808
===========================================================================
MONEY MARKET FUNDS-11.83%
STIC Liquid Assets Portfolio(d) 69,563,948 69,563,948
- ---------------------------------------------------------------------------
STIC Prime Portfolio(d) 69,563,948 69,563,948
===========================================================================
Total Money Market Funds (Cost
$139,127,896) 139,127,896
===========================================================================
TOTAL INVESTMENTS-101.08% (Cost
$1,213,032,269) 1,188,673,355
===========================================================================
OTHER ASSETS LESS LIABILITIES-(1.08%) (12,651,942)
===========================================================================
NET ASSETS-100.00% $1,176,021,413
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
Wts. - Warrants
</Table>
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) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-28
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2001
<Table>
ASSETS:
Investments, at market value (cost
$1,213,032,269)* $1,188,673,355
- -------------------------------------------------------------
Foreign currencies, at value (cost
$5,653,511) 5,638,016
- -------------------------------------------------------------
Receivables for:
Investments sold 12,012,616
- -------------------------------------------------------------
Capital stock sold 453,729
- -------------------------------------------------------------
Dividends 1,165,504
- -------------------------------------------------------------
Investment for deferred compensation plan 61,747
- -------------------------------------------------------------
Collateral for securities loaned 115,648,547
- -------------------------------------------------------------
Other assets 27,208
=============================================================
Total assets 1,323,680,722
=============================================================
LIABILITIES:
Payables for:
Investments purchased 26,709,558
- -------------------------------------------------------------
Capital stock reacquired 3,158,186
- -------------------------------------------------------------
Deferred compensation plan 61,747
- -------------------------------------------------------------
Collateral upon return of securities loaned 115,648,547
- -------------------------------------------------------------
Accrued distribution fees 965,097
- -------------------------------------------------------------
Accrued directors' fees 1,449
- -------------------------------------------------------------
Accrued transfer agent fees 670,268
- -------------------------------------------------------------
Accrued operating expenses 444,457
=============================================================
Total liabilities 147,659,309
=============================================================
Net assets applicable to shares outstanding $1,176,021,413
=============================================================
NET ASSETS:
Class A $ 563,827,722
_____________________________________________________________
=============================================================
Class B $ 583,933,291
_____________________________________________________________
=============================================================
Class C $ 28,260,400
_____________________________________________________________
=============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 44,828,759
_____________________________________________________________
=============================================================
Class B:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 48,789,139
_____________________________________________________________
=============================================================
Class C:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 2,359,810
_____________________________________________________________
=============================================================
Class A:
Net asset value per share $ 12.58
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $12.58 divided by
95.25%) $ 13.21
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 11.97
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 11.98
_____________________________________________________________
=============================================================
</Table>
* At October 31, 2001, securities with an aggregate market value of $112,584,290
were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended October 31, 2001
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$1,212,637) $ 9,108,590
- ------------------------------------------------------------
Dividends from affiliated money market funds 6,608,951
- ------------------------------------------------------------
Interest 276,198
- ------------------------------------------------------------
Security lending income 2,320,511
============================================================
Total investment income 18,314,250
============================================================
EXPENSES:
Advisory fees 14,440,026
- ------------------------------------------------------------
Administrative services fees 173,416
- ------------------------------------------------------------
Custodian fees 1,173,152
- ------------------------------------------------------------
Distribution fees -- Class A 3,928,551
- ------------------------------------------------------------
Distribution fees -- Class B 8,163,001
- ------------------------------------------------------------
Distribution fees -- Class C 379,927
- ------------------------------------------------------------
Transfer agent fees -- Class A 2,653,191
- ------------------------------------------------------------
Transfer agent fees -- Class B 2,955,681
- ------------------------------------------------------------
Transfer agent fees -- Class C 137,565
- ------------------------------------------------------------
Directors' fees 14,832
- ------------------------------------------------------------
Other 1,088,983
============================================================
Total expenses 35,108,325
============================================================
Less: Fees waived (4,957)
- ------------------------------------------------------------
Expenses paid indirectly (29,109)
============================================================
Net expenses 35,074,259
============================================================
Net investment income (loss) (16,760,009)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (141,749,972)
- ------------------------------------------------------------
Foreign currencies (848,325)
============================================================
(142,598,297)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (692,170,123)
- ------------------------------------------------------------
Foreign currencies 11,241
============================================================
(692,158,882)
============================================================
Net gain (loss) from investment securities
and foreign currencies (834,757,179)
============================================================
Net increase (decrease) in net assets
resulting from operations $(851,517,188)
____________________________________________________________
============================================================
</Table>
See Notes to Financial Statements.
FS-29
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2001 and 2000
<Table>
<Caption>
2001 2000
--------------- --------------
OPERATIONS:
Net investment income (loss) $ (16,760,009) $ (31,828,442)
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (142,598,297) 463,678,841
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (692,158,882) (36,883,831)
===============================================================================================
Net increase (decrease) in net assets resulting from
operations (851,517,188) 394,966,568
===============================================================================================
Distributions to shareholders from net realized gains:
Class A (201,308,981) (51,990,426)
- -----------------------------------------------------------------------------------------------
Class B (218,184,705) (58,426,813)
- -----------------------------------------------------------------------------------------------
Class C (9,633,290) (1,135,421)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 64,597,208 112,191,153
- -----------------------------------------------------------------------------------------------
Class B 71,798,372 84,244,285
- -----------------------------------------------------------------------------------------------
Class C 6,642,905 38,282,689
===============================================================================================
Net increase (decrease) in net assets (1,137,605,679) 518,132,035
===============================================================================================
NET ASSETS:
Beginning of year 2,313,627,092 1,795,495,057
===============================================================================================
End of year $ 1,176,021,413 $2,313,627,092
_______________________________________________________________________________________________
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 1,344,175,481 $1,218,746,808
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (124,227) (108,263)
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (143,605,635) 427,253,871
- -----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (24,424,206) 667,734,676
===============================================================================================
$ 1,176,021,413 $2,313,627,092
_______________________________________________________________________________________________
===============================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
October 31, 2001
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 -- 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.
FS-30
GLOBAL AGGRESSIVE GROWTH FUND
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").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the 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 the close of the respective
markets. Occasionally, events affecting the values of such foreign securities
may occur between the times at which the particular foreign market closes 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 a
development/event is so significant that there is a reasonably high degree of
certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer reflect
actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE 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, 2001, undistributed net investment income (loss) was
increased by $16,744,045, undistributed net realized gains increased by
$865,767 and paid in capital decreased by $17,609,812 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 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 $138,223,796 as of October 31,
2001 which may be carried forward to offset future taxable gains, if any,
which expires, if not previously utilized, in the year 2009.
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.
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 based on relative net assets.
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. Effective July 1, 2001, AIM has
voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of
the advisory fee AIM receives from the affiliated money market fund of which the
Fund has invested. For the year ended October 31, 2001, AIM waived fees of
$4,957.
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, 2001, AIM was
paid $173,416 for such services.
FS-31
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 2001, AFS
was paid $3,169,885 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. For the year ended October 31, 2001,
the Class A, Class B and Class C shares paid AIM Distributors $3,928,551,
$8,163,001 and $379,927, respectively, as compensation under the Plans.
AIM Distributors received commissions of $235,749 from sales of the Class A
shares of the Fund during the year ended October 31, 2001. 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, 2001,
AIM Distributors received $114,760 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, 2001, the Fund paid legal fees of $5,736 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, 2001, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $29,109 under an expense offset
arrangement which resulted in a reduction of the Fund's total expenses of
$29,109.
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,
2001, 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. 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 October 31, 2001, securities with an aggregate value of $112,584,290 were
on loan to brokers. The loans were secured by cash collateral of $115,648,547
received by the Fund and invested in affiliated money market funds as follows:
$57,824,273 in STIC Liquid Assets Portfolio and $57,824,274 in STIC Prime
Portfolio. For the year ended October 31, 2001, the Fund received fees of
$2,320,511 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, 2001 was
$1,306,856,302 and $1,483,128,037, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2001 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 145,687,355
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (175,428,107)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $ (29,740,752)
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $1,218,414,107.
</Table>
FS-32
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 2001 and
2000 were as follows:
<Table>
<Caption>
2001 2000
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sold:
Class A 39,018,701 $ 612,509,848 18,396,903 $ 547,555,973
- --------------------------------------------------------------------------------------------------------------------------
Class B 2,311,795 37,138,541 6,080,280 181,657,597
- --------------------------------------------------------------------------------------------------------------------------
Class C 1,060,678 16,872,704 1,805,060 53,447,289
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 10,348,387 190,616,587 1,995,404 49,763,525
- --------------------------------------------------------------------------------------------------------------------------
Class B 11,471,372 202,004,337 2,238,791 54,178,748
- --------------------------------------------------------------------------------------------------------------------------
Class C 509,053 8,969,519 42,452 1,027,748
==========================================================================================================================
Reacquired:
Class A (47,208,581) (738,529,227) (16,549,844) (485,128,345)
- --------------------------------------------------------------------------------------------------------------------------
Class B (11,394,193) (167,344,506) (5,346,711) (151,592,060)
- --------------------------------------------------------------------------------------------------------------------------
Class C (1,247,194) (19,199,318) (574,953) (16,192,348)
==========================================================================================================================
4,870,018 $ 143,038,485 8,087,382 $ 234,718,127
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2001 2000(a) 1999(a) 1998(a) 1997(a)
-------- ---------- -------- -------- ----------
Net asset value, beginning of period $ 25.87 $ 21.95 $ 15.87 $ 17.28 $ 15.76
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.28) (0.17) (0.10) (0.15)
- -----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (8.42) 5.56 6.25 (1.31) 1.67
===========================================================================================================
Total from investment operations (8.55) 5.28 6.08 (1.41) 1.52
===========================================================================================================
Less distributions from net realized gains (4.74) (1.36) -- -- --
===========================================================================================================
Net asset value, end of period $ 12.58 $ 25.87 $ 21.95 $ 15.87 $ 17.28
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) (38.87)% 24.27% 38.31% (8.16)% 9.65%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $563,828 $1,103,740 $852,198 $937,587 $1,242,505
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets 1.87%(c) 1.65% 1.80% 1.75% 1.75%
===========================================================================================================
Ratio of net investment income (loss) to
average net assets (0.75)%(c) (0.96)% (0.95)% (0.55)% (0.88)%
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate 87% 62% 60% 50% 57%
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $785,710,258.
FS-33
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2001 2000(a) 1999(a) 1998(a) 1997(a)
-------- ---------- -------- -------- ----------
Net asset value, beginning of period $ 24.98 $ 21.35 $ 15.52 $ 17.00 $ 15.58
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.21) (0.42) (0.27) (0.19) (0.24)
- -----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (8.06) 5.41 6.10 (1.29) 1.66
===========================================================================================================
Total from investment operations (8.27) 4.99 5.83 (1.48) 1.42
===========================================================================================================
Less distributions from net realized gains (4.74) (1.36) -- -- --
===========================================================================================================
Net asset value, end of period $ 11.97 $ 24.98 $ 21.35 $ 15.52 $ 17.00
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) (39.19)% 23.56% 37.56% (8.71)% 9.11%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $583,933 $1,158,979 $926,972 $947,293 $1,241,999
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets 2.39%(c) 2.19% 2.37% 2.32% 2.30%
===========================================================================================================
Ratio of net investment income (loss) to
average net assets (1.27)%(c) (1.50)% (1.52)% (1.11)% (1.44)%
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate 87% 62% 60% 50% 57%
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(C) Ratios are based on average daily net assets of $816,300,085.
<Table>
<Caption>
CLASS C
------------------------------------------------------------------
AUGUST 4, 1997
YEAR ENDED OCTOBER 31, (DATE SALES COMMENCED)
---------------------------------------- TO OCTOBER 31,
2001 2000(a) 1999(a) 1998(a) 1997(a)
------- ------- ------- ------- ----------------------
Net asset value, beginning of period $ 24.99 $ 21.35 $ 15.52 $ 17.00 $18.39
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.21) (0.42) (0.27) (0.19) (0.04)
- -----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (8.06) 5.42 6.10 (1.29) (1.35)
=================================================================================================================
Total from investment operations (8.27) 5.00 5.83 (1.48) (1.39)
=================================================================================================================
Less distributions from net realized gains (4.74) (1.36) -- -- --
=================================================================================================================
Net asset value, end of period $ 11.98 $ 24.99 $ 21.35 $ 15.52 $17.00
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) (39.17)% 23.61% 37.56% (8.71)% 7.56%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,260 $50,908 $16,325 $13,186 $4,676
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets 2.39%(c) 2.19% 2.37% 2.34% 2.36%(d)
=================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.28)%(c) (1.50)% (1.52)% (1.13)% (1.50)%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate 87% 62% 60% 50% 57%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(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 $37,992,693.
(d) Annualized.
FS-34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of AIM Global 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 the AIM Global Growth Fund (one of
the funds constituting AIM International Funds, Inc; hereafter referred to as
the "Fund") at October 31, 2001, and the results of its operations, the changes
in its net assets, and the financial highlights for the year then ended, 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 audit. We conducted our audit 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 audit, which included
confirmation of securities at October 31, 2001 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion. The
statement of changes in net assets of the Fund for the year ended October 31,
2000 and the financial highlights for each of the periods ended on or before
October 31, 2000 were audited by other independent accountants whose report,
dated December 6, 2000, expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
December 12, 2001
Houston, Texas
FS-35
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of changes in net assets of AIM
Global Growth Fund (a portfolio of AIM International Funds, Inc.) for the year
ended October 31, 2000 and the financial highlights for each of the periods in
the four-year period then ended. This financial statement and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on this financial statement 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 statement and financial highlights referred to
above present fairly, in all material respects, the changes in net assets of AIM
Global Growth Fund for the year ended October 31, 2000 and the financial
highlights for each of the periods in the four-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-36
SCHEDULE OF INVESTMENTS
October 31, 2001
<Table>
<Caption>
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS-44.96%
AEROSPACE & DEFENSE-1.88%
General Dynamics Corp. 91,000 $ 7,425,600
- ------------------------------------------------------------------------
Lockheed Martin Corp. 180,000 8,778,600
========================================================================
16,204,200
========================================================================
APPLICATION SOFTWARE-1.56%
Electronic Arts Inc.(a) 130,000 6,689,800
- ------------------------------------------------------------------------
PeopleSoft, Inc.(a) 225,000 6,698,250
========================================================================
13,388,050
========================================================================
BIOTECHNOLOGY-1.57%
Amgen Inc.(a) 148,000 8,409,360
- ------------------------------------------------------------------------
IDEC Pharmaceuticals Corp.(a) 85,000 5,098,300
========================================================================
13,507,660
========================================================================
DATA PROCESSING SERVICES-1.34%
First Data Corp. 170,000 11,486,900
========================================================================
DIVERSIFIED FINANCIAL SERVICES-7.33%
Citigroup Inc. 250,000 11,380,000
- ------------------------------------------------------------------------
Fannie Mae 135,000 10,929,600
- ------------------------------------------------------------------------
Freddie Mac 170,000 11,529,400
- ------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 130,000 10,160,800
- ------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 145,000 9,056,700
- ------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 205,000 10,028,600
========================================================================
63,085,100
========================================================================
GENERAL MERCHANDISE STORES-1.22%
Wal-Mart Stores, Inc. 204,500 10,511,300
========================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-1.42%
AmerisourceBergen Corp. 65,000 4,131,400
- ------------------------------------------------------------------------
Cardinal Health, Inc. 120,000 8,053,200
========================================================================
12,184,600
========================================================================
HEALTH CARE EQUIPMENT-1.45%
Baxter International Inc. 195,000 9,432,150
- ------------------------------------------------------------------------
Biomet, Inc.(a) 100,000 3,050,000
========================================================================
12,482,150
========================================================================
HEALTH CARE FACILITIES-2.17%
HCA Inc. 232,000 9,201,120
- ------------------------------------------------------------------------
Tenet Healthcare Corp.(a) 165,000 9,490,800
========================================================================
18,691,920
========================================================================
HOME IMPROVEMENT RETAIL-2.13%
Home Depot, Inc. (The) 230,000 8,792,900
- ------------------------------------------------------------------------
Lowe's Cos., Inc. 280,000 9,548,000
========================================================================
18,340,900
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
INDUSTRIAL CONGLOMERATES-1.06%
General Electric Co. 250,000 $ 9,102,500
========================================================================
IT CONSULTING & SERVICES-0.60%
SunGard Data Systems Inc.(a) 205,000 5,166,000
========================================================================
MANAGED HEALTH CARE-0.50%
UnitedHealth Group Inc. 65,000 4,273,750
========================================================================
MOVIES & ENTERTAINMENT-1.05%
AOL Time Warner Inc.(a) 125,000 3,901,250
- ------------------------------------------------------------------------
Viacom Inc.-Class B(a) 140,000 5,111,400
========================================================================
9,012,650
========================================================================
MULTI-LINE INSURANCE-1.25%
American International Group, Inc. 137,000 10,768,200
========================================================================
NETWORKING EQUIPMENT-1.43%
Brocade Communications Systems, Inc.(a) 130,000 3,191,500
- ------------------------------------------------------------------------
Cisco Systems, Inc.(a) 540,000 9,136,800
========================================================================
12,328,300
========================================================================
PHARMACEUTICALS-6.39%
Abbott Laboratories 140,000 7,417,200
- ------------------------------------------------------------------------
Allergan, Inc. 131,000 9,404,490
- ------------------------------------------------------------------------
Andrx Group(a) 107,000 6,947,510
- ------------------------------------------------------------------------
Bristol-Myers Squibb Co. 121,000 6,467,450
- ------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 114,000 8,479,320
- ------------------------------------------------------------------------
Johnson & Johnson 122,000 7,065,020
- ------------------------------------------------------------------------
King Pharmaceuticals, Inc.(a) 235,000 9,162,650
========================================================================
54,943,640
========================================================================
SEMICONDUCTOR EQUIPMENT-1.24%
Applied Materials, Inc.(a) 151,000 5,150,610
- ------------------------------------------------------------------------
KLA-Tencor Corp.(a) 135,000 5,516,100
========================================================================
10,666,710
========================================================================
SEMICONDUCTORS-5.49%
Analog Devices, Inc.(a) 230,000 8,740,000
- ------------------------------------------------------------------------
Broadcom Corp.-Class A(a) 150,000 5,161,500
- ------------------------------------------------------------------------
Intel Corp. 367,000 8,962,140
- ------------------------------------------------------------------------
Linear Technology Corp. 150,000 5,820,000
- ------------------------------------------------------------------------
Texas Instruments Inc. 365,000 10,216,350
- ------------------------------------------------------------------------
Xilinx, Inc.(a) 275,000 8,365,500
========================================================================
47,265,490
========================================================================
SOFT DRINKS-0.54%
PepsiCo, Inc. 95,000 4,627,450
========================================================================
SYSTEMS SOFTWARE-1.46%
Microsoft Corp.(a) 155,000 9,013,250
- ------------------------------------------------------------------------
</Table>
FS-37
<Table>
<Caption>
MARKET
SHARES VALUE
SYSTEMS SOFTWARE-(CONTINUED)
Oracle Corp.(a) 260,000 $ 3,525,600
========================================================================
12,538,850
========================================================================
TELECOMMUNICATIONS EQUIPMENT-0.91%
QUALCOMM Inc.(a) 160,000 7,859,200
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.97%
Sprint Corp. (PCS Group)(a) 375,000 8,362,500
========================================================================
Total Domestic Common Stocks (Cost
$391,207,486) 386,798,020
========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-49.99%
AUSTRALIA-0.77%
AMP Ltd. (Multi-Line Insurance) 725,240 6,585,217
========================================================================
BERMUDA-0.99%
ACE Ltd. (Property & Casualty Insurance) 242,000 8,530,500
========================================================================
BRAZIL-0.55%
Companhia de Bebidas das Americas-ADR
(Brewers) 292,400 4,748,576
========================================================================
CANADA-3.16%
Bank of Nova Scotia (Banks) 80,000 2,208,095
- ------------------------------------------------------------------------
Biovail Corp. (Pharmaceuticals)(a) 344,300 16,271,618
- ------------------------------------------------------------------------
Bombardier Inc.-Class B (Aerospace & Defense) 681,020 4,415,249
- ------------------------------------------------------------------------
Manulife Financial Corp. (Life & Health
Insurance) 175,600 4,338,327
========================================================================
27,233,289
========================================================================
DENMARK-2.56%
Danske Bank A.S. (Banks) 541,050 8,015,835
- ------------------------------------------------------------------------
Novo Nordisk A.S.-Class B (Pharmaceuticals) 292,610 11,872,921
- ------------------------------------------------------------------------
Vestas Wind Systems A.S. (Heavy Electrical
Equipment) 67,800 2,131,959
========================================================================
22,020,715
========================================================================
FRANCE-11.27%
Aventis S.A. (Pharmaceuticals) 188,200 13,849,123
- ------------------------------------------------------------------------
BNP Paribas S.A. (Banks) 177,900 14,796,630
- ------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Department
Stores) 17,920 2,063,115
- ------------------------------------------------------------------------
PSA Peugeot Citroen (Automobile
Manufacturers) 235,200 9,558,945
- ------------------------------------------------------------------------
Sanofi-Synthelabo S.A. (Pharmaceuticals) 267,800 17,657,657
- ------------------------------------------------------------------------
Sodexho Alliance S.A. (Restaurants)(a) 111,200 5,235,056
- ------------------------------------------------------------------------
TotalFinaElf S.A. (Integrated Oil & Gas) 117,359 16,479,950
- ------------------------------------------------------------------------
Vinci S.A. (Construction & Engineering) 167,850 10,123,042
- ------------------------------------------------------------------------
Vivendi Environnement (Multi-Utilities) 187,000 7,189,291
========================================================================
96,952,809
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
GERMANY-3.43%
Allianz A.G. (Multi-Line Insurance) 14,340 $ 3,367,737
- ------------------------------------------------------------------------
Altana A.G. (Pharmaceuticals) 323,380 15,136,706
- ------------------------------------------------------------------------
Bayerisch Motoren Werke A.G. (Automobile
Manufacturers) 76,387 2,269,072
- ------------------------------------------------------------------------
Muenchener Rueckversicherungs-Gesellschaft
A.G. (Reinsurance) 32,900 8,703,829
========================================================================
29,477,344
========================================================================
HONG KONG-0.26%
China Mobile Ltd. (Wireless Telecommunication
Services)(a) 748,000 2,268,018
========================================================================
IRELAND-0.68%
Bank of Ireland (Banks) 658,800 5,888,677
========================================================================
ISRAEL-1.68%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 233,800 14,448,840
========================================================================
ITALY-1.79%
Autostrade-Concessioni e Costruzioni
Autostrade S.p.A. (Highways & Railtracks) 995,800 6,256,658
- ------------------------------------------------------------------------
ENI S.p.A. (Integrated Oil & Gas) 731,600 9,167,012
========================================================================
15,423,670
========================================================================
JAPAN-5.13%
Crayfish Co., Ltd.-ADR (Internet Software &
Services)(a) 15,220 144,438
- ------------------------------------------------------------------------
Fuji Photo Film Co., Ltd. (Photographic
Products) 63,000 2,078,732
- ------------------------------------------------------------------------
Fujisawa Pharmaceutical Co., Ltd.
(Pharmaceuticals) (Acquired 09/07/01-
09/13/01; Cost $6,226,462)(b) 311,000 7,467,658
- ------------------------------------------------------------------------
Hirose Electric Co., Ltd. (Electronic
Equipment & Instruments) 44,000 3,227,050
- ------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile
Manufacturers) 96,000 3,442,005
- ------------------------------------------------------------------------
Hoya Corp. (Electronic Equipment &
Instruments) 102,000 6,089,677
- ------------------------------------------------------------------------
Nintendo Co. Ltd. (Consumer Electronics) 14,000 2,158,772
- ------------------------------------------------------------------------
NTT DoCoMo, Inc. (Wireless Telecommunication
Services) (Acquired 01/27/99-02/21/01; Cost
$6,458,082)(b) 424 5,748,448
- ------------------------------------------------------------------------
Ricoh Co., Ltd. (Office Electronics) 215,000 3,582,163
- ------------------------------------------------------------------------
Sharp Corp. (Consumer Electronics) 217,000 2,243,728
- ------------------------------------------------------------------------
Takeda Chemical Industries, Ltd.
(Pharmaceuticals) 57,000 2,760,617
- ------------------------------------------------------------------------
Toyota Motor Corp. (Automobile Manufacturers) 80,200 1,945,394
- ------------------------------------------------------------------------
Trend Micro Inc. (Application Software)(a) 150,100 3,224,134
========================================================================
44,112,816
========================================================================
</Table>
FS-38
<Table>
<Caption>
MARKET
SHARES VALUE
MEXICO-1.42%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 137,300 $ 2,059,500
- ------------------------------------------------------------------------
Telefonos de Mexico S.A. de C.V.-Class L-ADR
(Integrated Telecommunication Services) 137,300 4,676,438
- ------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series C
(General Merchandise Stores) 2,536,200 5,474,364
========================================================================
12,210,302
========================================================================
NETHERLANDS-2.13%
Koninklijke Ahold N.V. (Food Retail) 381,200 10,726,468
- ------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Integrated Oil &
Gas) 103,340 5,255,715
- ------------------------------------------------------------------------
Wolters Kluwer N.V. (Publishing & Printing) 110,100 2,311,164
========================================================================
18,293,347
========================================================================
PORTUGAL-0.17%
Portugal Telecom, SGPS, S.A. (Integrated
Telecommunications Services)(a) 188,450 1,492,773
========================================================================
SOUTH KOREA-1.06%
Korea Telecom Corp.-ADR (Integrated
Telecommunication Services) 178,000 3,709,520
- ------------------------------------------------------------------------
Samsung Electronics Co., Ltd.
(Semiconductors) 40,600 5,456,313
========================================================================
9,165,833
========================================================================
SPAIN-2.27%
Banco Bilbao Vizcaya Argentaria, S.A. (Banks) 185,500 2,075,534
- ------------------------------------------------------------------------
Banco Popular Espanol S.A. (Banks) 177,000 5,942,880
- ------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 286,900 5,345,838
- ------------------------------------------------------------------------
Telefonica, S.A. (Integrated
Telecommunication Services)(a) 515,380 6,188,684
========================================================================
19,552,936
========================================================================
SWEDEN-1.02%
Hennes & Mauritz A.B.-Class B (Apparel
Retail)(a) 262,200 4,584,862
- ------------------------------------------------------------------------
Securitas A.B.-Class B (Diversified
Commercial Services)(a) 249,800 4,157,244
========================================================================
8,742,106
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
SWITZERLAND-2.02%
Nestle S.A.-Class B (Packaged Foods) 58,300 $ 12,095,288
- ------------------------------------------------------------------------
Serono S.A.-Class B (Biotechnology) 6,700 5,293,574
========================================================================
17,388,862
========================================================================
UNITED KINGDOM-7.63%
BP PLC (Integrated Oil & Gas) 1,675,200 13,529,518
- ------------------------------------------------------------------------
Next PLC (Department Stores) 607,900 7,687,314
- ------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products) 661,000 9,234,117
- ------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Banks) 624,400 14,946,912
- ------------------------------------------------------------------------
Shell Transport & Trading Co. PLC (Integrated
Oil & Gas) 1,243,000 9,315,390
- ------------------------------------------------------------------------
Smith & Nephew PLC (Health Care Supplies) 1,083,200 6,096,234
- ------------------------------------------------------------------------
WPP Group PLC (Advertising) 531,600 4,815,562
========================================================================
65,625,047
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $429,940,418) 430,161,677
========================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY SECURITIES-0.23%
U.S. TREASURY BILLS
2.08%, 12/20/01 (Cost $1,994,202)(c) $2,000,000 1,994,202
========================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-5.22%
STIC Liquid Assets Portfolio(d) 22,461,503 22,461,503
- ------------------------------------------------------------------------
STIC Prime Portfolio(d) 22,461,503 22,461,503
========================================================================
Total Money Market Funds (Cost
$44,923,006) 44,923,006
========================================================================
TOTAL INVESTMENTS-100.40% (Cost $868,065,112) 863,876,905
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.40%) (3,469,769)
========================================================================
NET ASSETS-100.00% $860,407,136
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The aggregate market value of these securities at
10/31/01 was $13,216,106 which represented 1.54% of the Fund's net assets.
(c) 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.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-39
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2001
<Table>
ASSETS:
Investments, at market value (cost
$868,065,112)* $863,876,905
- ------------------------------------------------------------
Foreign currencies, at value (cost $639,040) 625,803
- ------------------------------------------------------------
Receivables for:
Investments sold 5,862,925
- ------------------------------------------------------------
Capital stock sold 302,737
- ------------------------------------------------------------
Dividends and interest 1,242,212
- ------------------------------------------------------------
Investment for deferred compensation plan 42,910
- ------------------------------------------------------------
Collateral for securities loaned 55,216,201
- ------------------------------------------------------------
Other assets 27,249
============================================================
Total assets 927,196,942
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,617,969
- ------------------------------------------------------------
Capital stock reacquired 4,602,023
- ------------------------------------------------------------
Deferred compensation plan 42,910
- ------------------------------------------------------------
Collateral upon return of securities loaned 55,216,201
- ------------------------------------------------------------
Accrued distribution fees 702,613
- ------------------------------------------------------------
Accrued directors' fees 1,775
- ------------------------------------------------------------
Accrued transfer agent fees 459,424
- ------------------------------------------------------------
Accrued operating expenses 146,891
============================================================
Total liabilities 66,789,806
============================================================
Net assets applicable to shares outstanding $860,407,136
____________________________________________________________
============================================================
NET ASSETS:
Class A $439,612,496
____________________________________________________________
============================================================
Class B $369,170,517
____________________________________________________________
============================================================
Class C $ 51,624,123
____________________________________________________________
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 30,158,749
____________________________________________________________
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 26,366,929
____________________________________________________________
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 3,685,552
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 14.58
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $14.58 divided by
95.25%) $ 15.31
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 14.00
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 14.01
____________________________________________________________
============================================================
</Table>
* At October 31, 2001, securities with an aggregate market value of $52,937,081
were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended October 31, 2001
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$704,394) $ 7,935,042
- ------------------------------------------------------------
Dividends from affiliated money market funds 4,042,042
- ------------------------------------------------------------
Interest 73,167
- ------------------------------------------------------------
Security lending income 131,844
============================================================
Total investment income 12,182,095
============================================================
EXPENSES:
Advisory fees 10,072,947
- ------------------------------------------------------------
Administrative services fees 151,718
- ------------------------------------------------------------
Custodian fees 605,916
- ------------------------------------------------------------
Distribution fees -- Class A 2,878,873
- ------------------------------------------------------------
Distribution fees -- Class B 5,513,030
- ------------------------------------------------------------
Distribution fees -- Class C 695,408
- ------------------------------------------------------------
Transfer agent fees -- Class A 1,853,674
- ------------------------------------------------------------
Transfer agent fees -- Class B 1,825,156
- ------------------------------------------------------------
Transfer agent fees -- Class C 230,223
- ------------------------------------------------------------
Directors' fees 13,501
- ------------------------------------------------------------
Other 741,308
============================================================
Total expenses 24,581,754
============================================================
Less: Fees waived (1,367,253)
- ------------------------------------------------------------
Expenses paid indirectly (22,415)
============================================================
Net expenses 23,192,086
============================================================
Net investment income (loss) (11,009,991)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES CONTRACTS AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (338,879,948)
- ------------------------------------------------------------
Foreign currencies (194,055)
- ------------------------------------------------------------
Futures contracts (883,639)
- ------------------------------------------------------------
Option contracts written 481,493
============================================================
(339,476,149)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (334,748,118)
- ------------------------------------------------------------
Foreign currencies 339,904
============================================================
(334,408,214)
============================================================
Net gain (loss) from investment securities,
foreign currencies, futures contracts and
option contracts (673,884,363)
============================================================
Net increase (decrease) in net assets
resulting from operations $(684,894,354)
____________________________________________________________
============================================================
</Table>
See Notes to Financial Statements.
FS-40
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2001 and 2000
<Table>
<Caption>
2001 2000
-------------- --------------
OPERATIONS:
Net investment income (loss) $ (11,009,991) $ (5,429,162)
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures contracts and option
contracts (339,476,149) (3,575,459)
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts (334,408,214) 22,843,525
==============================================================================================
Net increase (decrease) in net assets resulting from
operations (684,894,354) 13,838,904
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (1,427,057) (22,377,539)
- ----------------------------------------------------------------------------------------------
Class B (1,483,758) (25,278,124)
- ----------------------------------------------------------------------------------------------
Class C (173,903) (1,981,428)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (30,347,996) 420,853,851
- ----------------------------------------------------------------------------------------------
Class B (115,804,932) 399,786,433
- ----------------------------------------------------------------------------------------------
Class C 2,328,723 62,117,243
==============================================================================================
Net increase (decrease) in net assets (831,803,277) 846,959,340
==============================================================================================
NET ASSETS:
Beginning of year 1,692,210,413 845,251,073
==============================================================================================
End of year $ 860,407,136 $1,692,210,413
______________________________________________________________________________________________
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,209,235,279 $1,364,256,905
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (61,233) (47,437)
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, futures contracts and
option contracts (344,487,506) (2,127,865)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (4,279,404) 330,128,810
==============================================================================================
$ 860,407,136 $1,692,210,413
______________________________________________________________________________________________
==============================================================================================
</Table>
See Notes to Financial Statements.
FS-41
NOTES TO FINANCIAL STATEMENTS
October 31, 2001
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 -- 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").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the 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 the close of the respective
markets. Occasionally, events affecting the values of such foreign securities
may occur between the times at which the particular foreign market closes 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 a
development/event is so significant that there is a reasonably high degree of
certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer reflect
actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE 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, 2001, undistributed net investment income was increased by
$10,996,195, undistributed net realized gains increased by $201,226 and paid
in capital decreased by $11,197,421 as a result of book/tax differences due
to 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 $339,470,549 as of October 31,
2001 which may be carried forward to offset
FS-42
future taxable gains, if any, which expires, if not previously utilized, in
the year 2009.
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.
G. Covered Call Options -- The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. 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.
H. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
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 based on relative net assets.
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. Effective July 1, 2001, AIM has
voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of
the advisory fee AIM receives from the affiliated money market fund of which the
Fund has invested. For the year ended October 31, 2001, AIM waived fees of
$1,367,253.
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, 2001, AIM was
paid $151,718 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 2001, AFS
was paid $2,176,088 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. For the year ended October 31, 2001,
the Class A, Class B and Class C shares paid AIM Distributors $2,878,873,
$5,513,030 and $695,408, respectively, as compensation under the Plans.
FS-43
AIM Distributors received commissions of $219,358 from sales of the Class A
shares of the Fund during the year ended October 31, 2001. 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, 2001,
AIM Distributors received $74,887 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, 2001, the Fund paid legal fees of $5,081 or
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, 2001, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $21,368 and reductions in
custodian fees of $1,047 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $22,415.
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,
2001, 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. 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 October 31, 2001, securities with an aggregate value of $52,937,081 were on
loan to brokers. The loans were secured by cash collateral of $55,216,201
received by the Fund and invested in STIC Liquid Assets Portfolio, an affiliated
money market fund. For the year ended October 31, 2001, the Fund received fees
of $131,844 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, 2001 was
$1,503,169,744 and $1,495,723,222, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2001 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 50,204,793
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
Investment securities $(59,409,956)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $ (9,205,163)
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $873,082,068.
</Table>
NOTE 8-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 2001 are
summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
Beginning of year -- $ --
- ---------------------------------------------------------
Written 3,280 753,191
- ---------------------------------------------------------
Closed (1,480) (664,616)
- ---------------------------------------------------------
Exercised (1,108) (54,523)
- ---------------------------------------------------------
Expired (692) (34,052)
=========================================================
End of year -- $ --
_________________________________________________________
=========================================================
</Table>
FS-44
NOTE 9-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 2001 and
2000 were as follows:
<Table>
<Caption>
2001 2000
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- -------------
Sold:
Class A 22,586,351 $ 407,568,683 15,127,777 $ 406,628,704
- ----------------------------------------------------------------------------------------------------------
Class B 2,605,609 48,789,699 6,900,851 184,168,116
- ----------------------------------------------------------------------------------------------------------
Class C 2,107,158 38,028,226 2,828,982 75,283,012
==========================================================================================================
Issued as reinvestment of dividends:
Class A 62,001 1,403,687 806,611 20,568,517
- ----------------------------------------------------------------------------------------------------------
Class B 68,397 1,494,466 942,086 23,307,209
- ----------------------------------------------------------------------------------------------------------
Class C 9,643 210,693 77,109 1,907,682
==========================================================================================================
Issued in connection with acquisitions:
Class A -- -- 7,688,264 213,107,428*
- ----------------------------------------------------------------------------------------------------------
Class B -- -- 10,539,727 282,469,092*
- ----------------------------------------------------------------------------------------------------------
Class C -- -- 91,163 2,444,182*
==========================================================================================================
Reacquired:
Class A (24,582,846) (439,320,366) (8,110,012) (219,450,798)
- ----------------------------------------------------------------------------------------------------------
Class B (9,939,010) (166,089,097) (3,420,141) (90,157,984)
- ----------------------------------------------------------------------------------------------------------
Class C (2,134,027) (35,910,196) (670,330) (17,517,633)
==========================================================================================================
(9,216,724) $(143,824,205) 32,802,087 $ 882,757,527
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
* 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 $85,685,863
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.
NOTE 10-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2001 2000(a) 1999 1998 1997
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 24.83 $ 23.43 $ 17.91 $ 16.65 $ 14.20
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.13) (0.03) (0.10) (0.05) (0.04)
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (10.08) 2.77 6.12 1.74 2.49
======================================================================================================================
Total from investment operations (10.21) 2.74 6.02 1.69 2.45
======================================================================================================================
Less distributions from net realized gains (0.04) (1.34) (0.50) (0.43) --
======================================================================================================================
Net asset value, end of period $ 14.58 $ 24.83 $ 23.43 $ 17.91 $ 16.65
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (41.17)% 11.52% 34.43% 10.43% 17.25%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $439,612 $796,992 $388,549 $219,050 $178,917
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.68%(c) 1.62% 1.67% 1.70% 1.76%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.79%(c) 1.63% 1.67% 1.70% 1.76%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.66)%(c) (0.10)% (0.57)% (0.27)% (0.30)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 134% 110% 93% 97% 96%
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $575,774,649.
FS-45
NOTE 10-FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2001 2000(a) 1999(a) 1998(a) 1997
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 23.98 $ 22.78 $ 17.52 $ 16.39 $ 14.05
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.24) (0.17) (0.23) (0.15) (0.11)
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (9.70) 2.71 5.99 1.71 2.45
======================================================================================================================
Total from investment operations (9.94) 2.54 5.76 1.56 2.34
======================================================================================================================
Less distributions from net realized gains (0.04) (1.34) (0.50) (0.43) --
======================================================================================================================
Net asset value, end of period $ 14.00 $ 23.98 $ 22.78 $ 17.52 $ 16.39
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (41.50)% 10.95% 33.69% 9.78% 16.65%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $369,171 $806,409 $425,345 $282,456 $224,225
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.19%(c) 2.16% 2.23% 2.26% 2.29%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.30%(c) 2.17% 2.23% 2.26% 2.29%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.16)%(c) (0.64)% (1.13)% (0.83)% (0.83)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 134% 110% 93% 97% 96%
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $551,303,019.
<Table>
<Caption>
CLASS C
----------------------------------------------------------
AUGUST 4, 1997
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
---------------------------------------- OCTOBER 31,
2001 2000(a) 1999(a) 1998(a) 1997
------- ------- ------- ------- --------------
Net asset value, beginning of period $ 23.98 $ 22.79 $ 17.52 $ 16.39 $17.39
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22) (0.17) (0.23) (0.15) (0.03)
- ---------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (9.71) 2.70 6.00 1.71 (0.97)
=========================================================================================================
Total from investment operations (9.93) 2.53 5.77 1.56 (1.00)
=========================================================================================================
Less distributions from net realized gains (0.04) (1.34) (0.50) (0.43) --
=========================================================================================================
Net asset value, end of period $ 14.01 $ 23.98 $ 22.79 $ 17.52 $16.39
_________________________________________________________________________________________________________
=========================================================================================================
Total return(b) (41.46)% 10.90% 33.69% 9.78% (5.75)%
_________________________________________________________________________________________________________
=========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,624 $88,810 $31,356 $11,765 $1,100
_________________________________________________________________________________________________________
=========================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.19%(c) 2.16% 2.23% 2.26% 2.29%(d)
- ---------------------------------------------------------------------------------------------------------
Without fee waivers 2.30%(c) 2.17% 2.23% 2.26% 2.29%(d)
=========================================================================================================
Ratio of net investment income (loss) to
average net assets (1.16)%(c) (0.64)% (1.13)% (0.83)% (0.83)%(d)
_________________________________________________________________________________________________________
=========================================================================================================
Portfolio turnover rate 134% 110% 93% 97% 96%
_________________________________________________________________________________________________________
=========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized
for period less than one year.
(c) Ratios are based on average daily net assets of $69,540,733.
(d) Annualized.
FS-46
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of AIM Global Income 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 the AIM Global Income Fund (one of
the funds constituting AIM International Funds, Inc.; hereafter referred to as
the "Fund") at October 31, 2001, and the results of its operations, the changes
in its net assets, and the financial highlights for the year then ended, 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 audit. We conducted our audit 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 audit, which included
confirmation of securities at October 31, 2001 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion. The
statement of changes in net assets of the Fund for the year ended October 31,
2000 and the financial highlights for each of the periods ended on or before
October 31, 2000 were audited by other independent accountants whose report,
dated December 6, 2000, expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
December 12, 2001
Houston, Texas
FS-47
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of changes in net assets of AIM
Global Income Fund (a portfolio of AIM International Funds, Inc.) for the year
ended October 31, 2000 and the financial highlights for each of the periods in
the four-year period then ended. This financial statement and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on this financial statement 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 statement and financial highlights referred to
above present fairly, in all material respects, the changes in net assets of AIM
Global Income Fund for the year ended October 31, 2000, and the financial
highlights for each of the periods in the four-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-48
SCHEDULE OF INVESTMENTS
October 31, 2001
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
U.S. DOLLAR DENOMINATED BONDS & NOTES-79.29%
AEROSPACE & DEFENSE-0.33%
Dunlop Standard Aerospace Holdings PLC
(United Kingdom), Sr. Unsec. Sub. Yankee
Notes, 11.88%, 05/15/09 $ 530,000 $ 524,700
=========================================================================
AIRLINES-0.30%
Air 2 US-Series C, Equipment Trust Ctfs.,
10.13%, 10/01/20 (Acquired 10/28/99; Cost
$450,000)(a) 450,000 478,570
=========================================================================
ALTERNATIVE CARRIERS-0.94%
Intermedia Communications Inc., Sr. Sub.
Disc. Notes, 12.25%, 03/01/09(b) 320,000 279,200
- -------------------------------------------------------------------------
Intermedia Communications Inc.-Series B, Sr.
Unsec. Notes, 9.50%, 03/01/09 1,150,000 1,210,375
=========================================================================
1,489,575
=========================================================================
APPAREL RETAIL-0.15%
Big 5 Corp.-Series B, Sr. Unsec. Notes,
10.88%, 11/15/07 250,000 241,250
=========================================================================
AUTOMOBILE MANUFACTURERS-0.57%
Ford Holdings, Inc., Unsec. Gtd. Unsub. Deb.,
9.30%, 03/01/30 400,000 470,060
- -------------------------------------------------------------------------
Ford Motor Credit Co., Notes, 7.88%, 06/15/10 400,000 423,972
=========================================================================
894,032
=========================================================================
BANKS-7.04%
Bank of America Corp., Sub. Notes, 9.38%,
09/15/09 600,000 726,282
- -------------------------------------------------------------------------
Bank United-Series A, Medium Term Notes,
8.00%, 03/15/09 1,000,000 1,111,470
- -------------------------------------------------------------------------
BB&T Corp., RAPS Sub. Notes, 6.38%, 06/30/05 600,000 628,662
- -------------------------------------------------------------------------
First Union Corp., Putable Unsec. Sub. Deb.,
6.55%, 10/15/35 1,500,000 1,588,140
- -------------------------------------------------------------------------
7.50%, 04/15/35 1,000,000 1,081,940
- -------------------------------------------------------------------------
Firstar Bank N.A., Unsec. Sub. Notes, 7.13%,
12/01/09 1,000,000 1,083,900
- -------------------------------------------------------------------------
Midland Bank PLC (United Kingdom), Unsec.
Putable Sub. Yankee Notes, 7.65%, 05/01/25 280,000 316,823
- -------------------------------------------------------------------------
NBD Bank N.A. Michigan, Putable Unsec. Sub.
Deb., 8.25%, 11/01/24 1,350,000 1,550,785
- -------------------------------------------------------------------------
Regions Financial Corp., Putable Sub. Notes,
7.75%, 09/15/24 500,000 540,245
- -------------------------------------------------------------------------
St. Paul Bancorp, Inc., Sr. Unsec. Unsub.
Notes, 7.13%, 02/15/04 200,000 210,602
- -------------------------------------------------------------------------
Suntrust Bank, Sub. Notes, 6.38%, 04/01/11 445,000 466,253
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
BANKS-(CONTINUED)
Swiss Bank Corp., Sub. Notes, 7.38%, 06/15/17 $ 350,000 $ 394,758
- -------------------------------------------------------------------------
U.S. Bancorp, Unsec. Putable Sub. Deb.,
7.50%, 06/01/26 1,000,000 1,100,890
- -------------------------------------------------------------------------
Washington Mutual, Inc., Jr. Unsec. Sub.
Notes, 8.25%, 04/01/10 300,000 342,525
=========================================================================
11,143,275
=========================================================================
BROADCASTING & CABLE TV-11.34%
Adelphia Communications Corp., Sr. Unsec.
Notes, 10.88%, 10/01/10 700,000 668,500
- -------------------------------------------------------------------------
AT&T Corp.-Liberty Media Corp., Sr. Unsec.
Notes, 7.88%, 07/15/09 835,000 858,622
- -------------------------------------------------------------------------
British Sky Broadcasting Group PLC (United
Kingdom), Sr. Unsec. Gtd. Yankee Notes,
8.20%, 07/15/09 165,000 171,232
- -------------------------------------------------------------------------
Callahan Nordrhein Westfalen (Germany), Sr.
Unsec. Yankee Notes, 14.00%, 07/15/10 560,000 372,400
- -------------------------------------------------------------------------
Charter Communications Holdings, LLC/Charter
Communications Holdings Capital Corp., Sr.
Unsec. Sub. Notes,
9.63%, 11/15/09 400,000 403,000
- -------------------------------------------------------------------------
10.75%, 10/01/09 570,000 601,350
- -------------------------------------------------------------------------
11.13%, 01/15/11 290,000 308,125
- -------------------------------------------------------------------------
Cox Enterprises, Inc., Notes, 8.00%, 02/15/07
(Acquired 02/16/00; Cost $297,759)(a) 300,000 327,684
- -------------------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Deb.,
7.63%, 07/15/18 1,000,000 913,480
- -------------------------------------------------------------------------
7.88%, 02/15/18 1,000,000 936,110
- -------------------------------------------------------------------------
Sr. Unsec. Notes,
7.25%, 07/15/08 670,000 675,353
- -------------------------------------------------------------------------
7.88%, 12/15/07 1,875,000 1,965,244
- -------------------------------------------------------------------------
Series B, Sr. Unsec. Notes
7.63%, 04/01/11 750,000 758,610
- -------------------------------------------------------------------------
8.13%, 07/15/09 1,300,000 1,354,964
- -------------------------------------------------------------------------
Fox Family Worldwide, Inc., Sr. Unsec. Disc.
Notes, 10.25%, 11/01/07(b) 940,000 941,175
- -------------------------------------------------------------------------
Knology Holdings, Inc., Sr. Unsub. Disc.
Notes, 11.88%, 10/15/07(b) 540,000 217,350
- -------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec. Sub.
Notes, 8.25%, 02/15/08 650,000 710,911
- -------------------------------------------------------------------------
NTL Inc.-Series B, Sr. Notes, 11.50%,
02/01/06 1,120,000 688,800
- -------------------------------------------------------------------------
Shaw Communications Inc. (Canada), Sr. Unsec.
Unsub. Yankee Notes, 7.25%, 04/06/11 500,000 519,275
- -------------------------------------------------------------------------
TCI Communications, Inc., Sr. Unsec. Deb.,
8.75%, 08/01/15 750,000 893,977
- -------------------------------------------------------------------------
</Table>
FS-49
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
BROADCASTING & CABLE TV-(CONTINUED)
Time Warner Inc.,
Sr. Unsec. Gtd. Deb., 7.57%, 02/01/24 $ 750,000 $ 777,292
- -------------------------------------------------------------------------
Unsec. Deb., 9.15%, 02/01/23 1,600,000 1,924,640
- -------------------------------------------------------------------------
Turner Broadcasting System, Inc.-Class A,
Notes 8.38%, 07/01/13 835,000 968,909
=========================================================================
17,957,003
=========================================================================
BUILDING PRODUCTS-0.22%
MMI Products, Inc.-Series B, Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 400,000 354,000
=========================================================================
CASINOS & GAMING-0.90%
Ameristar Casinos, Inc., Sr. Unsec. Gtd. Sub.
Notes, 10.75%, 02/15/09 520,000 548,600
- -------------------------------------------------------------------------
Hollywood Casino Corp.-Class A, Sr. Sec. Gtd.
Notes, 11.25%, 05/01/07 350,000 369,250
- -------------------------------------------------------------------------
Isle of Capri Casinos, Inc., Unsec. Gtd. Sub.
Notes, 8.75%, 04/15/09 175,000 159,250
- -------------------------------------------------------------------------
Park Place Entertainment Corp., Sr. Unsec.
Sub. Notes, 8.88%, 09/15/08 345,000 345,000
=========================================================================
1,422,100
=========================================================================
CONSUMER FINANCE-2.38%
CitiFinancial Credit Co., Unsec. Putable
Notes, 7.88%, 02/01/25 1,500,000 1,699,080
- -------------------------------------------------------------------------
Ford Motor Credit Co., Unsec. Notes, 7.38%,
10/28/09 700,000 717,304
- -------------------------------------------------------------------------
Household Finance Corp., Unsec. Notes, 8.00%,
07/15/10 1,200,000 1,356,360
=========================================================================
3,772,744
=========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.14%
Tekni-Plex, Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 12.75%, 06/15/10 245,000 221,725
=========================================================================
DIVERSIFIED FINANCIAL SERVICES-6.69%
AIG SunAmerica Global Financing VI, Sr. Sec.
Notes, 6.30%, 05/10/11 (Acquired
05/02/01-05/24/01; Cost $746,730)(a) 750,000 787,545
- -------------------------------------------------------------------------
AIG SunAmerica Global Financing VII, Notes,
5.85%, 08/01/08 (Acquired 08/21/01-
08/22/01; Cost $902,226)(a) 900,000 937,575
- -------------------------------------------------------------------------
Associates Corp. of North America, Sr. Deb.,
6.95%, 11/01/18 1,500,000 1,552,800
- -------------------------------------------------------------------------
Auburn Hills Trust, Gtd. Deb., 12.00%,
05/01/20 500,000 705,665
- -------------------------------------------------------------------------
CIT Group, Inc. (The), Notes, 6.50%, 02/07/06 250,000 263,652
- -------------------------------------------------------------------------
Citigroup Inc., Unsec. Sub. Notes, 7.25%,
10/01/10 415,000 461,272
- -------------------------------------------------------------------------
Fidelity Investments, Bonds, 7.57%, 06/15/29
(Acquired 04/10/01-05/09/01; Cost
$1,629,691)(a) 1,560,000 1,728,215
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
General Electric Capital Corp.-Series A,
Medium Term Notes, 6.13%, 02/22/11 $ 600,000 $ 639,828
- -------------------------------------------------------------------------
Lehman Brothers Holdings Inc.-Series E,
Medium Term Disc. Notes, 9.56%, 02/10/28(c) 1,100,000 147,675
- -------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., Unsec.
Unsub. Bonds, 6.75%, 04/15/11 600,000 630,342
- -------------------------------------------------------------------------
Pinnacle Partners, Sr. Notes, 8.83%, 08/15/04
(Acquired 08/02/00; Cost $1,000,000)(a) 1,000,000 1,050,120
- -------------------------------------------------------------------------
Qwest Capital Funding, Bonds, 7.63%, 08/03/21
(Acquired 10/10/01; Cost $578,460)(a) 600,000 588,096
- -------------------------------------------------------------------------
Salomon Smith Barney Holdings Inc., Unsec.
Notes, 7.13%, 10/01/06 1,000,000 1,104,280
=========================================================================
10,597,065
=========================================================================
DIVERSIFIED METALS & MINING-0.17%
Rio Algom Ltd. (Canada), Unsec. Yankee Deb.,
7.05%, 11/01/05 250,000 262,262
=========================================================================
ELECTRIC UTILITIES-9.20%
AES Corp. (The), Sr. Unsec. Notes,
8.75%, 12/15/02 1,350,000 1,366,875
- -------------------------------------------------------------------------
9.50%, 06/01/09 700,000 661,500
- -------------------------------------------------------------------------
Calpine Canada Energy Finance ULC (Canada),
Sr. Unsec. Gtd. Yankee Notes, 8.50%,
05/01/08 1,100,000 1,134,287
- -------------------------------------------------------------------------
CILCORP, Inc., Sr. Unsec. Bonds, 9.38%,
10/15/29 1,000,000 1,130,550
- -------------------------------------------------------------------------
Cleveland Electric Illuminating Co. (The),
First Mortgage Bonds, 6.86%, 10/01/08 500,000 520,205
- -------------------------------------------------------------------------
Series D, Sr. Sec. Notes, 7.88%, 11/01/17 1,500,000 1,570,980
- -------------------------------------------------------------------------
CMS Energy Corp., Sr. Unsec. Unsub. Notes,
8.90%, 07/15/08 700,000 726,250
- -------------------------------------------------------------------------
Cogentrix Energy, Inc., Sr. Unsec. Gtd.
Notes, 8.75%, 10/15/08 600,000 643,284
- -------------------------------------------------------------------------
Commonwealth Edison Co.-Series 92, First
Mortgage Bonds, 7.63%, 04/15/13 1,350,000 1,509,786
- -------------------------------------------------------------------------
El Paso Electric Co.,
Series D, Sec. First Mortgage Bonds, 8.90%,
02/01/06 760,000 847,886
- -------------------------------------------------------------------------
Series E, Sec. First Mortgage Bonds, 9.40%,
05/01/11 1,000,000 1,123,630
- -------------------------------------------------------------------------
Kincaid Generation LLC, Sec. Bonds, 7.33%,
06/15/20 (Acquired 04/30/98; Cost
$488,938)(a) 482,746 478,232
- -------------------------------------------------------------------------
Mirant Corp., Sr. Notes, 7.90%, 07/15/09
(Acquired 09/28/01; Cost $206,996)(a) 200,000 210,118
- -------------------------------------------------------------------------
Mission Energy Holding Co., Sr. Sec. Notes,
13.50%, 07/15/08(d) 240,000 270,600
- -------------------------------------------------------------------------
Niagara Mohawk Power Corp.-Series H, Sr.
Unsec. Disc. Notes, 8.50%, 07/01/10(b) 1,750,000 1,662,045
- -------------------------------------------------------------------------
</Table>
FS-50
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
ELECTRIC UTILITIES-(CONTINUED)
Public Service Company of New Mexico- Series
A, Sr. Unsec. Notes, 7.10%, 08/01/05 $ 120,000 $ 126,418
- -------------------------------------------------------------------------
Texas-New Mexico Power Co., Sr. Sec. Notes,
6.25%, 01/15/09 620,000 584,015
=========================================================================
14,566,661
=========================================================================
EMPLOYMENT SERVICES-0.11%
MSX International, Inc., Sr. Unsec. Gtd. Sub.
Notes, 11.38%, 01/15/08 220,000 177,100
=========================================================================
ENVIRONMENTAL SERVICES-1.73%
Allied Waste North America Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 10.00%, 08/01/09 300,000 304,500
- -------------------------------------------------------------------------
Browning-Ferris Industries, Inc., Deb.,
9.25%, 05/01/21 350,000 334,763
- -------------------------------------------------------------------------
Waste Management, Inc., Putable Unsec. Notes,
7.10%, 08/01/26 2,000,000 2,102,500
=========================================================================
2,741,763
=========================================================================
GAS UTILITIES-2.90%
Northern Border Partners, L.P., Sr. Unsec.
Gtd. Notes, 7.10%, 03/15/11 600,000 631,704
- -------------------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada), Yankee
Deb., 8.50%, 12/15/12 450,000 540,306
- -------------------------------------------------------------------------
ONEOK, Inc., Unsec. Notes, 7.75%, 08/15/06 400,000 441,780
- -------------------------------------------------------------------------
Sonat Inc., Sr. Unsec. Notes, 7.63%, 07/15/11 800,000 870,304
- -------------------------------------------------------------------------
Tennessee Gas Pipeline Co., Unsec. Deb.,
7.63%, 04/01/37 650,000 665,652
- -------------------------------------------------------------------------
TransCanada Pipelines Ltd. (Canada), Yankee
Deb., 8.63%, 05/15/12 1,200,000 1,432,380
=========================================================================
4,582,126
=========================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-0.13%
Fresenius Medical Care Capital Trust, Sec.
Gtd. Pfd. Notes, 7.88%, 06/15/11 210,000 212,100
=========================================================================
HOME FURNISHINGS-0.00%
Glenoit Corp., Sr. Unsec. Gtd. Sub. Notes,
11.00%, 04/15/07(e) 380,000 4
=========================================================================
HOMEBUILDING-0.32%
K Hovnanian Enterprises, Inc., Sr. Unsec.
Gtd. Notes, 10.50%, 10/01/07 500,000 512,500
=========================================================================
INTEGRATED OIL & GAS-3.00%
El Paso CGP Co., Sr. Putable Unsec. Deb.,
6.70%, 02/15/27 900,000 941,382
- -------------------------------------------------------------------------
Husky Oil Ltd. (Canada), Sr. Unsec. Yankee
Notes, 7.13%, 11/15/06 600,000 632,550
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
INTEGRATED OIL & GAS-(CONTINUED)
Occidental Petroleum Corp.,
Sr. Putable Deb., 9.25%, 08/01/19 $ 950,000 $ 1,145,624
- -------------------------------------------------------------------------
Sr. Unsec. Notes,
7.38%, 11/15/08 750,000 802,943
- -------------------------------------------------------------------------
7.65%, 02/15/06 310,000 337,156
- -------------------------------------------------------------------------
Petro-Canada (Canada), Yankee Deb., 9.25%,
10/15/21 700,000 891,051
=========================================================================
4,750,706
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-3.23%
AT&T Canada Inc. (Canada),
Sr. Disc. Yankee Notes, 9.95%, 06/15/08(b) 800,000 386,000
- -------------------------------------------------------------------------
Sr. Unsec. Yankee Notes, 7.65%, 09/15/06 370,000 226,163
- -------------------------------------------------------------------------
MCI Communications Corp., Sr. Unsec. Putable
Deb., 7.13%, 06/15/27 1,500,000 1,566,390
- -------------------------------------------------------------------------
NTELOS Inc., Sr. Unsec. Notes, 13.00%,
08/15/10 535,000 393,225
- -------------------------------------------------------------------------
Sprint Corp., Putable Deb., 9.00%, 10/15/19 200,000 224,536
- -------------------------------------------------------------------------
TELUS Corp. (Canada), Yankee Notes, 7.50%,
06/01/07 1,000,000 1,084,060
- -------------------------------------------------------------------------
Verizon Global Funding Corp.,-Series REGS,
Conv. Sr. Euro Notes, 4.25%, 09/15/05 500,000 511,974
- -------------------------------------------------------------------------
WorldCom, Inc./WorldCom Group, Bonds, 8.25%,
05/15/31 700,000 712,635
=========================================================================
5,104,983
=========================================================================
INTERNET RETAIL-0.12%
Amazon.com, Inc., Conv. Unsec. Sub. Notes,
4.75%, 02/01/09 (Acquired 01/29/99; Cost
$501,875)(a) 500,000 195,625
=========================================================================
INTERNET SOFTWARE & SERVICES-0.04%
Equinix, Inc., Sr. Unsec. Notes, 13.00%,
12/01/07 250,000 63,125
=========================================================================
LIFE & HEALTH INSURANCE-1.21%
American General Finance Corp., Sr. Putable
Notes, 8.45%, 10/15/09 770,000 892,130
- -------------------------------------------------------------------------
Sr. Unsec. Notes, 8.13%, 08/15/09 300,000 340,770
- -------------------------------------------------------------------------
Conseco, Inc., Sr. Unsec. Notes, 8.75%,
02/09/04 160,000 82,400
- -------------------------------------------------------------------------
Prudential Funding, LLC, Medium Term Notes,
6.60%, 05/15/08 (Acquired 05/09/01; Cost
$399,536)(a) 400,000 420,900
- -------------------------------------------------------------------------
Torchmark Corp., Notes, 7.88%, 05/15/23 165,000 170,886
=========================================================================
1,907,086
=========================================================================
MULTI-UTILITIES-2.20%
Dynegy Inc., Sr. Unsec. Deb., 7.13%, 05/15/18 1,100,000 1,089,902
- -------------------------------------------------------------------------
Enron Corp., Sec. Notes, 8.00%, 08/15/05
(Acquired 06/05/01; Cost $516,515)(a) 500,000 380,625
- -------------------------------------------------------------------------
</Table>
FS-51
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
MULTI-UTILITIES-(CONTINUED)
Williams Cos., Inc. (The), Sr. Putable Unsec.
Notes, 6.75%, 01/15/06 $ 670,000 $ 700,612
- -------------------------------------------------------------------------
Williams Gas Pipeline Center Inc., Sr. Notes,
7.38%, 11/15/06 (Acquired 02/15/01; Cost
$1,239,360)(a) 1,200,000 1,306,752
=========================================================================
3,477,891
=========================================================================
OIL & GAS DRILLING-1.65%
Global Marine Inc., Sr. Unsec. Notes, 7.13%,
09/01/07 1,200,000 1,287,336
- -------------------------------------------------------------------------
R & B Falcon Corp.-Series B, Sr. Unsec.
Notes, 6.95%, 04/15/08 1,270,000 1,322,908
=========================================================================
2,610,244
=========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.43%
First Wave Marine, Inc., Sr. Unsec. Notes,
11.00%, 02/01/08(e) 250,000 20,625
- -------------------------------------------------------------------------
National-Oilwell, Inc., Sr. Unsec. Notes,
6.50%, 03/15/11 1,000,000 1,020,200
- -------------------------------------------------------------------------
Petroleum Geo-Services A.S.A. (Norway),
Sr. Unsec. Yankee Notes, 7.13%, 03/30/28 1,000,000 730,150
- -------------------------------------------------------------------------
Yankee Notes, 7.50%, 03/31/07 1,600,000 1,564,128
- -------------------------------------------------------------------------
Smith International, Inc., Notes, 6.75%,
02/15/11 500,000 507,155
=========================================================================
3,842,258
=========================================================================
OIL & GAS EXPLORATION & PRODUCTION-7.83%
Anadarko Petroleum Corp., Unsec. Putable
Deb., 7.73%, 09/15/26 1,200,000 1,293,468
- -------------------------------------------------------------------------
Anderson Exploration Ltd. (Canada), Unsec.
Sub. Yankee Notes, 6.75%, 03/15/11 500,000 503,740
- -------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Canada),
Yankee Notes, 6.70%, 07/15/11 550,000 566,055
- -------------------------------------------------------------------------
Canadian Oil Sands Ltd. (Canada), Sr. Yankee
Notes, 7.90%, 09/01/21 (Acquired 08/17/01;
Cost $424,269)(a) 425,000 450,513
- -------------------------------------------------------------------------
Chesapeake Energy Corp., Sr. Notes, 8.38%,
11/01/08 (Acquired 10/26/01; Cost
$307,195)(a) 310,000 310,775
- -------------------------------------------------------------------------
Devon Financing Corp., Unsec. Gtd. Deb.,
7.88%, 09/30/31 (Acquired 09/28/01; Cost
$498,900)(a) 500,000 509,050
- -------------------------------------------------------------------------
Louis Dreyfus Natural Gas Corp., Unsec.
Notes, 6.88%, 12/01/07 1,000,000 1,052,370
- -------------------------------------------------------------------------
Newfield Exploration Co., Sr. Unsec. Unsub.
Notes, 7.63%, 03/01/11 2,200,000 2,219,250
- -------------------------------------------------------------------------
Nexen Inc. (Canada), Unsec. Unsub. Yankee
Notes, 7.40%, 05/01/28 1,655,000 1,738,379
- -------------------------------------------------------------------------
Noble Affiliates Inc., Sr. Unsec. Deb.,
7.25%, 08/01/97 1,200,000 1,114,008
- -------------------------------------------------------------------------
Pioneer Natural Resources Co., Sr. Unsec.
Notes, 8.25%, 08/15/07 1,370,000 1,416,046
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
OIL & GAS EXPLORATION & PRODUCTION-(CONTINUED)
Pogo Producing Co.-Series B, Sr. Unsec. Sub.
Notes, 10.38%, 02/15/09 $ 420,000 $ 450,450
- -------------------------------------------------------------------------
Talisman Energy Inc. (Canada), Unsec. Unsub.
Yankee Deb., 7.13%, 06/01/07 250,000 265,460
- -------------------------------------------------------------------------
Union Pacific Resources Group Inc., Unsec.
Notes, 6.75%, 05/15/08 475,000 502,536
=========================================================================
12,392,100
=========================================================================
OIL & GAS REFINING & MARKETING-1.60%
Petroleos Mexicanos (Mexico),
Unsec. Gtd. Yankee Bonds, 9.38%, 12/02/08 480,000 525,034
- -------------------------------------------------------------------------
Series P, Unsec. Putable Unsub. Yankee
Notes, 9.50%, 09/15/27 1,800,000 2,001,672
=========================================================================
2,526,706
=========================================================================
PHARMACEUTICALS-0.18%
Warner Chilcott, Inc.-Series B, Sr. Unsec.
Gtd. Notes, 12.63%, 02/15/08 250,000 278,750
=========================================================================
PROPERTY & CASUALTY INSURANCE-1.37%
Allstate Financial Global Funding, Notes,
6.50%, 06/14/11 (Acquired 06/07/01; Cost
$748,853)(a) 750,000 784,868
- -------------------------------------------------------------------------
Florida Windstorm Underwriting Association-
Series 1999A, Sr. Sec. Notes, 7.13%,
02/25/19 (Acquired 04/25/01; Cost
$425,709)(a) 430,000 444,117
- -------------------------------------------------------------------------
Terra Nova Insurance (United Kingdom)
Holding, Sr. Unsec. Gtd. Yankee Notes,
7.00%, 05/15/08 500,000 464,215
- -------------------------------------------------------------------------
7.20%, 08/15/07 500,000 471,315
=========================================================================
2,164,515
=========================================================================
PUBLISHING & PRINTING-2.32%
News America Holdings, Inc.,
Putable Notes, 8.45%, 08/01/34 1,500,000 1,660,170
- -------------------------------------------------------------------------
Sr. Gtd. Deb., 9.25%, 02/01/13 1,250,000 1,484,150
- -------------------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds, 7.43%,
10/01/26 500,000 533,555
=========================================================================
3,677,875
=========================================================================
RAILROADS-0.83%
Consolidated Rail Corp., Deb., 9.75%,
06/15/20 450,000 568,800
- -------------------------------------------------------------------------
CSX Corp., Sr. Unsec. Putable Deb., 7.25%,
05/01/27 350,000 379,813
- -------------------------------------------------------------------------
Railamerica Transportation Corp., Sr. Unsec.
Gtd. Sub. Notes, 12.88%, 08/15/10 375,000 358,125
=========================================================================
1,306,738
=========================================================================
REAL ESTATE INVESTMENT TRUSTS-1.29%
ERP Operating L.P., Unsec. Notes, 7.13%,
10/15/17 600,000 582,348
- -------------------------------------------------------------------------
</Table>
FS-52
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
Healthcare Realty Trust, Inc., Sr. Unsec.
Notes, 8.13%, 05/01/11 $ 400,000 $ 414,028
- -------------------------------------------------------------------------
HealthCare REIT, Inc., Sr. Unsec. Notes,
7.50%, 08/15/07 300,000 306,435
- -------------------------------------------------------------------------
iStar Financial Inc., Sr. Unsec. Notes,
8.75%, 08/15/08 190,000 190,950
- -------------------------------------------------------------------------
Spieker Properties LP, Unsec. Deb., 7.50%,
10/01/27 300,000 300,405
- -------------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Unsub. Deb.,
7.35%, 12/01/17 250,000 248,823
=========================================================================
2,042,989
=========================================================================
REINSURANCE-0.59%
GE Global Insurance Holdings Corp., Unsec.
Notes, 7.75%, 06/15/30 800,000 938,760
=========================================================================
SOVEREIGN DEBT-2.52%
Quebec (Province of) (Canada), Yankee Deb.,
7.50%, 07/15/23 1,000,000 1,170,860
- -------------------------------------------------------------------------
Republica Orient (Uruguay), Unsec. Yankee
Bonds, 7.88%, 07/15/27 3,000,000 2,820,000
=========================================================================
3,990,860
=========================================================================
SPECIALTY STORES-0.27%
United Rentals (North America) Inc., Sr.
Unsec. Gtd. Notes, 10.75%, 04/15/08(d) 400,000 422,000
=========================================================================
TELECOMMUNICATIONS EQUIPMENT-0.30%
SBA Communications Corp., Sr. Unsec. Notes,
10.25%, 02/01/09 590,000 477,900
=========================================================================
TRUCKING-0.13%
Avis Group Holdings, Inc., Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 05/01/09 200,000 212,500
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.62%
Crown Castle International Corp., Sr. Unsec.
Notes, 10.75%, 08/01/11 600,000 561,000
- -------------------------------------------------------------------------
Nextel Communications, Inc., Sr. Unsec.
Notes, 9.50%, 02/01/11 600,000 417,000
=========================================================================
978,000
=========================================================================
Total U.S. Dollar Denominated Bonds (Cost
$123,669,434) 125,512,166
=========================================================================
<Caption>
PRINCIPAL
AMOUNT(f)
NON-U.S. DOLLAR DENOMINATED BONDS &
NOTES-11.12%
CANADA-4.25%
AT&T Canada Inc. (Integrated
Telecommunication Services), Sr. Unsec.
Unsub. Notes, 7.15%, 09/23/04 CAD 800,000 328,571
- -------------------------------------------------------------------------
Bell Mobility Cellular Inc. (Wireless
Telecommunication Services), Unsec. Deb.,
6.55%, 06/02/08 CAD 750,000 491,534
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT(f) VALUE
CANADA-(CONTINUED)
Canada Government (Sovereign Debt),
Gtd. Bonds, 7.00%, 12/01/06 CAD 300,000 $ 212,995
- -------------------------------------------------------------------------
Bonds,
5.75%, 06/01/29 CAD 300,000 200,447
- -------------------------------------------------------------------------
6.00%, 06/01/08 CAD 5,520,000 3,763,829
- -------------------------------------------------------------------------
9.00%, 03/01/11 CAD 500,000 410,411
- -------------------------------------------------------------------------
Export Development Corp. (Sovereign Debt),
Sr. Unsec. Unsub. Bonds, 6.50%, 12/21/04NZD 415,000 176,099
- -------------------------------------------------------------------------
Ontario (Province of) (Sovereign Debt),
Unsec. Unsub. Notes, 6.25%, 12/03/08 NZD 1,500,000 617,673
- -------------------------------------------------------------------------
Rogers Cablesystems Ltd. (Broadcasting &
Cable TV), Sr. Sec. Second Priority Deb.,
9.65%, 01/15/14 CAD 300,000 192,610
- -------------------------------------------------------------------------
Westcoast Energy Inc. (Gas Utilities)-Series
V, Unsec. Deb., 6.45%, 12/18/06 CAD 500,000 337,540
=========================================================================
6,731,709
=========================================================================
FRANCE-0.23%
Vivendi Environnement (Environmental
Services), Sr. Conv. Gtd. Bonds, 1.50%,
01/01/05 EUR 150,000 370,982
=========================================================================
GERMANY-0.05%
Bundesrepublik Deutschland (Sovereign Debt),
Bonds, 6.50%, 10/14/05 EUR 75,000 74,521
=========================================================================
GREECE-1.48%
Hellenic Republic (Sovereign Debt), Bonds
6.00%, 05/19/10 EUR 2,400,000 2,347,244
=========================================================================
NETHERLANDS-1.09%
KPNQwest N.V. (Alternative Carriers), Sr.
Notes, 8.88%, 02/01/08 AUD 1,470,000 875,158
- -------------------------------------------------------------------------
Olivetti International Finance N.V.
(Integrated Telecommunication
Services)-Series E, Gtd. Medium Term Euro
Notes, 6.13%, 07/30/09 EUR 290,000 251,361
- -------------------------------------------------------------------------
Vodafone Finance B.V. (Industrial
Conglomerates), Unsec. Unsub. Gtd. Euro
Bonds, 4.75%, 05/27/09 EUR 690,000 596,869
=========================================================================
1,723,388
=========================================================================
NEW ZEALAND-0.74%
Inter-American Development Bank (Banks),
Unsec. Bonds, 5.75%, 04/15/04 NZD 2,000,000 831,862
- -------------------------------------------------------------------------
International Bank for Reconstruction &
Development-Class E (Banks), Unsec. Medium
Term Notes, 5.50%, 04/15/04 NZD 800,000 330,727
=========================================================================
1,162,589
=========================================================================
UNITED KINGDOM-0.91%
British Sky Broadcasting Group PLC
(Broadcasting & Cable TV), Sr. Gtd. Unsec.
Unsub. Euro Bonds, 7.75%, 07/09/09 GBP 450,000 628,034
- -------------------------------------------------------------------------
</Table>
FS-53
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT(f) VALUE
UNITED KINGDOM-(CONTINUED)
Jazztel PLC (Integrated Telecommunication
Services), Sr. Unsec. Notes, 13.25%,
12/15/09 EUR 285,000 $ 100,199
- -------------------------------------------------------------------------
Sutton Bridge Financing Ltd. (Electric
Utilities), Gtd. Euro Bonds, 8.63%,
06/30/22(d) GBP 450,000 711,568
=========================================================================
1,439,801
=========================================================================
UNITED STATES OF AMERICA-2.37%
Federal National Mortgage Association
(Sovereign Debt) Sr. Unsub. Medium Term
Notes, 6.38%, 08/15/07 AUD 3,785,000 2,023,683
- -------------------------------------------------------------------------
KFW International Finance (Sovereign Debt),
Unsec. Gtd. Unsub. Euro Medium Term Notes,
7.25%, 07/16/07 AUD 3,100,000 1,722,538
=========================================================================
3,746,221
=========================================================================
Total Non-U.S. Dollar Denominated Bonds &
Notes (Cost $20,380,903) 17,596,455
=========================================================================
<Caption>
SHARES
WARRANTS & OTHER EQUITY INTERESTS-0.46%
BROADCASTING & CABLE TV-0.00%
Knology Inc.-Wts., expiring 10/22/07
(Acquired 03/12/98; Cost $0)(a)(g) 700 7
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.01%
NTELOS Inc.-Wts., expiring 08/15/10 (Acquired
11/15/00; Cost $0)(a)(g) 535 10,700
=========================================================================
INTERNET SOFTWARE & SERVICES-0.00%
Equinix, Inc.-Wts., expiring 12/01/07
(Acquired 05/30/00; Cost $0)(a)(g) 250 2,257
=========================================================================
RAILROADS-0.01%
Railamerica Inc.-Wts., expiring 08/15/10
(Acquired 10/01/00; Cost $0)(a)(g) 375 24,469
=========================================================================
REAL ESTATE INVESTMENT TRUSTS-0.44%
First Republic Capital Corp.-Series A-Pfd.
(Acquired 03/26/99; Cost $750,000)(a) 750 693,750
=========================================================================
Total Warrants & Other Equity Interests
(Cost $750,000) 731,183
=========================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. GOVERNMENT AGENCY SECURITIES-6.40%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-3.67%
Jr. Unsec. Sub. Notes,
5.88%, 03/21/11 $ 200,000 210,524
- -------------------------------------------------------------------------
Pass Through Ctfs.,
7.00%, 07/01/29 77,000 80,440
- -------------------------------------------------------------------------
7.50%, 10/01/29 to 06/01/31 1,798,792 1,888,278
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-(CONTINUED)
8.50%, 03/01/10 $ 502,002 $ 531,023
- -------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.50%, 12/01/31(h) 2,152,000 2,215,215
- -------------------------------------------------------------------------
Unsec. Notes,
5.13%, 10/15/08 225,000 231,934
- -------------------------------------------------------------------------
5.50%, 09/15/11 625,000 653,825
=========================================================================
5,811,239
=========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-2.73%
Pass Through Ctfs.,
6.50%, 10/01/16 77,000 80,104
- -------------------------------------------------------------------------
8.00%, 06/01/31 779,520 824,342
- -------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.50%, 11/01/31(h) 2,000,000 2,056,875
- -------------------------------------------------------------------------
6.50%, 12/01/31(h) 150,000 154,266
- -------------------------------------------------------------------------
Unsec. Notes,
6.00%, 05/15/11 77,000 83,424
- -------------------------------------------------------------------------
Unsec. Sub. Notes,
5.50%, 05/02/06 450,000 475,713
- -------------------------------------------------------------------------
6.25%, 02/01/11 600,000 648,024
=========================================================================
4,322,748
=========================================================================
Total U.S. Government Agency Securities
(Cost $9,899,167) 10,133,987
=========================================================================
U.S. TREASURY SECURITIES-2.00%
U.S. TREASURY NOTES-2.00%
5.00%, 08/15/11 (Cost $3,084,844) 3,000,000 3,172,980
=========================================================================
ASSET-BACKED SECURITIES-2.40%
AIRLINES-1.04%
American Airlines, Inc.-Class A2, Series
2001-01, Pass Through Ctfs., 6.82%,
05/23/11 (Acquired 06/28/01; Cost
$609,816)(a) 600,000 589,314
- -------------------------------------------------------------------------
United Air Lines, Inc., Pass Through Ctfs.,
7.73%, 07/01/10 800,000 798,320
- -------------------------------------------------------------------------
United Air Lines, Inc.-Series 95A2, Pass
Through Ctfs., 9.56%, 10/19/18 300,000 268,053
=========================================================================
1,655,687
=========================================================================
BANKS-0.33%
Premium Asset Trust-Series 01-6, Sec. Notes,
5.25%, 07/19/04 (Acquired 07/11/01; Cost
$499,340)(a) 500,000 517,169
=========================================================================
DIVERSIFIED FINANCIAL SERVICES-0.88%
Citicorp Lease-Class A2, Series 1999-1, Pass
Through Ctfs., 8.04%, 12/15/19 (Acquired
06/01/00-01/25/01; Cost $1,312,194)(a) 1,300,000 1,395,342
=========================================================================
</Table>
FS-54
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
ELECTRIC UTILITIES-0.15%
Beaver Valley II Funding Corp., SLOBS, Deb.,
9.00%, 06/01/17 $ 200,000 $ 232,726
=========================================================================
Total Asset-Backed Securities (Cost
$3,745,799) 3,800,924
=========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
<Caption>
MARKET
SHARES VALUE
MONEY MARKET FUNDS-0.28%
STIC Liquid Assets Portfolio(i) 220,745 $ 220,745
- -------------------------------------------------------------------------
STIC Prime Portfolio(i) 220,745 220,745
=========================================================================
Total Money Market Funds (Cost $441,490) 441,490
=========================================================================
TOTAL INVESTMENTS-101.95% (Cost $161,971,637) 161,389,185
=========================================================================
OTHER ASSETS LESS LIABILITIES-(1.95)% (3,087,769)
=========================================================================
NET ASSETS-100.00% $158,301,416
_________________________________________________________________________
=========================================================================
</Table>
Investment Abbreviations:
<Table>
AUD - Australian Dollar
CAD - Canadian Dollar
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
EUR - Euro
GBP - British Pound Sterling
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
RAPS - Redeemable and Putable Securities
REGS - Regulation S
REIT - Real Estate Investment Trust
Sec. - Secured
SLOBS - Secured Lease Obligations
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
</Table>
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
10/31/01 was $13,227,046, which represented 8.36% of the Fund's net assets.
(b) Discounted security at issue. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the original issue discount at issue.
(d) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(e) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(f) Foreign denominated security. Par value is denominated in currency
indicated.
(g) Acquired as part of a unit with or in exchange for other securities.
(h) Security purchased on forward commitment basis. These securities are
subject to dollar roll transactions. See Note 1 Section G.
(I) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-55
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2001
<Table>
ASSETS:
Investments, at market value (cost
$161,971,637) $161,389,185
- ------------------------------------------------------------
Receivables for:
Capital stock sold 68,175
- ------------------------------------------------------------
Dividends and interest 3,083,144
- ------------------------------------------------------------
Investment for deferred compensation plan 34,113
- ------------------------------------------------------------
Other assets 17,344
============================================================
Total assets 164,591,961
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,514,171
- ------------------------------------------------------------
Capital stock reacquired 298,818
- ------------------------------------------------------------
Dividends 229,012
- ------------------------------------------------------------
Foreign currency contracts outstanding 16,888
- ------------------------------------------------------------
Deferred compensation plan 34,113
- ------------------------------------------------------------
Accrued distribution fees 104,538
- ------------------------------------------------------------
Accrued directors' fees 877
- ------------------------------------------------------------
Accrued transfer agent fees 39,152
- ------------------------------------------------------------
Accrued operating expenses 52,976
============================================================
Total liabilities 6,290,545
============================================================
Net assets applicable to shares outstanding $158,301,416
____________________________________________________________
============================================================
NET ASSETS:
Class A $110,579,414
____________________________________________________________
============================================================
Class B $ 45,510,165
____________________________________________________________
============================================================
Class C $ 2,211,837
____________________________________________________________
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 12,219,723
____________________________________________________________
============================================================
Class B:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 5,029,513
____________________________________________________________
============================================================
Class C:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 244,528
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.05
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $9.05 divided by
95.25%) $ 9.50
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 9.05
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 9.05
____________________________________________________________
============================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended October 31, 2001
<Table>
INVESTMENT INCOME:
Interest $12,853,273
- ------------------------------------------------------------
Dividends (net of foreign withholding tax of
$99) 87,988
- ------------------------------------------------------------
Dividends from affiliated money market funds 70,353
============================================================
Total investment income 13,011,614
============================================================
EXPENSES:
Advisory fees 1,138,755
- ------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------
Custodian fees 55,862
- ------------------------------------------------------------
Distribution fees -- Class A 534,690
- ------------------------------------------------------------
Distribution fees -- Class B 536,152
- ------------------------------------------------------------
Distribution fees -- Class C 21,261
- ------------------------------------------------------------
Transfer agent fees -- Class A 288,600
- ------------------------------------------------------------
Transfer agent fees -- Class B 145,174
- ------------------------------------------------------------
Transfer agent fees -- Class C 5,757
- ------------------------------------------------------------
Directors' fees 7,992
- ------------------------------------------------------------
Other 194,302
============================================================
Total expenses 2,978,545
============================================================
Less: Fees waived (662,056)
- ------------------------------------------------------------
Expenses paid indirectly (2,752)
============================================================
Net expenses 2,313,737
============================================================
Net investment income 10,697,877
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES AND
FOREIGN CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (6,450,868)
- ------------------------------------------------------------
Foreign currencies 62,975
- ------------------------------------------------------------
Foreign currency contracts 404,719
============================================================
(5,983,174)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 9,077,274
- ------------------------------------------------------------
Foreign currencies 21,871
- ------------------------------------------------------------
Foreign currency contracts (643,680)
============================================================
8,455,465
============================================================
Net gain from investment securities, foreign
currencies and foreign currency contracts 2,472,291
============================================================
Net increase in net assets resulting from
operations $13,170,168
____________________________________________________________
============================================================
</Table>
See Notes to Financial Statements.
FS-56
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2001 and 2000
<Table>
<Caption>
2001 2000
------------- -------------
OPERATIONS:
Net investment income $ 10,697,877 $ 7,916,929
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and foreign currency contracts (5,983,174) (10,136,782)
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and foreign currency
contracts 8,455,465 1,174,196
============================================================================================
Net increase (decrease) in net assets resulting from
operations 13,170,168 (1,045,657)
============================================================================================
Distributions to shareholders from net investment income:
Class A (7,062,623) (697,810)
- --------------------------------------------------------------------------------------------
Class B (3,320,823) (427,241)
- --------------------------------------------------------------------------------------------
Class C (126,329) (22,193)
- --------------------------------------------------------------------------------------------
Return of capital:
Class A (159,295) (4,541,889)
- --------------------------------------------------------------------------------------------
Class B (29,780) (2,529,211)
- --------------------------------------------------------------------------------------------
Class C (6,068) (95,826)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 3,294,103 60,321,560
- --------------------------------------------------------------------------------------------
Class B (15,669,649) 29,421,207
- --------------------------------------------------------------------------------------------
Class C 404,143 41,717
============================================================================================
Net increase (decrease) in net assets (9,506,153) 80,424,657
============================================================================================
NET ASSETS:
Beginning of year 167,807,569 87,382,912
============================================================================================
End of year $ 158,301,416 $ 167,807,569
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 194,968,488 $ 317,756,543
- --------------------------------------------------------------------------------------------
Undistributed net investment income (36,695) (45,909)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and foreign currency
contracts (36,033,681) (140,850,904)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and foreign currency
contracts (596,696) (9,052,161)
============================================================================================
$ 158,301,416 $ 167,807,569
____________________________________________________________________________________________
============================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
October 31, 2001
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
FS-57
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").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the 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 the close of the respective
markets. Occasionally, events affecting the values of such foreign securities
may occur between the times at which the particular foreign market closes 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 a
development/event is so significant that there is a reasonably high degree of
certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer reflect
actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE 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, 2001, undistributed net investment income was increased by
$16,255, undistributed net realized gains increased by $110,800,397 and paid
in capital decreased by $110,816,652 as a result of differing book/tax
treatment of foreign currency transactions, expiration of capital loss
carryforward, return of capital reclassifications, and other
reclassifications. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Distributions -- Distributions from income are declared daily
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's capital loss carryforward of $36,050,568 is broken down by
expiration date as follows:
<Table>
<Caption>
CAPITAL LOSS
CARRYFORWARD EXPIRATION
------------ ----------
$ 15,745,586 October 31, 2002
---------------------------------
3,646,988 October 31, 2006
---------------------------------
7,391,799 October 31, 2007
---------------------------------
2,830,735 October 31, 2008
---------------------------------
6,435,460 October 31, 2009
=================================
$ 36,050,568
________________________________
=================================
</Table>
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
FS-58
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, 2001 were as
follows:
<Table>
<Caption>
CONTRACT TO UNREALIZED
SETTLEMENT ---------------------- APPRECIATION
DATE CURRENCY DELIVER RECEIVE VALUE (DEPRECIATION)
---------- -------- --------- ---------- ---------- --------------
12/10/01 AUD 500,000 $ 259,500 $ 250,942 $ 8,558
---------------------------------------------------------------------------
01/07/02 AUD 3,500,000 1,733,200 1,753,716 (20,516)
---------------------------------------------------------------------------
01/07/02 NZD 2,600,000 1,059,240 1,064,170 (4,930)
===========================================================================
6,600,000 $3,051,940 $3,068,828 $(16,888)
___________________________________________________________________________
===========================================================================
</Table>
G. The Fund may engage in dollar roll transactions with respect to
mortgage backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll
transaction, the Fund sells a mortgage backed security held in the Fund 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 backed securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools
of mortgages with prepayment histories. During the period between the sale
and repurchase, the Fund will not be entitled to receive interest and
principal payments on 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 security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the 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 in 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.
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 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 based on relative net assets.
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, dividends on short
sales, extraordinary items and increases in expenses due to expense 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 1.50%.
Effective July 1, 2001, AIM has voluntarily agreed to waive advisory fees of the
Fund in the amount of 25% of the advisory fee AIM receives from the affiliated
money market fund of which the Fund has invested. For the year ended October 31,
2001, AIM waived fees of $662,056.
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, 2001, 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 October 31, 2001, AFS
was paid $257,171 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. For the year ended October 31, 2001,
the Class A, Class B and Class C shares paid AIM Distributors $534,690, $536,152
and $21,261, respectively, as compensation under the Plans.
AIM Distributors received commissions of $13,996 from sales of the Class A
shares of the Fund during the year ended October 31, 2001. Such commissions are
not an expense of the Fund. They are
FS-59
deducted from, and are not included in, the proceeds from sales of Class A
shares. During the year ended October 31, 2001, AIM Distributors received $3,017
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, 2001, the Fund paid legal fees of $3,495 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, 2001, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $2,752 under an expense offset
arrangement which resulted in a reduction of the Fund's total expenses of
$2,752.
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,
2001, 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. 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. During the year ended October 31, 2001, 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, 2001 was
$146,872,410 and $157,552,546, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2001 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 6,299,261
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (6,881,713)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $ (582,452)
_________________________________________________________
=========================================================
Cost of investments is the same for tax and financial
statement purposes.
</Table>
FS-60
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 2001 and
2000 were as follows:
<Table>
<Caption>
2001 2000
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sold:
Class A 2,787,887 $ 25,102,258 2,364,069 $ 22,041,534
- ----------------------------------------------------------------------------------------------------------------------
Class B 825,098 7,447,312 696,358 6,483,160
- ----------------------------------------------------------------------------------------------------------------------
Class C 193,875 1,740,272 70,602 655,664
======================================================================================================================
Issued as reinvestment of dividends:
Class A 588,019 5,302,446 423,455 3,901,231
- ----------------------------------------------------------------------------------------------------------------------
Class B 251,898 2,271,548 225,452 2,081,717
- ----------------------------------------------------------------------------------------------------------------------
Class C 11,169 100,688 9,446 87,470
======================================================================================================================
Issued in connection with acquisitions:*
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 (3,007,557) (27,110,601) (3,345,608) (31,190,637)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,824,864) (25,388,509) (2,239,193) (20,817,614)
- ----------------------------------------------------------------------------------------------------------------------
Class C (160,298) (1,436,817) (96,253) (903,456)
======================================================================================================================
(1,334,773) $(11,971,403) 9,835,822 $ 89,784,484
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
* As of the close of business on June 16, 2000, the Fund acquired all the net
assets of AIM Global Government Income 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.
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- ------- ------- -------
Net asset value, beginning of period $ 8.91 $ 9.72 $ 10.60 $ 10.93 $ 10.85
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.61 0.66 0.67 0.71 0.72
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.14 (0.79) (0.86) (0.27) 0.21
===================================================================================================================
Total from investment operations 0.75 (0.13) (0.19) 0.44 0.93
===================================================================================================================
Less distributions:
Dividends from net investment income (0.60) (0.13) (0.61) (0.61) (0.72)
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.07) (0.13)
- -------------------------------------------------------------------------------------------------------------------
Returns of capital (0.01) (0.55) (0.08) (0.09) --
===================================================================================================================
Total distributions (0.61) (0.68) (0.69) (0.77) (0.85)
===================================================================================================================
Net asset value, end of period $ 9.05 $ 8.91 $ 9.72 $ 10.60 $ 10.93
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(a) 8.64% (1.38)% (1.94)% 3.95% 9.05%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $110,579 $105,636 $51,077 $58,115 $30,924
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.25%(b) 1.25% 1.25% 1.23% 1.25%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.66%(b) 1.71% 1.67% 1.73% 1.86%
===================================================================================================================
Ratio of net investment income to average net assets 6.75%(b) 6.97% 6.54% 6.38% 6.54%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 92% 184% 93% 47% 61%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(a) Does not include sales charges.
(b) Ratios are based on average daily net assets of $106,937,946.
FS-61
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
Net asset value, beginning of period $ 8.91 $ 9.72 $ 10.59 $ 10.92 $ 10.84
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.56 0.61 0.62 0.65 0.67
- -----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.14 (0.79) (0.85) (0.27) 0.21
=================================================================================================================
Total from investment operations 0.70 (0.18) (0.23) 0.38 0.88
=================================================================================================================
Less distributions:
Dividends from net investment income (0.55) (0.12) (0.56) (0.55) (0.67)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.07) (0.13)
- -----------------------------------------------------------------------------------------------------------------
Returns of capital (0.01) (0.51) (0.08) (0.09) --
=================================================================================================================
Total distributions (0.56) (0.63) (0.64) (0.71) (0.80)
=================================================================================================================
Net asset value, end of period $ 9.05 $ 8.91 $ 9.72 $ 10.59 $ 10.92
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(a) 8.08% (1.94)% (2.37)% 3.38% 8.48%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $45,510 $60,391 $34,423 $36,525 $25,121
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.75%(b) 1.75% 1.75% 1.75% 1.76%
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers 2.16%(b) 2.21% 2.17% 2.25% 2.37%
=================================================================================================================
Ratio of net investment income to average net assets 6.25%(b) 6.47% 6.04% 5.87% 6.03%
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate 92% 184% 93% 47% 61%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) Does not include sales contingent deferred sales charges.
(b) Ratios are based on average daily net assets of $53,615,216.
<Table>
<Caption>
CLASS C
--------------------------------------------------------------
AUGUST 4, 1997
YEAR ENDED OCTOBER 31, (DATE SALES COMMENCED)
------------------------------------ TO OCTOBER 31,
2001 2000 1999 1998 1997(a)
------ ------ ------ ------ ----------------------
Net asset value, beginning of period $ 8.91 $ 9.71 $10.59 $10.92 $10.76
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.56 0.60 0.62 0.66 0.15
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.14 (0.77) (0.86) (0.28) 0.17
============================================================================================================================
Total from investment operations 0.70 (0.17) (0.24) 0.38 0.32
============================================================================================================================
Less distributions:
Dividends from net investment income (0.55) (0.12) (0.56) (0.55) (0.13)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.07) (0.03)
- ----------------------------------------------------------------------------------------------------------------------------
Returns of capital (0.01) (0.51) (0.08) (0.09) --
============================================================================================================================
Total distributions (0.56) (0.63) (0.64) (0.71) (0.16)
============================================================================================================================
Net asset value, end of period $ 9.05 $ 8.91 $ 9.71 $10.59 $10.92
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 8.08% (1.84)% 2.47% 3.39% 2.99%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,212 $1,780 $1,884 $1,785 $ 242
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.75%(c) 1.75% 1.75% 1.73% 1.76%(d)
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.16%(c) 2.21% 2.17% 2.22% 2.37%(d)
============================================================================================================================
Ratio of net investment income to average net assets 6.25%(c) 6.47% 6.04% 5.88% 6.03%(d)
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 92% 184% 93% 47% 61%
____________________________________________________________________________________________________________________________
============================================================================================================================
</Table>
(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 $2,126,143.
(d) Annualized.
FS-62
INTERNATIONAL EQUITY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of AIM International Equity 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 the AIM International Equity Fund
(one of the funds constituting AIM International Funds, Inc.; hereafter referred
to as the "Fund") at October 31, 2001, and the results of its operations, the
changes in its net assets, and the financial highlights for the year then ended,
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 audit. We conducted our audit 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
audit, which included confirmation of securities at October 31, 2001 by
correspondence with the custodian and brokers, provides a reasonable basis for
our opinion. The statement of changes in net assets of the Fund for the year
ended October 31, 2000 and the financial highlights for each of the periods
ended on or before October 31, 2000 were audited by other independent
accountants whose report, dated December 6, 2000, expressed an unqualified
opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
December 12, 2001
Houston, Texas
FS-63
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
AIM International Funds, Inc.:
We have audited the accompanying statement of changes in net assets of AIM
International Equity Fund (a portfolio of AIM International Funds, Inc.) for the
year ended October 31, 2000 and the financial highlights for each of the periods
in the four-year period then ended. This financial statement and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on this financial statement 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 statement and financial highlights referred to
above present fairly, in all material respects, the changes in net assets of AIM
International Equity Fund for the year ended October 31, 2000, and the financial
highlights for each of the periods in the four-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-64
SCHEDULE OF INVESTMENTS
October 31, 2001
<Table>
<Caption>
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-90.58%
AUSTRALIA-0.89%
AMP Ltd. (Multi-Line Insurance) 2,148,700 $ 19,510,309
=============================================================================
BRAZIL-1.11%
Companhia de Bebidas das Americas-ADR
(Brewers) 753,800 12,241,712
- -----------------------------------------------------------------------------
Petroleo Brasileiro S.A.-Petrobras-Pfd.
(Integrated Oil & Gas) 622,814 11,989,632
=============================================================================
24,231,344
=============================================================================
CANADA-9.06%
Alberta Energy Co. Ltd. (Oil & Gas
Exploration & Production) 517,900 20,374,363
- -----------------------------------------------------------------------------
Bank of Nova Scotia (Banks) 388,000 10,709,259
- -----------------------------------------------------------------------------
Biovail Corp. (Pharmaceuticals)(a) 1,253,600 59,245,136
- -----------------------------------------------------------------------------
Bombardier Inc.-Class B (Aerospace & Defense) 2,183,200 14,154,315
- -----------------------------------------------------------------------------
Celestica Inc. (Electronic Equipment &
Instruments)(a) 309,400 10,618,608
- -----------------------------------------------------------------------------
Loblaw Cos. Ltd. (Food Retail) 1,375,200 42,501,618
- -----------------------------------------------------------------------------
Manulife Financial Corp. (Life & Health
Insurance) 683,000 16,874,016
- -----------------------------------------------------------------------------
Talisman Energy Inc. (Oil & Gas Exploration &
Production) 593,000 20,846,636
- -----------------------------------------------------------------------------
TransCanada PipeLines Ltd. (Gas Utilities) 181,500 2,343,152
=============================================================================
197,667,103
=============================================================================
DENMARK-3.41%
Danske Bank A.S. (Banks) 1,741,390 25,799,306
- -----------------------------------------------------------------------------
Novo Nordisk A.S.-Class B (Pharmaceuticals) 1,016,544 41,247,212
- -----------------------------------------------------------------------------
Vestas Wind Systems A.S. (Heavy Electrical
Equipment) 233,150 7,331,362
=============================================================================
74,377,880
=============================================================================
FRANCE-18.47%
Altran Technologies S.A. (IT Consulting &
Services) 838,800 38,507,337
- -----------------------------------------------------------------------------
Assurances Generales de France (Multi-Line
Insurance) 347,749 16,058,247
- -----------------------------------------------------------------------------
Aventis S.A. (Pharmaceuticals) 691,000 50,848,798
- -----------------------------------------------------------------------------
BNP Paribas S.A. (Banks) 588,100 48,914,547
- -----------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Department
Stores) 47,950 5,520,444
- -----------------------------------------------------------------------------
PSA Peugeot Citroen (Automobile
Manufacturers) 1,015,000 41,251,399
- -----------------------------------------------------------------------------
Publicis Groupe S.A. (Advertising) 315,400 6,984,120
- -----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
FRANCE-(CONTINUED)
Sanofi-Synthelabo S.A. (Pharmaceuticals) 923,700 $ 60,905,072
- -----------------------------------------------------------------------------
Sodexho Alliance S.A. (Restaurants)(a) 489,400 23,039,897
- -----------------------------------------------------------------------------
TotalFinaElf S.A. (Integrated Oil & Gas) 380,644 53,451,325
- -----------------------------------------------------------------------------
Vinci S.A. (Construction & Engineering) 445,200 26,850,034
- -----------------------------------------------------------------------------
Vivendi Environnement (Multi-Utilities) 797,749 30,669,785
=============================================================================
403,001,005
=============================================================================
GERMANY-5.27%
Allianz A.G. (Multi-Line Insurance) 35,160 8,257,296
- -----------------------------------------------------------------------------
Altana A.G. (Pharmaceuticals) 1,303,420 61,010,223
- -----------------------------------------------------------------------------
Bayerisch Motoren Werke A.G. (Automobile
Manufacturers) 196,866 5,847,895
- -----------------------------------------------------------------------------
Muenchener Rueckversicherungs-Gesellschaft
A.G. (Reinsurance) 128,200 33,915,834
- -----------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobile Manufacturers) 21,450 5,985,547
=============================================================================
115,016,795
=============================================================================
HONG KONG-1.19%
China Mobile Ltd. (Wireless Telecommunication
Services)(a) 3,090,000 9,369,219
- -----------------------------------------------------------------------------
CNOOC Ltd.-ADR (Oil & Gas Exploration &
Production) 843,000 16,548,090
=============================================================================
25,917,309
=============================================================================
INDIA-0.45%
Infosys Technologies Ltd. (IT Consulting &
Services) 163,228 9,912,385
=============================================================================
IRELAND-2.37%
Bank of Ireland (Banks) 2,817,100 25,180,619
- -----------------------------------------------------------------------------
Elan Corp. PLC-ADR (Pharmaceuticals)(a) 579,700 26,463,305
=============================================================================
51,643,924
=============================================================================
ISRAEL-2.63%
Check Point Software Technologies Ltd.
(Internet Software & Services)(a) 185,900 5,487,768
- -----------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 841,300 51,992,340
=============================================================================
57,480,108
=============================================================================
ITALY-3.70%
Autostrade-Concessioni e Costruzioni
Autostrade S.p.A (Highways & Railtracks) 4,047,800 25,432,518
- -----------------------------------------------------------------------------
Bulgari S.p.A. (Apparel & Accessories) 1,318,000 10,084,380
- -----------------------------------------------------------------------------
ENI S.p.A. (Integrated Oil & Gas) 3,607,449 45,201,653
=============================================================================
80,718,551
=============================================================================
</Table>
FS-65
<Table>
<Caption>
MARKET
SHARES VALUE
JAPAN-9.56%
Banyu Pharmaceutical Co., Ltd.
(Pharmaceuticals) 510,000 $ 9,913,427
- -----------------------------------------------------------------------------
Crayfish Co., Ltd.-ADR (Internet Software &
Services)(a) 89,430 848,691
- -----------------------------------------------------------------------------
Fuji Photo Film Co., Ltd. (Photographic
Products) 308,000 10,162,692
- -----------------------------------------------------------------------------
Fujisawa Pharmaceutical Co., Ltd.
(Pharmaceuticals) (Acquired 09/07/01-
09/13/01; Cost $17,857,081)(b) 889,000 21,346,455
- -----------------------------------------------------------------------------
Hirose Electric Co., Ltd. (Electronic
Equipment & Instruments) 234,000 17,162,039
- -----------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile
Manufacturers) 371,100 13,305,530
- -----------------------------------------------------------------------------
Hoya Corp. (Electronic Equipment &
Instruments) 428,800 25,600,523
- -----------------------------------------------------------------------------
Kao Corp. (Household Products) 121,000 2,865,893
- -----------------------------------------------------------------------------
Nintendo Co. Ltd. (Consumer Electronics) 48,200 7,432,342
- -----------------------------------------------------------------------------
NTT Data Corp. (IT Consulting & Services)(a) 1,984 8,669,062
- -----------------------------------------------------------------------------
NTT DoCoMo, Inc. (Wireless Telecommunication
Services) (Acquired 10/12/98-02/21/01; Cost
$17,246,548)(b) 1,497 20,295,818
- -----------------------------------------------------------------------------
Ricoh Co., Ltd. (Office Electronics) 920,000 15,328,324
- -----------------------------------------------------------------------------
Sharp Corp. (Consumer Electronics) 1,093,000 11,301,356
- -----------------------------------------------------------------------------
Takeda Chemical Industries, Ltd.
(Pharmaceuticals) 336,000 16,273,113
- -----------------------------------------------------------------------------
Toyota Motor Corp. (Automobile Manufacturers) 276,500 6,706,999
- -----------------------------------------------------------------------------
Trend Micro Inc. (Application Software)(a) 991,400 21,295,181
=============================================================================
208,507,445
=============================================================================
MEXICO-2.64%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 739,900 11,098,500
- -----------------------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series C (Brewers) 4,538,900 10,423,565
- -----------------------------------------------------------------------------
Telefonos de Mexico S.A. de C.V.- Class L-ADR
(Integrated Telecommunication Services) 384,300 13,089,258
- -----------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series C
(General Merchandise Stores) 10,703,000 23,102,325
=============================================================================
57,713,648
=============================================================================
NETHERLANDS-2.00%
Koninklijke Ahold N.V. (Food Retail) 1,349,000 37,959,091
- -----------------------------------------------------------------------------
Wolters Kluwer N.V. (Publishing & Printing) 268,700 5,640,416
=============================================================================
43,599,507
=============================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
PORTUGAL-0.18%
Portugal Telecom, SGPS, S.A. (Integrated
Telecommunications Services)(a) 490,950 $ 3,888,972
=============================================================================
SINGAPORE-0.71%
Datacraft Asia Ltd. (Networking Equipment) 4,797,136 15,542,721
=============================================================================
SOUTH KOREA-1.08%
Korea Telecom Corp.-ADR (Integrated
Telecommunication Services) 464,000 9,669,760
- -----------------------------------------------------------------------------
Samsung Electronics Co., Ltd.
(Semiconductors) 103,700 13,936,445
=============================================================================
23,606,205
=============================================================================
SPAIN-3.73%
Banco Bilbao Vizcaya Argentaria, S.A. (Banks) 467,700 5,233,032
- -----------------------------------------------------------------------------
Banco Popular Espanol S.A. (Banks) 985,300 33,082,034
- -----------------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 1,075,200 20,034,314
- -----------------------------------------------------------------------------
Telefonica, S.A. (Integrated
Telecommunication Services)(a) 1,926,877 23,137,941
=============================================================================
81,487,321
=============================================================================
SWEDEN-1.53%
Hennes & Mauritz A.B.-Class B (Apparel
Retail)(a) 667,200 11,666,742
- -----------------------------------------------------------------------------
Securitas A.B.-Class B (Diversified
Commercial Services)(a) 1,305,900 21,733,166
=============================================================================
33,399,908
=============================================================================
SWITZERLAND-2.82%
Nestle S.A.-Class B (Packaged Foods) 192,600 39,958,017
- -----------------------------------------------------------------------------
Serono S.A.-Class B (Biotechnology) 27,300 21,569,339
=============================================================================
61,527,356
=============================================================================
TAIWAN-0.85%
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)(a) 10,433,736 18,448,055
=============================================================================
UNITED KINGDOM-16.93%
BP PLC (Integrated Oil & Gas) 5,923,300 47,838,703
- -----------------------------------------------------------------------------
Capita Group PLC (Employment Services) 6,514,800 41,239,466
- -----------------------------------------------------------------------------
Man Group PLC (Diversified Financial
Services) 705,000 11,367,149
- -----------------------------------------------------------------------------
Matalan PLC (Apparel Retail)(a) 153,100 806,989
- -----------------------------------------------------------------------------
Next PLC (Department Stores) 1,946,100 24,609,773
- -----------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products) 2,839,000 39,660,603
- -----------------------------------------------------------------------------
Rentokil Initial PLC (Diversified Commercial
Services) 7,619,800 27,443,624
- -----------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Banks) 2,185,400 52,314,193
- -----------------------------------------------------------------------------
</Table>
FS-66
<Table>
<Caption>
MARKET
SHARES VALUE
UNITED KINGDOM-(CONTINUED)
Safeway PLC (Food Retail) 6,205,100 $ 31,603,815
- -----------------------------------------------------------------------------
Shell Transport & Trading Co. PLC (Integrated
Oil & Gas) 4,568,700 34,239,117
- -----------------------------------------------------------------------------
Smith & Nephew PLC (Health Care Supplies) 3,635,900 20,462,794
- -----------------------------------------------------------------------------
Tesco PLC (Food Retail)(a) 5,408,900 19,087,251
- -----------------------------------------------------------------------------
WPP Group PLC (Advertising) 2,065,900 18,714,203
=============================================================================
369,387,680
=============================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $1,959,235,512) 1,976,585,531
=============================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
MONEY MARKET FUNDS-9.75%
STIC Liquid Assets Portfolio(c) 106,438,222 $ 106,438,222
- -----------------------------------------------------------------------------
STIC Prime Portfolio(c) 106,438,222 106,438,222
=============================================================================
Total Money Market Funds (Cost
$212,876,444) 212,876,444
=============================================================================
TOTAL INVESTMENTS-100.33% (Cost
$2,172,111,956) 2,189,461,975
=============================================================================
OTHER ASSETS LESS LIABILITIES-(0.33%) (7,211,679)
=============================================================================
NET ASSETS-100.00% $2,182,250,296
_____________________________________________________________________________
=============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The aggregate market value of these securities at
10/31/01 was $41,642,273, which represented 1.91% of the Fund's net assets.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-67
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2001
<Table>
ASSETS:
Investments, at market value (cost
$2,172,111,956)* $2,189,461,975
- -------------------------------------------------------------
Foreign currencies, at value (cost
$4,058,581) 4,032,501
- -------------------------------------------------------------
Receivables for:
Investments sold 26,144,480
- -------------------------------------------------------------
Capital stock sold 4,942,801
- -------------------------------------------------------------
Dividends 3,798,562
- -------------------------------------------------------------
Investment for deferred compensation plan 82,151
- -------------------------------------------------------------
Collateral for securities loaned 115,299,878
- -------------------------------------------------------------
Other assets 53,624
=============================================================
Total assets 2,343,815,972
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 22,977,016
- -------------------------------------------------------------
Capital stock reacquired 19,746,622
- -------------------------------------------------------------
Deferred compensation plan 82,151
- -------------------------------------------------------------
Collateral upon return of securities loaned 115,299,878
- -------------------------------------------------------------
Accrued distribution fees 1,901,688
- -------------------------------------------------------------
Accrued directors' fees 1,507
- -------------------------------------------------------------
Accrued transfer agent fees 1,059,960
- -------------------------------------------------------------
Accrued operating expenses 496,854
=============================================================
Total liabilities 161,565,676
=============================================================
Net assets applicable to shares outstanding $2,182,250,296
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $1,404,268,913
_____________________________________________________________
=============================================================
Class B $ 612,124,595
_____________________________________________________________
=============================================================
Class C $ 165,856,788
_____________________________________________________________
=============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 400,000,000
- -------------------------------------------------------------
Outstanding 97,188,477
_____________________________________________________________
=============================================================
Class B:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 44,424,506
_____________________________________________________________
=============================================================
Class C:
Authorized 200,000,000
- -------------------------------------------------------------
Outstanding 12,027,171
_____________________________________________________________
=============================================================
Class A:
Net asset value per share $ 14.45
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $14.45 divided by
94.50%) $ 15.29
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 13.78
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 13.79
_____________________________________________________________
=============================================================
</Table>
* At October 31, 2001, securities with an aggregate market value of $111,191,618
were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended October 31, 2001
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$3,962,351) $ 31,204,706
- ------------------------------------------------------------
Dividends from affiliated money market funds 10,136,941
- ------------------------------------------------------------
Interest 134,796
- ------------------------------------------------------------
Security lending income 2,055,217
============================================================
Total investment income 43,531,660
============================================================
EXPENSES:
Advisory fees 26,188,064
- ------------------------------------------------------------
Administrative services fees 239,396
- ------------------------------------------------------------
Custodian fees 1,710,356
- ------------------------------------------------------------
Distribution fees -- Class A 5,554,261
- ------------------------------------------------------------
Distribution fees -- Class B 7,879,400
- ------------------------------------------------------------
Distribution fees -- Class C 2,148,690
- ------------------------------------------------------------
Transfer agent fees -- Class A 5,181,566
- ------------------------------------------------------------
Transfer agent fees -- Class B 2,205,291
- ------------------------------------------------------------
Transfer agent fees -- Class C 601,376
- ------------------------------------------------------------
Directors' fees 19,260
- ------------------------------------------------------------
Other 1,326,749
============================================================
Total expenses 53,054,409
============================================================
Less: Fees waived (1,184,439)
- ------------------------------------------------------------
Expenses paid indirectly (50,109)
============================================================
Net expenses 51,819,861
============================================================
Net investment income (loss) (8,288,201)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (321,418,911)
- ------------------------------------------------------------
Foreign currencies (3,081,472)
============================================================
(324,500,383)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (592,990,304)
- ------------------------------------------------------------
Foreign currencies 2,412,732
============================================================
(590,577,572)
============================================================
Net gain (loss) from investment securities
and foreign currencies (915,077,955)
============================================================
Net increase (decrease) in net assets
resulting from operations $(923,366,156)
____________________________________________________________
============================================================
</Table>
See Notes to Financial Statements.
FS-68
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2001 and 2000
<Table>
<Caption>
2001 2000
--------------- --------------
OPERATIONS:
Net investment income (loss) $ (8,288,201) $ 1,818,566
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (324,500,383) 290,796,677
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (590,577,572) (274,429,169)
===============================================================================================
Net increase (decrease) in net assets resulting from
operations (923,366,156) 18,186,074
===============================================================================================
Distributions to shareholders from net realized gains:
Class A (156,825,052) (86,520,783)
- -----------------------------------------------------------------------------------------------
Class B (70,681,276) (38,910,409)
- -----------------------------------------------------------------------------------------------
Class C (18,156,188) (5,375,907)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (180,428,359) 313,494,138
- -----------------------------------------------------------------------------------------------
Class B (46,358,665) 148,996,045
- -----------------------------------------------------------------------------------------------
Class C 589,170 163,874,554
===============================================================================================
Net increase (decrease) in net assets (1,395,226,526) 513,743,712
===============================================================================================
NET ASSETS:
Beginning of year 3,577,476,822 3,063,733,110
===============================================================================================
End of year $ 2,182,250,296 $3,577,476,822
_______________________________________________________________________________________________
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 2,516,881,207 $2,727,015,413
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (160,057) (137,143)
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (351,577,431) 233,356,824
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 17,106,577 617,241,728
===============================================================================================
$ 2,182,250,296 $3,577,476,822
_______________________________________________________________________________________________
===============================================================================================
</Table>
See Notes to Financial Statements.
FS-69
NOTES TO FINANCIAL STATEMENTS
October 31, 2001
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 -- 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").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the 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 the close of the respective
markets. Occasionally, events affecting the values of such foreign securities
may occur between the times at which the particular foreign market closes 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 a
development/event is so significant that there is a reasonably high degree of
certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer reflect
actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE 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, 2001, undistributed net investment income was increased by
$8,265,287, undistributed net realized gains decreased by $14,771,356 and
paid in capital increased by $6,506,069 as a result of book/tax differences
due to foreign currency transactions, merger related adjustments, 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.
FS-70
The Fund's capital loss carryforward of $328,198,427 is broken down by
expiration date as follows:
<Table>
<Caption>
CAPITAL
LOSS CARRYFORWARD EXPIRATION
----------------- ----------
$ 11,425,187 October 31, 2008
-----------------------------------
316,773,240 October 31, 2009
-----------------------------------
$328,198,427
__________________________________
===================================
</Table>
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.
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 based on relative net assets.
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. Effective July 1, 2001, AIM has voluntarily agreed to waive
advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives
from the affiliated money market fund of which the Fund has invested. For the
year ended October 31, 2001, AIM waived fees of $1,184,439.
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, 2001, AIM was
paid $239,396 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 2001, AFS
was paid $3,018,417 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. For the year ended October 31, 2001,
the Class A, Class B and Class C shares paid AIM Distributors $5,554,261,
$7,879,400 and $2,148,690, respectively, as compensation under the Plans.
AIM Distributors received commissions of $291,152 from sales of the Class A
shares of the Fund during the year ended October 31, 2001. 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, 2001,
AIM Distributors received $315,479 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, 2001, the Fund paid legal fees of $7,414 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, 2001, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $50,109 under an expense offset
arrangement which resulted in a reduction of the Fund's total expenses of
$50,109.
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-71
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,
2001, 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. 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 October 31, 2001, securities with an aggregate value of $111,191,618 were
on loan to brokers. The loans were secured by cash collateral of $115,299,878
received by the Fund and invested in STIC Liquid Assets Portfolio, an affiliated
money market fund. For the year ended October 31, 2001, the Fund received fees
of $2,055,217 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, 2001 was
$2,211,065,667 and $2,518,733,700 respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2001 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $200,596,623
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (197,068,026)
=========================================================
Net unrealized appreciation of investment
securities $ 3,528,597
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $2,185,933,378.
</Table>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 2001 and
2000 were as follows:
<Table>
<Caption>
2001 2000
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- ---------------
Sold:
Class A 175,580,029 $ 2,950,679,623 74,959,702 $ 1,884,430,622
- -----------------------------------------------------------------------------------------------------------------------------
Class B 4,979,371 82,782,098 10,706,006 266,318,794
- -----------------------------------------------------------------------------------------------------------------------------
Class C 14,086,051 222,470,653 11,663,828 288,872,717
=============================================================================================================================
Issued as reinvestment of dividends:
Class A 7,606,981 146,967,008 3,304,133 80,984,287
- -----------------------------------------------------------------------------------------------------------------------------
Class B 3,458,005 64,111,410 1,485,236 35,304,035
- -----------------------------------------------------------------------------------------------------------------------------
Class C 924,281 17,145,423 214,163 5,094,930
=============================================================================================================================
Issued in connection with acquisition:*
Class A 2,217,146 33,310,375 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Class B 1,619,058 23,291,645 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Class C 232,554 3,348,737 -- --
=============================================================================================================================
Reacquired:
Class A (195,871,662) (3,311,385,365) (65,335,468) (1,651,920,771)
- -----------------------------------------------------------------------------------------------------------------------------
Class B (13,584,017) (216,543,818) (6,258,901) (152,626,784)
- -----------------------------------------------------------------------------------------------------------------------------
Class C (15,412,641) (242,375,643) (5,276,103) (130,093,093)
=============================================================================================================================
(14,164,844) $ (226,197,854) 25,462,596 $ 626,364,737
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</Table>
* As of the close of business on September 07, 2001, the Fund acquired all the
net assets of AIM Japan Growth Fund pursuant to a plan of reorganization
approved by AIM Japan Growth Fund shareholders on August 17, 2001. The
acquisition was accomplished by a tax-free exchange of 4,068,758 shares of the
Fund for 9,652,967 shares of AIM Japan Growth Fund outstanding as of the close
of business on September 07, 2001. AIM Japan Growth Fund net assets at that
date of $59,950,757 including $(9,557,579) of unrealized depreciation, were
combined with those of the Fund. The aggregate net assets of the Fund
immediately before the acquisition were $2,282,502,806.
FS-72
NOTE 9-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------
2001 2000(a) 1999 1998(a) 1997(a)
---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 21.60 $ 21.73 $ 17.59 $ 16.64 $ 15.37
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) 0.08 (0.03) 0.05 0.04
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.66) 0.72 4.49 0.96 1.68
================================================================================================================================
Total from investment operations (5.67) 0.80 4.46 1.01 1.72
================================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.11) (0.06) (0.02)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.48) (0.93) (0.21) -- (0.43)
================================================================================================================================
Total distributions (1.48) (0.93) (0.32) (0.06) (0.45)
================================================================================================================================
Net asset value, end of period $ 14.45 $ 21.60 $ 21.73 $ 17.59 $ 16.64
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (27.96)% 3.16% 25.73% 6.11% 11.43%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,404,269 $2,325,636 $2,058,419 $1,724,635 $1,577,390
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.57%(c) 1.44% 1.48% 1.45% 1.47%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.61%(c) 1.48% 1.52% 1.49% 1.51%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.04)%(c) 0.30% (0.14)% 0.28% 0.24%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 85% 87% 86% 78% 50%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratios are based on average daily net assets of $1,851,420,253.
<Table>
<Caption>
CLASS B
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2001 2000(a) 1999(a) 1998(a) 1997(a)
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 20.81 $ 21.11 $ 17.13 $ 16.27 $ 15.13
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.11) (0.17) (0.09) (0.09)
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.42) 0.74 4.36 0.95 1.66
======================================================================================================================
Total from investment operations (5.55) 0.63 4.19 0.86 1.57
======================================================================================================================
Less distributions from net realized gains (1.48) (0.93) (0.21) -- (0.43)
======================================================================================================================
Net asset value, end of period $ 13.78 $ 20.81 $ 21.11 $ 17.13 $ 16.27
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (28.48)% 2.42% 24.72% 5.29% 10.61%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $612,125 $997,843 $887,106 $744,987 $678,809
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.27%(c) 2.18% 2.27% 2.22% 2.25%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.31%(c) 2.22% 2.31% 2.26% 2.28%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.75)%(c) (0.44)% (0.93)% (0.49)% (0.53)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 85% 87% 86% 78% 50%
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $787,939,985.
FS-73
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
-------------------------------------------------------------
AUGUST 4, 1997
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED)
------------------------------------------- TO OCTOBER 31,
2001 2000(a) 1999(a) 1998(a) 1997(a)
-------- -------- -------- ------- --------------
Net asset value, beginning of period $ 20.82 $ 21.13 $ 17.14 $ 16.27 $ 17.64
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.11) (0.17) (0.09) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.42) 0.73 4.37 0.96 (1.35)
===========================================================================================================================
Total from investment operations (5.55) 0.62 4.20 0.87 (1.37)
===========================================================================================================================
Less distributions from net realized gains (1.48) (0.93) (0.21) -- --
===========================================================================================================================
Net asset value, end of period $ 13.79 $ 20.82 $ 21.13 $ 17.14 $ 16.27
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) (28.47)% 2.37% 24.76% 5.35% 7.77%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $165,857 $253,998 $118,208 $58,579 $12,829
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.27%(c) 2.18% 2.27% 2.22% 2.27%(d)
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.31%(c) 2.22% 2.31% 2.26% 2.30%(d)
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.75)%(c) (0.44)% (0.93)% (0.49)% (0.55)%(d)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 85% 87% 86% 78% 50%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized
for period less than one year.
(c) Ratios are based on average daily net assets of $214,869,043.
(d) Annualized.
FS-74
APPENDIX II
ANNUAL REPORT / DECEMBER 31, 2001
AIM EUROLAND GROWTH FUND
[COVER IMAGE]
[AIM FUNDS LOGO]
--Registered Trademark--
[COVER IMAGE]
-------------------------------------
RAIN, STEAM AND SPEED BY J.M.W. TURNER (1844)
J.M.W. TURNER LIKED TO PAINT EPIC SCENES OF CALAMITY IN WHICH THE FURY OF THE
ELEMENTS UNDERLINES HUMANITY'S INSIGNIFICANCE WITHIN NATURE'S PLAN. SIMILAR
TO THE TRAIN FIGHTING THROUGH THE MIXED ELEMENTS, THIS SAME SPIRIT IS
PROPELLING EUROPE INTO ECONOMIC LEADERSHIP.
-------------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Euroland Growth Fund's performance figures are historical, and they
reflect fund expenses, the 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 structures and class expenses.
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 The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly increase the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may decrease the fund's total return.
o Investing in a single-region mutual fund may involve greater risk and
potential reward than investing in a more diversified fund.
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 Europe Index is a group of European securities tracked by
Morgan Stanley Capital International.
o The MSCI Europe Growth Index measures the performance of MSCI European
companies with higher price/book ratios and higher forecasted growth.
o The MSCI Europe Value Index measures the performance of MSCI European
companies with lower price/book ratios and lower forecasted growth.
o The unmanaged MSCI EMU Index includes securities tracked by Morgan Stanley
Capital International from ten countries that are a part of the European
Monetary Union.
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.
DEAR FELLOW SHAREHOLDER:
[PHOTO OF We understand how challenging the fiscal year covered by
ROBERT H. this report has been. For equity investors, the years 2000
GRAHAM] and 2001 were unlike anything we had seen in a generation.
For the first time since the 1970s, the S&P 500 and other
major domestic stock benchmarks produced negative returns
two years in a row. And there was no comfort overseas; the
MSCI World Index also produced negative returns both years.
As usually occurs during difficult stock markets,
fixed-income investments, particularly high-quality ones,
did well. The domestic, investment-grade Lehman Aggregate
Bond Index produced positive returns both years.
Conditions were trying on many levels. Geopolitically,
the appalling terrorist attacks of September 11 led to a
serious decline in markets, though initial success in our
ensuing war in Afghanistan helped markets advance later in
the year. Macroeconomically, the United States officially slipped into recession
in March, the first such slowdown in a decade.
And at the individual firm level, the Enron bankruptcy has occasioned a
confidence crisis that has markets unsettled. As I write this, several weeks
into the new year, several Congressional committees, the Securities and Exchange
Commission and the Justice Department are conducting investigations of Enron.
While we do not yet have all the details about what happened at Enron, it
clearly has resulted in a new level of skepticism of the financial statements of
even the soundest companies. AIM strongly believes that sound accounting
policies, full and accurate financial disclosure, and independent audits are
absolutely essential to maintain the integrity of the markets and the confidence
of investors, and will support any legislative or regulatory changes that may be
desirable to further these objectives.
WHAT SHOULD INVESTORS DO NOW?
Mindful of recent events and scandals and in view of the two-year bear market in
equities, many of our shareholders have asked us what they should do about their
investments. We cannot offer individualized advice--that is the role of your
financial advisor. But we can once again offer insights we have gained over many
years in this business.
First is the crucial importance of diversification when investing--a major
lesson of the Enron story that is reinforced by the disparate performance of
equity and fixed-income investments during this fiscal year. Relying on one
stock to build financial security has once again proven to be downright
dangerous, but mutual fund investors should also keep in mind that whole sectors
and investment approaches do go in and out of favor. A diversified portfolio
that embraces different classes of securities and various investment strategies
can offer protection from these shifts in sentiment.
A second insight is the importance of a long time horizon. Whatever current
market conditions are like, we at AIM intend to stay focused on the long term.
Our portfolio managers will continue to invest your money using the time-tested
disciplines AIM has employed for more than a quarter century. We consider a
long-term perspective the most advisable course for our shareholders too.
Changing your portfolio on the basis of short-term events and market moves
rarely proves beneficial. As we have reminded you on many occasions, data show
that pulling out of the market even for a short period and missing a few of its
best days is likely to have a negative effect on your long-term returns. In
investing, it is time in the markets, not market timing, that counts.
Now more than ever, we encourage you to stay in touch with your financial
advisor. He or she is familiar with the goals and time horizon you have
established for your investments and can help you build a diversified portfolio
and stay focused on those goals.
YOUR FUND'S PERFORMANCE
For the six months since our June 30, 2001 report to you, Class A shares of AIM
Euroland Growth Fund returned -9.74% at net asset value. By comparison, the MSCI
Europe Index returned -3.25% over the same period. The fund rebounded during the
final quarter of the year, with Class A shares rising 11.78%. The fourth quarter
of the year witnessed a rally in global markets; previously depressed sectors
such as technology contributed positively to fund performance late in the year.
For the fiscal year as a whole, AIM Euroland Growth Fund Class A shares
returned -33.10% at net asset value.
The following pages contain your portfolio managers' discussion of how they
have managed the portfolio during the fiscal year, how the markets affected the
fund, and the fund's long-term record. We hope you find their discussion
informative.
If you have questions or comments about this report, please contact us
anytime through our Web site, www.aimfunds.com. We understand that our
shareholders are relying on us for the growth of their investments, and we want
you to know that all of us are working diligently to that end. Thank you for
your continued participation in The AIM Family of Funds--Registered Trademark--.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
February 12, 2002
MARKETS DECLINE, BUT LATE-YEAR RALLY ENCOURAGING
HOW DID AIM EUROLAND GROWTH FUND PERFORM DURING 2001?
Economic growth slowed across Europe and stock markets, for the most part, were
disappointing. Although European markets rebounded strongly in the final months
of the year, it was not enough to pull most market returns into positive
territory. Given this environment, for the fiscal year ended December 31, 2001,
AIM Euroland Growth Fund returned -33.10% for Class A shares, -33.45% for Class
B shares and -33.56% for Class C shares, excluding sales charges. By comparison,
the fund's index, the MSCI European Monetary Union (EMU) Index returned -23.63%
over the same period.
The fund's one-year return belies a marked improvement in fund performance
during the fourth quarter. For the three-month period ended December 31, 2001,
the fund posted a return of 11.78% for Class A shares, 11.72% for Class B shares
and 11.61% for Class C shares, excluding sales charges.
HOW DID EUROPEAN MARKETS FARE DURING 2001?
Global economic unease coupled with concern over deteriorating corporate
earnings translated into lower equity markets worldwide. For the first three
quarters of the year, European equity markets declined but the third quarter was
particularly harsh as the effects of September 11 dominated all markets.
Following the attacks, stock markets in the United States were closed for nearly
a week. European markets remained open but were volatile. As part of a global
effort to calm markets, central banks in Europe joined other world banks and
reduced interest rates in tandem with the U.S. Federal Reserve.
Increasingly, investors moved out of growth investments and into either
more defensive stocks or fixed-income securities. Even a fourth-quarter rally in
which growth stocks strongly bested value stocks was insufficient to overcome
value in the first three quarters. In fact, the MSCI Europe Value Index
outperformed the MSCI Europe Growth Index by more than seven percentage points
for the year. Therefore, AIM Euroland Growth Fund's growth-oriented investment
style was out of favor for a good portion of the year.
Historically, however, no one style or sector remains in favor or out of
favor, indefinitely. That became apparent in the fourth quarter as European
equity markets bounced off their September lows and reversed a value-oriented
trend with a growth stock rally. Industries hard hit throughout the
year--computer hardware services, software, telecommunications equipment and
media--soared, and most European bourses recouped all of their post-attack
losses.
WHAT OTHER FACTORS AFFECTED EUROPE?
The region's manufacturing industry reported reductions in new orders, consumer
confidence declined and unemployment in some key countries, such as France and
Germany, rose.
The French economy grew at a relatively robust 0.5% in the third quarter,
helped by an increase in household consumption. Germany--Europe's largest
economy--continued to battle a flagging industrial sector, which pushed up
unemployment for months. (Germany's highly regulated labor market makes it hard
to shed workers and difficult to hire on an upswing.) Indeed, the German economy
turned in one of its worst performances in nearly a decade as Germany's GDP grew
by just 0.6% for the year 2001.
That said, the International Monetary Fund (IMF) forecasts the European
Union area will grow 1.3% in 2002 versus just 0.8% for the U.S.
Investors were also concerned about monetary decisions made by the European
Central Bank (ECB). Throughout 2001,
FUND AT A GLANCE
AIM Euroland Growth Fund is for shareholders seeking long-term growth of
capital. The fund invests primarily in equity securities of issuers from
European countries that are members of the European Economic and Monetary Union
(EMU) and have the euro as their common currency.
[ARTWORK]
INVESTMENT STYLE: Growth (Focuses on the growth potential of a company's
earnings, the most tangible measure of growth and success)
o Focuses on large-cap companies with market leadership, pricing power and
high barriers to entry
o Invests primarily within countries using the euro, which include: Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal and Spain
o Seeks companies with potential to consistently beat earnings estimates over
the long term
2
PORTFOLIO COMPOSITION
As of 12/31/01, based on total net assets
<Table>
<Caption>
======================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES TOP 10 COUNTRIES
- ----------------------------------------------------------------------------------------------------------------------
1. Nokia Oyj (Finland) 4.3% 1. Banks 12.1% 1. France 31.6%
2. Aventis S.A. (France) 3.2 2. Pharmaceuticals 8.5 2. Germany 24.2
3. Medion A.G. (Germany) 3.1 3 Integrated Telecommunication Services 7.2 3. Netherlands 11.4
4. BNP Paribas S.A.. (France) 2.8 4. Automobile Manufacturers 6.0 4. Italy 7.9
5. Porsche A.G.-Pfd. (Germany) 2.6 5. Diversified Financial Services 5.9 5. Spain 5.0
6. Deutsche Bank A.G. (Germany) 2.5 6. IT Consulting & Services 5.4 6. Finland 4.3
7. TotalFinaElf S.A. (France) 2.4 7. Wireless Telecommunication Services 4.6 7. Sweden 3.5
8. Telefonica, S.A. (Spain) 2.3 8. Telecommunications Equipment 4.3 8. Switzerland 3.2
9. Orange, S.A. (France) 2.3 9. Integrated Oil & Gas 3.7 9. Denmark 1.6
10. Assa Abloy A.B.-Class B (Sweden) 2.2 10. Multi-line Insurance 3.4 10. Luxembourg 1.2
The fund's portfolio is subject to change, and there is no guarantee that the
fund will continue to hold any particular security.
======================================================================================================================
</Table>
the Fed dropped interest rates 11 times in the U.S. But, the ECB could only
muster four rate reductions for the euro-zone. ECB detractors are quick to point
out that this is in the face of slowing growth. However, the ECB targets
inflation not economic activity; its goal is to keep inflation below 2%. Still,
investors expressed their disapproval of ECB strategy when European markets sold
off sharply in late October after the ECB announced there would be no rate
reduction at that meeting.
HOW DID THE EURO FARE?
The euro--the single currency for 12 European countries--began 2001 at roughly
$0.94 U.S. (virtually its high for the year) and seemed poised to strengthen
against the U.S. dollar. But for much of the year the euro steadily lost ground
against the dollar, hitting a low of approximately $0.84 U.S. in July. But
following the September terrorist attacks in the U.S., the euro rallied
strongly and ended the year above $0.88 U.S. Although the euro has been used in
bank transactions since January 1999, the euro will no longer be a "virtual"
currency beginning January 1, 2002 when cash dispensers in European Union
countries begin to expel euro banknotes.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Beyond macro economic conditions in Europe, the fund focuses on companies with
strong fundamentals. Indeed, many of the fund's holdings met or exceeded
earnings expectations but some stocks were dragged down by the mere association
with disappointing sectors or industries.
The fund, however, did find good opportunities in industries not
traditionally associated with growth, such as pharmaceuticals, optical lens
manufacturers and regional banks. Two fund holdings in the pharmaceutical
industry with strong fundamentals include:
o Aventis S.A.: one of the world's largest drugmakers. This French firm was
formed and benefited from the merger of France's Rhone Poulenc and
Germany's Hoechst.
o Sanofi-Synthelabo S.A.: a Paris-based drug manufacturer that specializes in
cardiovascular, central nervous system, oncology and internal medicine
formulations.
And although we reduced our technology weighting this year, we continue to
focus on tech stocks that should respond when corporate spending rebounds. Our
holdings in this area, therefore, typically have strong balance sheets and are
market leaders. An example of a fund holding with these traits is Nokia Oyj, the
world's number one manufacturer of mobile phones. This Finnish company is also
one of Europe's largest companies by market capitalization.
WHAT WERE CONDITIONS LIKE AT THE CLOSE OF THE REPORTING PERIOD?
The global economic downturn, and indeed the U.S. recession, impacted Europe
more in 2001 than many analysts had predicted. Still, of the three largest world
economies--Japan, the U.S. and Europe--Europe is anticipated to have the best
growth rate in 2002. And some hope the new euro notes and coins will act as a
stimulus for the euro zone and forge a more unified fiscal policy.
See important fund and index disclosures inside front cover.
3
YOUR FUND'S LONG-TERM PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/01, including sales charges
================================================================================
CLASS A SHARES
Inception (7/19/85) 8.36%
10 Years 2.77
5 Years -1.39
1 Year -36.77
CLASS B SHARES
Inception (4/01/93) 3.95%
5 Years -1.21
1 Year -36.73
CLASS C SHARES
Inception (5/3/99) -9.01%
1 Year -34.21
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
================================================================================
RESULTS OF A $10,000 INVESTMENT
12/31/91-12/31/01
<Table>
<Caption>
================================================================================
(HYPO Chart)
AIM EUROLAND MSCI MSCI
GROWTH FUND, EUROPE EMU
CLASS A SHARES INDEX INDEX
12/31/91 $ 9,450 $10,000 $10,000
1/31/92 $ 9,410 $ 9,997 $10,048
2/29/92 $ 9,479 $10,036 $10,253
3/31/92 $ 9,272 $ 9,685 $ 9,968
4/30/92 $ 9,637 $10,219 $10,124
5/31/92 $ 9,952 $10,801 $10,625
6/30/92 $ 9,646 $10,600 $10,535
7/31/92 $ 9,223 $10,221 $10,042
8/31/92 $ 9,144 $10,188 $10,023
9/30/92 $ 8,494 $10,020 $ 9,753
10/31/92 $ 8,031 $ 9,320 $ 9,192
11/30/92 $ 8,268 $ 9,316 $ 9,071
12/31/92 $ 8,386 $ 9,529 $ 9,077
1/31/93 $ 8,396 $ 9,545 $ 9,268
2/28/93 $ 8,524 $ 9,654 $ 9,681
3/31/93 $ 8,829 $10,150 $ 9,999
4/30/93 $ 9,085 $10,375 $10,075
5/31/93 $ 9,234 $10,487 $10,012
6/30/93 $ 9,273 $10,333 $ 9,816
7/31/93 $ 9,520 $10,369 $ 9,892
8/31/93 $10,299 $11,279 $10,931
9/30/93 $ 9,904 $11,244 $10,849
10/31/93 $10,298 $11,713 $11,223
11/30/93 $10,013 $11,460 $10,766
12/31/93 $10,762 $12,320 $11,532
1/31/94 $11,507 $12,948 $11,938
2/28/94 $10,951 $12,489 $11,679
3/31/94 $10,445 $12,136 $11,673
4/30/94 $10,842 $12,638 $12,306
5/31/94 $10,266 $12,101 $11,718
6/30/94 $10,088 $11,974 $11,434
7/31/94 $10,733 $12,601 $12,168
8/31/94 $10,902 $13,001 $12,379
9/30/94 $10,396 $12,485 $11,797
10/31/94 $10,694 $13,029 $12,217
11/30/94 $10,208 $12,530 $11,721
12/31/94 $10,139 $12,602 $11,758
1/31/95 $ 9,897 $12,503 $11,686
2/28/95 $ 9,917 $12,787 $11,996
3/31/95 $ 9,695 $13,380 $12,338
4/30/95 $10,129 $13,809 $12,838
5/31/95 $10,352 $14,092 $12,986
6/30/95 $10,534 $14,224 $13,074
7/31/95 $11,130 $14,965 $13,796
8/31/95 $10,828 $14,386 $13,060
9/30/95 $11,191 $14,821 $13,160
10/31/95 $11,070 $14,751 $12,950
11/30/95 $11,010 $14,856 $12,986
12/31/95 $11,140 $15,327 $13,469
1/31/96 $11,181 $15,426 $13,872
2/29/96 $11,641 $15,707 $14,024
3/31/96 $12,000 $15,895 $14,089
4/30/96 $12,154 $16,010 $14,236
5/31/96 $12,501 $16,133 $14,385
6/30/96 $12,716 $16,311 $14,549
7/31/96 $11,938 $16,107 $14,219
8/31/96 $12,358 $16,585 $14,314
9/30/96 $12,583 $16,933 $14,721
10/31/96 $12,675 $17,326 $14,851
11/30/96 $13,146 $18,205 $15,643
12/31/96 $13,324 $18,558 $15,882
1/31/97 $13,406 $18,608 $16,104
2/28/97 $13,613 $18,854 $16,164
3/31/97 $13,861 $19,462 $16,795
4/30/97 $13,478 $19,365 $16,479
5/31/97 $13,912 $20,192 $16,950
6/30/97 $14,594 $21,202 $18,042
7/31/97 $14,781 $22,196 $19,002
8/31/97 $13,830 $20,929 $17,522
9/30/97 $15,122 $22,959 $19,252
10/31/97 $14,429 $21,829 $18,035
11/30/97 $14,481 $22,165 $18,370
12/31/97 $14,816 $22,974 $19,019
1/31/98 $15,374 $23,930 $19,803
2/28/98 $17,039 $25,801 $21,387
3/31/98 $18,259 $27,638 $23,350
4/30/98 $18,539 $28,175 $24,116
5/31/98 $18,776 $28,747 $25,282
6/30/98 $18,879 $29,063 $25,602
7/31/98 $19,635 $29,638 $26,433
8/31/98 $16,159 $25,910 $22,602
9/30/98 $14,907 $24,873 $21,717
10/31/98 $15,786 $26,863 $23,398
11/30/98 $16,397 $28,292 $24,774
12/31/98 $17,278 $29,529 $26,152
1/31/99 $18,546 $29,340 $25,962
2/28/99 $17,400 $28,595 $24,689
3/31/99 $16,739 $28,906 $24,726
4/30/99 $16,541 $29,768 $25,374
5/31/99 $16,166 $28,339 $24,207
6/30/99 $16,662 $28,818 $24,840
7/31/99 $16,772 $29,086 $24,735
8/31/99 $16,871 $29,382 $25,243
9/30/99 $16,507 $29,156 $25,091
10/31/99 $17,642 $30,229 $26,105
11/30/99 $19,957 $31,045 $27,028
12/31/99 $23,352 $34,227 $30,689
1/31/00 $23,018 $31,790 $28,795
2/29/00 $28,178 $33,447 $31,392
3/31/00 $26,561 $34,253 $31,280
4/30/00 $24,861 $32,742 $29,723
5/31/00 $23,839 $32,474 $29,639
6/30/00 $24,185 $33,172 $30,457
7/31/00 $24,078 $32,641 $29,523
8/31/00 $24,232 $32,256 $28,777
9/30/00 $22,604 $30,746 $27,316
10/31/00 $21,248 $30,513 $26,949
11/30/00 $18,619 $29,332 $25,957
12/31/00 $19,655 $31,353 $27,712
1/31/01 $19,806 $31,369 $27,857
2/28/01 $17,075 $28,614 $25,102
3/31/01 $15,220 $26,480 $23,182
4/30/01 $16,485 $28,362 $24,998
5/31/01 $15,420 $26,978 $23,242
6/30/01 $14,569 $25,959 $22,277
7/31/01 $14,356 $26,023 $22,360
8/31/01 $13,555 $25,347 $21,500
9/30/01 $11,763 $22,817 $18,786
10/31/01 $12,240 $23,543 $19,612
11/30/01 $12,979 $24,487 $20,584
12/31/01 $13,141 $25,114 $21,163
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
</Table>
This chart compares the performance of AIM Euroland Growth Fund Class A shares
to its benchmark indexes. It is intended to give you a general idea of how your
fund performed compared to these indexes over the period 12/31/91-12/31/01.
It is important to understand the difference between your fund and an
index. A market index such as the MSCI EMU (European Monetary Union) Index is
not managed and incurs no sales charges, expenses or fees. If you could buy all
the securities that make up a market index, you would incur expenses that would
affect your investment return.
The fund's total return includes sales charges, expenses and management
fees.
Performance of the fund's Class A, B and C shares will differ due to
different sales charge structures and class expenses. For fund performance
calculations and indexes used in this report, please see the inside front cover.
Performance shown in the chart does not reflect taxes a shareholder would
pay on redemption of fund shares. Index performance does not reflect the effects
of taxes either.
Since the last reporting period, AIM Euroland Growth Fund has elected to use
the MSCI EMU Index as its benchmark instead of the MSCI Europe Index. The new
index more closely resembles the securities in which the fund invests. The fund
will no longer measure its performance against the MSCI Europe Index, the index
published in previous reports to shareholders. Because this is the first
reporting period since we have adopted the new index, SEC guidelines require
that we compare the fund's performance to both the old and the new index.
4
SCHEDULE OF INVESTMENTS
December 31, 2001
<Table>
<Caption>
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-96.93%
BELGIUM-0.81%
Fortis (Diversified Financial Services) 75,000 $ 1,949,588
=======================================================================
DENMARK-1.58%
Vestas Wind Systems A.S. (Heavy Electrical
Equipment) 140,000 3,823,899
=======================================================================
FINLAND-4.27%
Nokia Oyj (Telecommunication Equipment) 400,000 10,330,032
=======================================================================
FRANCE-31.58%
Altran Technologies S.A. (IT Consulting &
Services) 90,000 4,073,068
- -----------------------------------------------------------------------
Atos Origin S.A. (IT Consulting &
Services)(a) 35,000 2,295,587
- -----------------------------------------------------------------------
Aventis S.A. (Pharmaceuticals) 110,000 7,822,877
- -----------------------------------------------------------------------
AXA (Multi-Line Insurance) 120,000 2,511,525
- -----------------------------------------------------------------------
BNP Paribas S.A. (Banks) 75,000 6,721,566
- -----------------------------------------------------------------------
Cap Gemini S.A. (IT Consulting & Services) 50,000 3,616,046
- -----------------------------------------------------------------------
Carrefour S.A. (Food Retail) 50,000 2,603,910
- -----------------------------------------------------------------------
Compagnie de Saint-Gobain (Building Products) 17,000 2,569,578
- -----------------------------------------------------------------------
Essilor International S.A. Compagnie
D'Optique (Health Care Supplies) 150,000 4,541,237
- -----------------------------------------------------------------------
France Telecom S.A. (Integrated
Telecommunication Services) 40,000 1,601,583
- -----------------------------------------------------------------------
Hermes International (Apparel & Accessories) 9,272 1,430,417
- -----------------------------------------------------------------------
LVMH Moet Hennessy Louis Vitton S.A. (Apparel
& Accessories) 19,988 814,570
- -----------------------------------------------------------------------
Orange S.A. (Wireless Telecommunication
Services)(a) 600,000 5,446,809
- -----------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Department
Stores) 20,100 2,591,836
- -----------------------------------------------------------------------
PSA Peugeot Citroen (Automobile
Manufacturers) 60,000 2,554,864
- -----------------------------------------------------------------------
Sanofi-Synthelabo S.A. (Pharmaceuticals) 60,000 4,483,719
- -----------------------------------------------------------------------
Schneider Electric S.A. (Electrical
Components & Equipment)(a) 60,000 2,889,270
- -----------------------------------------------------------------------
Thales S.A. (Aerospace & Defense) 100,000 3,455,531
- -----------------------------------------------------------------------
Thomson Multimedia (Consumer Electronics)(a) 98,156 3,019,806
- -----------------------------------------------------------------------
TotalFinaElf S.A. (Integrated Oil & Gas) 40,000 5,721,468
- -----------------------------------------------------------------------
Vinci S.A. (Construction & Engineering) 20,000 1,174,435
- -----------------------------------------------------------------------
Vivendi Universal S.A. (Movies &
Entertainment) 80,000 4,387,410
=======================================================================
76,327,112
=======================================================================
GERMANY-24.16%
Allianz A.G. (Multi-Line Insurance) 11,000 2,604,356
- -----------------------------------------------------------------------
Bayerisch Motoren Werke A.G. (Automobile
Manufacturers) 75,000 2,645,153
- -----------------------------------------------------------------------
DaimlerChrysler A.G. (Automobile
Manufacturers) 70,000 3,002,522
- -----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
GERMANY-(CONTINUED)
Deutsche Bank A.G. (Banks) 85,000 $ 6,010,841
- -----------------------------------------------------------------------
Deutsche Boerse A.G. (Diversified Financial
Services) 48,748 1,934,461
- -----------------------------------------------------------------------
Deutsche Telekom A.G. (Integrated
Telecommunication Services) 245,000 4,238,488
- -----------------------------------------------------------------------
Infineon Technologies A.G.
(Semiconductors)(a) 125,000 2,619,516
- -----------------------------------------------------------------------
Marschollek Lautenschlaeger und Partner A.G.
(Diversified Financial Services) 50,000 3,674,010
- -----------------------------------------------------------------------
Medion A.G. (Distributors) 184,000 7,383,690
- -----------------------------------------------------------------------
Merck KGaA (Pharmaceuticals) 80,000 2,932,074
- -----------------------------------------------------------------------
Muenchener Rueckversicherungs-Gesellschaft
A.G. (Reinsurance) 15,000 4,079,756
- -----------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobile Manufacturers) 16,410 6,277,822
- -----------------------------------------------------------------------
Schering A.G. (Pharmaceuticals) 100,000 5,359,417
- -----------------------------------------------------------------------
Siemens A.G. (Industrial Conglomerates) 45,000 3,003,637
- -----------------------------------------------------------------------
Systeme, Anwendungen, Produkte in der
Datenvernabeitung (Application Software)(a) 20,000 2,625,490
=======================================================================
58,391,233
=======================================================================
ITALY-7.92%
Banca Fideuram S.p.A. (Diversified Financial
Services) 200,000 1,603,366
- -----------------------------------------------------------------------
ENI S.p.A. (Integrated Oil & Gas) 250,000 3,138,960
- -----------------------------------------------------------------------
IntesaBci S.p.A. (Banks) 800,000 2,004,654
- -----------------------------------------------------------------------
Luxottica Group S.p.A.-ADR (Health Care
Supplies) 200,000 3,296,000
- -----------------------------------------------------------------------
Mediolanum S.p.A. (Diversified Financial
Services) 400,000 3,609,804
- -----------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Wireless
Telecommunication Services)(a) 500,000 2,795,636
- -----------------------------------------------------------------------
Telecom Italia S.p.A. (Integrated
Telecommunication Services) 315,000 2,696,652
=======================================================================
19,145,072
=======================================================================
LUXEMBOURG-1.24%
Thiel Logistik A.G. (IT Consulting &
Services)(a) 153,568 2,999,079
=======================================================================
NETHERLANDS-11.41%
ABN AMRO Holding N.V. (Banks) 200,000 3,226,352
- -----------------------------------------------------------------------
Aegon N.V. (Life & Health Insurance) 50,000 1,355,460
- -----------------------------------------------------------------------
ASM Lithography Holding N.V. (Semiconductor
Equipment)(a) 150,000 2,611,044
- -----------------------------------------------------------------------
Gucci Group N.V. (Apparel & Accessories) 28,000 2,385,788
- -----------------------------------------------------------------------
ING Groep N.V. (Diversified Financial
Services) 55,000 1,404,685
- -----------------------------------------------------------------------
Koninklijke Ahold N.V. (Food Retail) 150,000 4,371,359
- -----------------------------------------------------------------------
Koninklijke (Royal) KPN N.V. (Integrated
Telecommunication Services)(a) 611,906 3,115,760
- -----------------------------------------------------------------------
</Table>
5
<Table>
<Caption>
MARKET
SHARES VALUE
NETHERLANDS-(CONTINUED)
Koninklijke (Royal) Philips Electronics N.V.
(Consumer Electronics) 140,000 $ 4,167,326
- -----------------------------------------------------------------------
Teleplan International N.V. (Marine)(a) 160,000 2,411,292
- -----------------------------------------------------------------------
VNU N.V. (Publishing & Printing) 81,890 2,520,107
=======================================================================
27,569,173
=======================================================================
NORWAY-1.08%
Tomra Systems A.S.A. (Industrial Machinery) 270,800 2,602,362
=======================================================================
SPAIN-5.00%
Banco Bilbao Vizcaya Argentaria, S.A. (Banks) 250,000 3,098,831
- -----------------------------------------------------------------------
Banco Santander Central Hispano, S.A. (Banks) 350,000 2,936,979
- -----------------------------------------------------------------------
Industria de Diseno Textil, S.A. (Apparel
Retail)(a) 22,352 426,753
- -----------------------------------------------------------------------
Telefonica, S.A. (Integrated
Telecommunication Services)(a) 420,000 5,629,261
=======================================================================
12,091,824
=======================================================================
SWEDEN-3.53%
Assa Abloy A.B.-Class B (Building Products) 374,400 5,412,114
- -----------------------------------------------------------------------
Skandia Forsakrings A.B. (Multi-Line
Insurance) 428,988 3,121,137
=======================================================================
8,533,251
=======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
SWITZERLAND-3.18%
Credit Suisse Group (Banks)(a) 120,000 $ 5,124,246
- -----------------------------------------------------------------------
STMicroelectronics N.V. (Semiconductors)(a) 80,000 2,571,807
=======================================================================
7,696,053
=======================================================================
UNITED KINGDOM-1.17%
Vodafone Group PLC (Wireless
Telecommunication Services) 1,078,121 2,821,615
=======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $234,796,344) 234,280,293
=======================================================================
MONEY MARKET FUNDS-4.01%
STIC Liquid Assets Portfolio(b) 4,850,368 4,850,368
- -----------------------------------------------------------------------
STIC Prime Portfolio(b) 4,850,368 4,850,368
=======================================================================
Total Money Market Funds (Cost
$9,700,736) 9,700,736
=======================================================================
TOTAL INVESTMENTS-100.94% (Cost $244,497,080) 243,981,029
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.94%) (2,272,667)
=======================================================================
NET ASSETS-100.00% $241,708,362
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Pfd. - Preferred
</Table>
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.
6
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2001
<Table>
ASSETS:
Investments, at market value (cost
$244,497,080)* $243,981,029
- ------------------------------------------------------------
Foreign currencies, at value (cost $2,323,763) 2,338,029
- ------------------------------------------------------------
Receivables for:
Investments sold 1,727,360
- ------------------------------------------------------------
Fund shares sold 364,358
- ------------------------------------------------------------
Dividends 678,166
- ------------------------------------------------------------
Investment for deferred compensation plan 1,448
- ------------------------------------------------------------
Collateral for securities loaned 68,871,808
- ------------------------------------------------------------
Other assets 18,164
============================================================
Total assets 317,980,362
============================================================
LIABILITIES:
Payables for:
Investments purchased 339,356
- ------------------------------------------------------------
Fund shares reacquired 6,633,170
- ------------------------------------------------------------
Deferred compensation plan 1,448
- ------------------------------------------------------------
Collateral upon return of securities loaned 68,871,808
- ------------------------------------------------------------
Accrued distribution fees 238,336
- ------------------------------------------------------------
Accrued transfer agent fees 136,861
- ------------------------------------------------------------
Accrued operating expenses 51,021
============================================================
Total liabilities 76,272,000
============================================================
Net assets applicable to shares outstanding $241,708,362
____________________________________________________________
============================================================
NET ASSETS:
Class A $206,956,605
____________________________________________________________
============================================================
Class B $ 32,101,448
____________________________________________________________
============================================================
Class C $ 2,650,309
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 19,930,970
____________________________________________________________
============================================================
Class B 3,257,145
____________________________________________________________
============================================================
Class C 269,015
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 10.38
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $10.38 divided by
94.50%) $ 10.98
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 9.86
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 9.85
____________________________________________________________
============================================================
</Table>
* At December 31, 2001, securities with an aggregate market value of $65,751,689
were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2001
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$462,846) $ 3,730,636
- ------------------------------------------------------------
Dividends from affiliated money market funds 465,948
- ------------------------------------------------------------
Interest 202,600
- ------------------------------------------------------------
Security lending income 193,823
============================================================
Total investment income 4,593,007
============================================================
EXPENSES:
Advisory fees 3,130,135
- ------------------------------------------------------------
Administrative services fees 84,208
- ------------------------------------------------------------
Custodian fees 275,776
- ------------------------------------------------------------
Distribution fees -- Class A 931,458
- ------------------------------------------------------------
Distribution fees -- Class B 513,658
- ------------------------------------------------------------
Distribution fees -- Class C 35,427
- ------------------------------------------------------------
Interest 1,288
- ------------------------------------------------------------
Transfer agent fees 1,121,179
- ------------------------------------------------------------
Trustees' fees 15,360
- ------------------------------------------------------------
Other 330,809
============================================================
Total expenses 6,439,298
============================================================
Less: Fees waived (611)
- ------------------------------------------------------------
Expenses paid indirectly (4,713)
============================================================
Net expenses 6,433,974
============================================================
Net investment income (loss) (1,840,967)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (31,569,077)
- ------------------------------------------------------------
Foreign currencies 716,666
============================================================
(30,852,411)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (98,784,847)
- ------------------------------------------------------------
Foreign currencies (1,754,069)
============================================================
(100,538,916)
============================================================
Net gain (loss) from investment securities
and foreign currencies (131,391,327)
============================================================
Net increase (decrease) in net assets
resulting from operations $(133,232,294)
____________________________________________________________
============================================================
</Table>
See Notes to Financial Statements.
7
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2001 and 2000
<Table>
<Caption>
2001 2000
------------- ------------
OPERATIONS:
Net investment income (loss) $ (1,840,967) $ (5,884,655)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (30,852,411) 21,572,170
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (100,538,916) (95,924,518)
===========================================================================================
Net increase (decrease) in net assets resulting from
operations (133,232,294) (80,237,003)
===========================================================================================
Distributions to shareholders from net realized gains:
Class A (2,245,611) (18,437,935)
- -------------------------------------------------------------------------------------------
Class B (385,943) (4,207,389)
- -------------------------------------------------------------------------------------------
Class C (29,947) (218,536)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (52,337,743) 3,819,795
- -------------------------------------------------------------------------------------------
Class B (21,739,868) 6,580,531
- -------------------------------------------------------------------------------------------
Class C (928,924) 5,858,614
- -------------------------------------------------------------------------------------------
Advisor Class* -- (1,857,577)
===========================================================================================
Net increase (decrease) in net assets (210,900,330) (88,699,500)
===========================================================================================
NET ASSETS:
Beginning of year 452,608,692 541,308,192
===========================================================================================
End of year $ 241,708,362 $452,608,692
___________________________________________________________________________________________
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 275,944,783 $351,947,050
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (131,168) --
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (33,578,184) 649,795
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (527,069) 100,011,847
===========================================================================================
$ 241,708,362 $452,608,692
___________________________________________________________________________________________
===========================================================================================
</Table>
* Advisor Class shares were converted to Class A shares effective as of close of
business on February 11, 2000.
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Euroland 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 four
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. 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
8
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").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the 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 the close of the respective
markets. Occasionally, events affecting the values of such foreign securities
may occur between the times at which the particular foreign market closes 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 a development/
event is so significant that there is a reasonably high degree of certainty
as to both the effect and the degree of effect that the development/event has
actually caused that closing price to no longer reflect actual value, the
closing prices, as determined at the close of the applicable foreign market,
may be adjusted to reflect the fair value of the affected foreign securities
as of the close of the NYSE 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, 2001, undistributed net investment income was increased by
$1,709,799, undistributed net realized gains decreased by $714,067 and shares
of beneficial interest was decreased by $995,732 as a result of differing
book/tax treatment due to foreign currency gain/(loss) and net operating loss
reclassifications. Net assets of the Fund were unaffected by the above
reclassifications.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds 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 $29,754,269 as of December 31,
2001 which may be carried forward to offset future taxable gains, if any,
which expires in varying increments, if not previously utilized, in the year
2009. As of December 31, 2001, the fund has a post-October capital loss
deferral of $2,665,678, which will be recognized in the next succeeding tax
year.
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.
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 based on
relative net assets.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO Asset Management Limited ("IAML") is the Fund's sub-advisor and
sub-administrator. The Fund pays
9
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 IAML, AIM pays IAML 40% of the
amount paid by the Fund to AIM. AIM has contractually agreed to limit total
annual operating expenses (excluding interest, taxes, dividends on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) to the maximum annual rate of 2.00%, 2.65% and 2.65% of
the average daily net assets of the Fund's Class A, Class B and Class C shares,
respectively. Effective July 1, 2001, AIM has voluntarily agreed to waive
advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives
from the affiliated money market fund of which the Fund has invested. For the
year ended December 31, 2001, AIM waived fees of $611.
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, 2001, AIM was
paid $84,208 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, 2001, AFS
was paid $678,694 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,
2001, the Class A, Class B and Class C shares paid AIM Distributors $931,458,
$513,658 and $35,427, respectively, as compensation under the Plans.
AIM Distributors received commissions of $38,657 from sales of the Class A
shares of the Fund during the year ended December 31, 2001. 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, 2001,
AIM Distributors received $53,011 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.
The law firm Kramer, Levin, Naftalis & Frankel LLP of which a trustee is a
member became counsel to the Trustees on August 17, 2001. During the period
August 17, 2001 through December 31, 2001, the Fund paid legal fees of $1,352
for services rendered.
NOTE 3-INDIRECT EXPENSES
For the year ended December 31, 2001, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $4,713 under an expense offset
arrangement which resulted in a reduction of the Fund's total expenses of
$4,713.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, 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 December 31,
2001, 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. 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, 2001, securities with an aggregate value of $65,751,689 were
on loan to brokers. The loans were secured by cash collateral of $68,871,808
received by the Fund and subsequently invested in affiliated money market funds
as follows: $34,435,904 in STIC Liquid Assets Portfolio and $34,435,904 in STIC
Prime Portfolio. For the year ended December 31, 2001, the Fund received fees of
$193,823 for securities lending.
10
NOTE 7-DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during 2001 and 2000 was as follows:
<Table>
<Caption>
2001 2000
---------- -----------
Distributions paid from
long-term capital gain $2,661,501 $22,863,860
===========================================================
</Table>
As of December 31, 2001, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
<Table>
Capital loss carryforward $(29,754,269)
- ---------------------------------------------------------
Unrealized appreciation (depreciation) (4,482,152)
=========================================================
$(34,236,421)
_________________________________________________________
=========================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation is
attributable primarily to the deferral of losses on wash sales, the tax deferral
of capital losses incurred after October 31 and other deferrals.
NOTE 8-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, 2001 was
$185,852,442 and $231,719,854, respectively.
The amount of unrealized appreciation of investment securities, for tax
purposes, as of December 31, 2001 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 29,621,993
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (31,296,281)
=========================================================
Net unrealized appreciation (depreciation)
of investment securities $ (1,674,288)
_________________________________________________________
=========================================================
Cost of investments for tax purposes is $245,655,317.
</Table>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2001 and 2000
were as follows:
<Table>
<Caption>
2001 2000
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sold:
Class A 73,727,647 $ 865,614,277 21,102,704 $ 403,886,511
- --------------------------------------------------------------------------------------------------------------------------
Class B 601,388 7,385,223 1,725,303 34,107,008
- --------------------------------------------------------------------------------------------------------------------------
Class C 1,068,809 12,074,301 704,505 13,104,848
- --------------------------------------------------------------------------------------------------------------------------
Advisor Class* -- -- 162,641 3,281,626
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 197,616 1,988,020 1,026,179 15,986,391
- --------------------------------------------------------------------------------------------------------------------------
Class B 36,962 352,991 255,989 3,811,000
- --------------------------------------------------------------------------------------------------------------------------
Class C 2,227 21,268 11,030 164,229
==========================================================================================================================
Conversion of Advisor Class shares to Class A shares**
Class A -- -- 98,573 2,277,044
- --------------------------------------------------------------------------------------------------------------------------
Advisor Class* -- -- (97,267) (2,277,044)
==========================================================================================================================
Reacquired:
Class A (77,471,315) (919,940,040) (21,467,755) (418,330,151)
- --------------------------------------------------------------------------------------------------------------------------
Class B (2,661,642) (29,478,082) (1,634,378) (31,337,477)
- --------------------------------------------------------------------------------------------------------------------------
Class C (1,142,271) (13,024,493) (393,691) (7,410,463)
- --------------------------------------------------------------------------------------------------------------------------
Advisor Class* -- -- (140,266) (2,862,159)
==========================================================================================================================
(5,640,579) $ (75,006,535) 1,353,567 $ 14,401,363
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
* Advisor Class shares were reclassified to Class A shares effective February
11, 2000.
** 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.
11
NOTE 10-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2001(a) 2000(a) 1999(a) 1998(a) 1997(a)
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 15.69 $ 19.64 $ 15.67 $ 14.32 $ 12.89
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.19) (0.09) (0.03) (0.04)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.14) (2.92) 5.45 2.35 1.48
========================================================================================================================
Total from investment operations (5.20) (3.11) 5.36 2.32 1.44
========================================================================================================================
Less distributions from net realized gains (0.11) (0.84) (1.39) (0.97) (0.01)
========================================================================================================================
Net asset value, end of period $ 10.38 $ 15.69 $ 19.64 $ 15.67 $ 14.32
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) (33.10)% (15.83)% 35.22% 16.63% 11.20%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $206,957 $368,340 $446,065 $415,066 $407,004
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets(c) 1.89%(d) 1.68% 1.83% 2.02% 1.75%
========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.46)%(d) (0.96)% (0.55)% (0.20)% (0.29)%
========================================================================================================================
Ratio of interest expense to average net assets 0.00%(d) 0.00% 0.01% 0.27% 0.00%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 62% 35% 71% 97% 107%
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include sales charges.
(c) Ratio excludes expense reductions. Ratio of expenses to average net assets
including expense reductions was 1.89% for 1997.
(d) Ratios are based on average daily net assets of 266,130,955.
<Table>
<Caption>
CLASS B
-----------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2001(a) 2000(a) 1999(a) 1998(a) 1997(a)
------- ------- ------- ------- -------
Net asset value, beginning of period $ 14.99 $ 18.93 $ 15.26 $ 14.06 $ 12.73
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.31) (0.18) (0.14) (0.13)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (4.89) (2.79) 5.24 2.31 1.47
===================================================================================================================
Total from investment operations (5.02) (3.10) 5.06 2.17 1.34
===================================================================================================================
Less distributions from net realized gains (0.11) (0.84) (1.39) (0.97) (0.01)
===================================================================================================================
Net asset value, end of period $ 9.86 $ 14.99 $ 18.93 $ 15.26 $ 14.06
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (33.44)% (16.37)% 34.19% 15.80% 10.55%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,101 $79,167 $93,404 $99,943 $81,011
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets(c) 2.54%(d) 2.33% 2.48% 2.67% 2.40%
===================================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(d) (1.61)% (1.19)% (0.85)% (0.94)%
===================================================================================================================
Ratio of interest expense to average net assets 0.00%(d) 0.00% 0.01% 0.27% 0.00%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 62% 35% 71% 97% 107%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges.
(c) Ratio excludes expense reductions. Ratio of expenses to average net assets
excluding expense reductions was 2.54% for 1997.
(d) Ratios are based on average daily net assets of $51,365,846.
12
NOTE 10-FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
-------------------------------------
MAY 3, 1999
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
-------------------- DECEMBER 31,
2001(a) 2000(a) 1999(a)
------- ------- -------------
Net asset value, beginning of period $ 14.99 $ 18.94 $14.64
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.29) (0.19)
- ---------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (4.90) (2.82) 5.88
===================================================================================================
Total from investment operations (5.03) (3.11) 5.69
===================================================================================================
Less distributions from net realized gains (0.11) (0.84) (1.39)
===================================================================================================
Net asset value, end of period $ 9.85 $ 14.99 $18.94
___________________________________________________________________________________________________
===================================================================================================
Total return(b) (33.51)% (16.42)% 39.95%
___________________________________________________________________________________________________
===================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,650 $ 5,101 $ 349
___________________________________________________________________________________________________
===================================================================================================
Ratio of expenses to average net assets 2.54%(c) 2.33% 2.48%(d)
===================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (1.61)% (1.19)%(d)
===================================================================================================
Ratio of interest expense to average net assets 0.00%(c) 0.00% 0.01%(d)
___________________________________________________________________________________________________
===================================================================================================
Portfolio turnover rate 62% 35% 71%
___________________________________________________________________________________________________
===================================================================================================
</Table>
(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 $3,542,649.
(d) Annualized.
13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Euroland
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 the
AIM Euroland Growth Fund (one of the funds constituting
AIM Growth Series; hereafter referred to as the "Fund")
at December 31, 2001, and 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, 2001 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 14, 2002
Houston, Texas
14
PROXY RESULTS (UNAUDITED)
A Special Meeting of Shareholders of AIM Euroland Growth Fund (the "Fund"), a
portfolio of AIM Growth Series, a Delaware business trust (the "Trust"), was
held on August 17, 2001. The meeting was held for the following purposes:
(1)* To elect the following Trustees: Robert H. Graham, Frank S. Bayley, Ruth H.
Quigley, Bruce L. Crockett, Owen Daly II, Albert R. Dowden, Edward K. Dunn,
Jr., Jack M. Fields, Carl Frischling, Prema Mathai-Davis, Lewis F. Pennock
and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement with A I M Advisors, Inc.
(3) To approve a new Sub-Advisory Agreement between A I M Advisors, Inc. and
INVESCO Asset Management Limited.
(4) To approve changing the fundamental investment restrictions of the Fund.
(5) To approve making the investment objective of the Fund non-fundamental.
(6) To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Fund for the fiscal year ending in 2001.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
Withheld/
Trustees/Matter Votes For Abstentions
--------------- --------- -----------
(1)* Robert H. Graham............................. 99,512,845 1,838,025
Frank S. Bayley.............................. 99,506,310 1,844,560
Ruth H. Quigley.............................. 99,428,522 1,922,348
Bruce L. Crockett............................ 99,524,735 1,826,135
Owen Daly II................................. 99,399,439 1,951,431
Albert R. Dowden............................. 99,536,284 1,814,586
Edward K. Dunn, Jr. ......................... 99,464,033 1,886,837
Jack M. Fields............................... 99,538,446 1,812,424
Carl Frischling.............................. 99,448,226 1,902,644
Prema Mathai-Davis........................... 99,459,830 1,891,040
Lewis F. Pennock............................. 99,524,247 1,826,623
Louis S. Sklar............................... 99,523,581 1,827,289
</Table>
<Table>
<Caption>
Votes Withheld/
Matter Votes For Against Abstentions
------ --------- ------- -----------
(2) Approval of a new Investment Advisory
Agreement with A I M Advisors, Inc........... 12,939,543 442,247 608,938
(3) Approval of a new Sub-Advisory Agreement
between A I M Advisors, Inc. and INVESCO
Asset Management Limited..................... 12,859,892 485,907 644,929
(4)(a) Approval of the Modification of the
Fundamental Restriction on Portfolio
Diversification.............................. 10,137,043 534,211 3,319,474**
(4)(b) Approval of the Modification of the
Fundamental Restriction on Issuing Senior
Securities and Borrowing Money............... 10,014,318 639,683 3,336,727**
(4)(c) Approval of the Modification of the
Fundamental Restriction on Underwriting
Securities................................... 10,079,697 566,303 3,344,728**
(4)(d) Approval of the Modification to or Addition
of the Fundamental Restriction on Industry
Concentration................................ 10,121,499 525,370 3,343,859**
(4)(e) Approval of the Modification of the
Fundamental Restriction on Real Estate
Investments.................................. 10,089,108 556,519 3,345,101**
(4)(f) Approval of the Modification of the
Fundamental Restriction on Purchasing or
Selling Commodities.......................... 10,023,248 620,693 3,346,787**
(4)(g) Approval of the Modification of the
Fundamental Restriction on Making Loans...... 9,966,695 663,284 3,360,749**
(4)(h) Approval of the Modification of the
Fundamental Policy on Investment in
Investment Companies......................... 10,013,736 621,646 3,355,346**
(5) Approval of Making the Investment Objective
of the Fund Non-Fundamental.................. 9,961,612 671,440 3,357,676**
(6) Ratification of the selection of
PricewaterhouseCoopers LLP as Independent
Accountants of the Fund...................... 13,254,739 256,865 479,124
</Table>
(*) Proposal 1 required approval by a combined vote of all of the portfolios of
AIM Growth Series
(**) Includes Broker Non-Votes
Effective December 31, 2001, Owen Daly II retired from his position as a trustee
of the Trust.
15
Trustees and Officers
- --------------------------------------------------------------------------------
As of December 31, 2001
The address of each trustee and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046. Each trustee oversees 86 portfolios in the AIM Funds
complex. Column two below includes length of time served with any predecessor
entities.
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER DIRECTORSHIP(S)
NAME, YEAR OF BIRTH AND AND/OR HELD BY TRUSTEE
POSITION(S) HELD WITH OFFICER
THE TRUST SINCE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSON
Robert H. Graham* - 1946 1998 Chairman, President and Chief Executive Officer, A I M None
Trustee, Chairman and Management Group Inc. (financial services holding
President company); Chairman and President, A I M Advisors, Inc.
(registered investment advisor); Director and Senior Vice
President, A I M Capital Management, Inc. (registered
investment advisor); Chairman, A I M Distributors, Inc.
(registered broker dealer), A I M Fund Services, Inc.
(registered transfer agent) and Fund Management Company
(registered broker dealer); and Director and Vice
Chairman, AMVESCAP PLC (parent of AIM and a global
investment management firm)
INDEPENDENT TRUSTEES
Frank S. Bayley - 1939 1985 Of Counsel, law firm of Baker & McKenzie Badgley Funds, Inc. (registered
Trustee investment company)
Bruce L. Crockett - 1944 2001 Chairman, Crockett Technology Associates (technology ACE Limited (insurance
Trustee consulting company) company); and Captaris, Inc.
(unified messaging provider)
Albert R. Dowden - 1941 2001 Chairman, Cortland Trust, Inc. (registered investment None
Trustee company) and DHJ Media, Inc.; Director, Magellan
Insurance Company; Member of Advisory Board of Rotary
Power International (designer, manufacturer, and seller
of rotary power engines); formerly, Director, President
and CEO, Volvo Group North America, Inc.; and director of
various affiliated Volvo companies
Edward K. Dunn, 2001 Formerly, Chairman, Mercantile Mortgage Corp.; Vice None
Jr. - 1935 Chairman, President and Chief Operating Officer,
Trustee Mercantile-Safe Deposit & Trust Co.; and President,
Mercantile Bankshares Corp.
Jack M. Fields - 1952 2001 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company)
Carl Frischling** - 1937 2001 Partner, law firm of Kramer Levin Naftalis and Frankel Cortland Trust, Inc.
Trustee LLP (registered investment company)
Prema 2001 Formerly, Chief Executive Officer, YWCA of the USA None
Mathai-Davis - 1950
Trustee
Lewis F. Pennock - 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
Ruth H. Quigley - 1935 1977 Retired None
Trustee
Louis S. Sklar - 1939 2001 Executive Vice President, Development and Operations, None
Trustee Hines Interests Limited Partnership (real estate
development company)
</Table>
* Mr. Graham is considered an interested person of the fund because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
** The law firm in which Mr. Frischling is a partner is counsel to the
independent directors/trustees of the AIM Funds and the AIM Funds pay such
firm's fees. The AIM Funds believe that Mr. Frischling is not an interested
person of the AIM Funds solely as a result of this relationship and are
currently communicating with the SEC to confirm their view.
Trustees and Officers (continued)
- --------------------------------------------------------------------------------
As of December 31, 2001
The address of each trustee and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046. Each trustee oversees 86 portfolios in the AIM Funds
complex. Column two below includes length of time served with any predecessor
entities.
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER DIRECTORSHIP(S)
NAME, YEAR OF BIRTH AND AND/OR HELD BY TRUSTEE
POSITION(S) HELD WITH OFFICER
THE TRUST SINCE
- -------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
Gary T. Crum - 1947 1993 Director and President, A I M Capital Management, Inc.; N/A
Vice President 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 (parent of AIM and a global investment
management firm)
Carol F. Relihan - 1954 1993 Director, Senior Vice President, General Counsel and N/A
Vice President and Secretary, A I M Advisors, Inc. and A I M Management
Secretary Group Inc.; Director, Vice President and General Counsel,
Fund Management Company; and Vice President, A I M Fund
Services, Inc., A I M Capital Management, Inc. and A I M
Distributors, Inc.
Melville B. Cox - 1943 1993 Vice President and Chief Compliance Officer, A I M N/A
Vice President Advisors, Inc. and A I M Capital Management, Inc.; and
Vice President, A I M Fund Services, Inc.
Dana R. Sutton - 1959 1992 Vice President and Fund Treasurer, A I M Advisors, Inc. N/A
Vice President and
Treasurer
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.347.4246.
- --------------------------------------------------------------------------------
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers INVESCO Asset
Suite 100 11 Greenway Plaza Inc. LLP Management Limited
Houston, TX 77046 Suite 100 11 Greenway Plaza 1201 Louisiana, Suite 11 Devonshire Square
Houston, TX 77046 Suite 100 2900 London EC2M 4YR
Houston, TX 77046 Houston, TX 77002 England
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
TRUSTEES
Ballard Spahr A I M Fund Services, State Street Bank and
Andrews & Ingersoll, Kramer, Levin, Inc. Trust Company
LLP Naftalis & Frankel LLP P.O. Box 4739 225 Franklin Street
1735 Market Street 919 Third Avenue Houston, TX 77210-4739 Boston, MA 02110
Philadelphia, PA 19103 New York, NY 10022
</Table>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended
December 31, 2001, 0% is eligible for the dividends received deduction for
corporations. The Fund distributed long-term capital gains of $2,661,501 for the
Fund's tax year ended December 31, 2001, which will be taxed as long-term gain.
<Table>
EQUITY FUNDS
DOMESTIC EQUITY FUNDS INTERNATIONAL/GLOBAL EQUITY FUNDS A I M Management Group Inc. has provided
leadership in the mutual fund industry since
MORE AGGRESSIVE MORE AGGRESSIVE 1976 and manages approximately $158 billion
in assets for more than 9 million shareholders,
AIM Small Cap Opportunities(1) AIM Developing Markets including individual investors, corporate
AIM Mid Cap Opportunities(1) AIM European Small Company clients and financial institutions.*
AIM Large Cap Opportunities(1) AIM Asian Growth The AIM Family of Funds--Registered
AIM Emerging Growth AIM International Emerging Growth Trademark-- is distributed nationwide. AIM
AIM Small Cap Growth AIM Global Aggressive Growth is a subsidiary of AMVESCAP PLC, one of the
AIM Aggressive Growth AIM European Development world's largest independent financial
AIM Mid Cap Growth AIM Euroland Growth services companies with $398 billion in
AIM Dent Demographic Trends AIM International Equity assets under management.*
AIM Constellation AIM Global Growth *As of 12/31/01
AIM Large Cap Growth AIM Worldwide Spectrum
AIM Weingarten AIM Global Trends
AIM Small Cap Equity AIM International Value(3)
AIM Capital Development
AIM Charter MORE CONSERVATIVE
AIM Mid Cap Equity
AIM Select Equity(2) SECTOR EQUITY FUNDS
AIM Value II
AIM Value MORE AGGRESSIVE
AIM Blue Chip
AIM Mid Cap Basic Value AIM New Technology
AIM Large Cap Core Equity AIM Global Telecommunications and Technology
AIM Basic Value AIM Global Energy(4)
AIM Large Cap Basic Value AIM Global Infrastructure
AIM Balanced AIM Global Financial Services
AIM Basic Balanced AIM Global Health Care
AIM Global Utilities
MORE CONSERVATIVE AIM Real Estate(5)
MORE CONSERVATIVE
FIXED-INCOME FUNDS
TAXABLE FIXED-INCOME FUNDS TAX-FREE FIXED-INCOME FUNDS
MORE AGGRESSIVE MORE AGGRESSIVE
AIM High Yield II AIM High Income Municipal
AIM High Yield AIM Municipal Bond
AIM Strategic Income AIM Tax-Free Intermediate
AIM Income AIM Tax-Exempt Cash
AIM Global Income
AIM Total Return Bond MORE CONSERVATIVE
AIM Intermediate Government
AIM Floating Rate
AIM Limited Maturity Treasury
AIM Money Market
MORE CONSERVATIVE
</Table>
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. This order is subject to change.
(1) Closed to new investors. (2) On July 13, 2001, AIM Select Growth Fund was
renamed AIM Select Equity Fund. (3) On July 1, 2001, AIM Advisor International
Value Fund was renamed AIM International Value Fund. (4) On September 1, 2001,
AIM Global Resources Fund was renamed AIM Global Energy Fund. (5) On July 1,
2001, AIM Advisor Real Estate Fund was renamed AIM Real Estate Fund. 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, 2002, this report must be accompanied by
a fund Performance & Commentary or by an AIM Quarterly Review of Performance for
the most recent quarter-end.
* As of 12/31/01 [AIM LOGO APPEARS HERE]
--Registered Trademark--
INVEST WITH DISCIPLINE
--Registered Trademark--
ERG-AR-1
A I M DISTRIBUTORS, INC.
APPENDIX III
AIM EUROPEAN GROWTH FUND
AIM EUROLAND GROWTH FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
10/31/2001
(UNAUDITED)
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
FOREIGN STOCKS & OTHER EQUITY INTERESTS--92.54%
BELGIUM-2.92%
200,000 -- 200,000 Fortis (Diversified Financial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 164,800 164,800 Omega Pharma S.A. (Health Care Supplies)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 108,492 108,492 UCB S.A. (Pharmaceuticals)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
DENMARK-3.93%
-- 59,500 59,500 Coloplast A.S. (Health Care Supplies)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 32,850 32,850 Danske Bank A.S. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 77,200 77,200 H. Lundbeck A.S. (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 136,869 136,869 Novo Nordisk A.S.-Class B (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
140,000 43,200 183,200 Vestas Wind Systems A.S. (Heavy Electrical Equipment)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
FINLAND-1.55%
400 -- 400 Nokia Oyj (Telecommunication Equipment)
============= =========== ============ ===========================================================================
FRANCE-25.92%
90,000 107,800 197,800 Altran Technologies S.A. (IT Consulting & Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 47,700 47,700 Assurances Generales de France (Multi-Line Insurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
FOREIGN STOCKS & OTHER EQUITY INTERESTS--92.54%
BELGIUM-2.92%
Fortis (Diversified Financial Services) $ 4,716,786 -- $ 4,716,786
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Omega Pharma S.A. (Health Care Supplies) -- 6,905,447 6,905,447
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
UCB S.A. (Pharmaceuticals) (a) -- 4,132,932 4,132,932
====================================================================== ========= =========== ============== ===============
4,716,786 11,038,379 15,755,165
====================================================================== ========= =========== ============== ===============
DENMARK-3.93%
Coloplast A.S. (Health Care Supplies) (a) -- 4,353,597 4,353,597
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Danske Bank A.S. (Banks) -- 3,480,867 3,480,867
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
H. Lundbeck A.S. (Pharmaceuticals) -- 1,970,043 1,970,043
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Novo Nordisk A.S.-Class B (Pharmaceuticals) -- 5,553,586 5,553,586
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Vestas Wind Systems A.S. (Heavy Electrical Equipment) 4,402,276 1,358,417 5,760,693
====================================================================== ========= =========== ============== ===============
4,402,276 16,716,510 21,118,786
====================================================================== ========= =========== ============== ===============
FINLAND-1.55%
Nokia Oyj (Telecommunication Equipment) 8,364,194 -- 8,364,194
====================================================================== ========= =========== ============== ===============
FRANCE-25.92%
Altran Technologies S.A. (IT Consulting & Services) 4,131,688 4,948,845 9,080,533
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Assurances Generales de France (Multi-Line Insurance) -- 2,202,676 2,202,676
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
</Table>
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
120,000 82,700 202,700 Aventis S.A. (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
220,000 -- 220,000 AXA (Multi-Line Insurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 24,800 24,800 Beneteau (Leisure Products)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
75,000 77,700 152,700 BNP Paribas S.A. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
50,000 -- 50,000 CAP Gemini S.A. (IT Consulting & Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
95,000 -- 95,000 Carrefour S.A. (Food Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
17,000 -- 17,000 Compagnie de Saint-Gobain (Building Products)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
150,000 -- 150,000 Essilor International S.A. Compagnie D'Optique (Health Care Supplies)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
40,000 -- 40,000 France Telecom S.A. (Integrated Telecommunication Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 6,220 6,220 Hermes International (Apparel & Accessories)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
60,000 -- 60,000 Lagardere S.C.A. (Publishing & Printing)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
19,988 -- 19,988 LVMH Moet Hennessy Louis Vitton S.A. (Apparel & Accessories)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
600,000 -- 600,000 Orange S.A. (Wireless Telecommunication Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
20,100 6,500 26,600 Pinault-Printemps-Redoute S.A. (Department Stores)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
102,000 140,100 242,100 PSA Peugeot Citroen (Automobile Manufacturers)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
60,000 116,250 176,250 Sanofi-Synthelabo S.A. (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
60,000 -- 60,000 Schneider Electric S.A. (Electrical Components & Equipment)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 262,600 262,600 Silicon-On-Insulator Technologies (SOITEC)
(Electronic Equipment & Instruments)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
127,466 54,100 181,566 Sodexho Alliance S.A. (Restaurants)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
100,000 -- 100,000 Thales S.A. (Aerospace & Defense)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
98,156 -- 98,156 Thomson Multimedia (Consumer Electronics)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
60,000 38,237 98,237 TotalFinaElf S.A. (Integrated Oil & Gas)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
20,000 57,700 77,700 Vinci S.A. (Construction & Engineering)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
80,000 82,400 162,400 Vivendi Environnement (Multi-Utilities)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
Aventis S.A. (Pharmaceuticals) 8,830,471 6,085,667 14,916,138
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
AXA (Multi-Line Insurance) 4,812,202 -- 4,812,202
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Beneteau (Leisure Products) -- 1,360,631 1,360,631
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
BNP Paribas S.A. (Banks) 6,238,039 6,462,609 12,700,648
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
CAP Gemini S.A. (IT Consulting & Services) 2,812,969 -- 2,812,969
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Carrefour S.A. (Food Retail) 4,861,485 -- 4,861,485
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Compagnie de Saint-Gobain (Building Products) 2,364,244 -- 2,364,244
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Essilor International S.A. Compagnie D'Optique (Health Care Supplies) 4,197,850 -- 4,197,850
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
France Telecom S.A. (Integrated Telecommunication Services) 1,493,169 -- 1,493,169
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Hermes International (Apparel & Accessories) -- 790,569 790,569
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Lagardere S.C.A. (Publishing & Printing) $ 2,116,073 -- $ 2,116,073
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
LVMH Moet Hennessy Louis Vitton S.A. (Apparel & Accessories) 704,754 -- 704,754
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Orange S.A. (Wireless Telecommunication Services) (a) 4,860,810 -- 4,860,810
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Pinault-Printemps-Redoute S.A. (Department Stores) 2,314,097 748,340 3,062,437
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
PSA Peugeot Citroen (Automobile Manufacturers) 4,145,461 5,693,912 9,839,373
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Sanofi-Synthelabo S.A. (Pharmaceuticals) 3,956,159 7,665,059 11,621,218
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Schneider Electric S.A. (Electrical Components & Equipment) (a) 2,402,320 -- 2,402,320
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Silicon-On-Insulator Technologies (SOITEC)
(Electronic Equipment & Instruments) (a) -- 3,498,415 3,498,415
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Sodexho Alliance S.A. (Restaurants) (a) 6,000,825 2,546,911 8,547,736
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Thales S.A. (Aerospace & Defense) 3,844,541 -- 3,844,541
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Thomson Multimedia (Consumer Electronics) (a) 2,343,178 -- 2,343,178
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
TotalFinaElf S.A. (Integrated Oil & Gas) 8,425,404 5,369,370 13,794,774
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Vinci S.A. (Construction & Engineering) 1,206,201 3,479,890 4,686,091
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Vivendi Environnement (Multi-Utilities) 3,737,423 3,167,901 6,905,324
====================================================================== ========= =========== ============== ===============
85,799,363 54,020,795 139,820,158
====================================================================== ========= =========== ============== ===============
</Table>
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
GERMANY-13.92%
11,000 4,850 15,850 Allianz A.G. (Multi-Line Insurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 176,800 176,800 Altana A.G. (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 38,300 38,300 AMB Aachener & Muenchener Beteiligungs A.G. (Multi-Line Insurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
75,000 25,937 100,937 Bayerisch Motoren Werke A.G. (Automobile Manufacturers)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
70,000 -- 70,000 DamlerChrysler A.G. (Automobile Manufacturers)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
85,000 -- 85,000 Deutsche Bank A.G. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
165,000 -- 165,000 Deutsche Telekom A.G. (Integrated Telecommunication Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 82,300 82,300 ELMOS Semiconductor A.G. (Electronic Equipment & Instruments)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 159,100 159,100 Hugo Boss A.G.-Pfd. (Apparel & Accessories)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
60,000 -- 60,000 Marschollek Lautenschlaeger und Partner A.G.
(Diversified Financial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
184,000 101,800 285,800 Medion A.G. (Distributors)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
15,000 16,900 31,900 Muenchener Rueckversicherungs-Gesellschaft A.G. (Reinsurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
80,000 -- 80,000 Merck KGaA (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
16,410 -- 16,410 Porsche A.G.-Pfd. (Automobile Manufacturers)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
100,000 -- 100,000 Schering A.G. (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
45,000 -- 45,000 Siemens A.G. (Industrial Conglomerates)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 74,000 74,000 Suess MicroTec A.G. (Semiconductor Equipment)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
Systeme, Anwendungen, Produkte in der Datenvernabeitung
20,000 -- 20,000 (Application Software)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 37,900 37,900 Wella A.G.-Pfd. (Personal Products)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
IRELAND-2.52%
-- 1,597,850 1,597,850 Anglo Irish Bank Corp. PLC (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
GERMANY-13.92%
Allianz A.G. (Multi-Line Insurance) 2,583,340 1,139,018 3,722,358
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Altana A.G. (Pharmaceuticals) -- 8,275,619 8,275,619
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
AMB Aachener & Muenchener Beteiligungs A.G. (Multi-Line Insurance) -- 4,154,327 4,154,327
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Bayerisch Motoren Werke A.G. (Automobile Manufacturers) 2,227,871 770,457 2,998,328
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
DamlerChrysler A.G. (Automobile Manufacturers) 2,441,657 -- 2,441,657
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Deutsche Bank A.G. (Banks) 4,705,534 -- 4,705,534
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Deutsche Telekom A.G. (Integrated Telecommunication Services) 2,539,773 -- 2,539,773
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
ELMOS Semiconductor A.G. (Electronic Equipment & Instruments) (a) -- 977,887 977,887
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Hugo Boss A.G.-Pfd. (Apparel & Accessories) -- 2,795,535 2,795,535
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Marschollek Lautenschlaeger und Partner A.G.
(Diversified Financial Services) 3,969,662 -- 3,969,662
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Medion A.G. (Distributors) 6,442,914 3,564,612 10,007,526
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Muenchener Rueckversicherungs-Gesellschaft A.G. (Reinsurance) 3,968,311 4,470,964 8,439,275
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Merck KGaA (Pharmaceuticals) 2,772,462 -- 2,772,462
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Porsche A.G.-Pfd. (Automobile Manufacturers) 4,579,153 -- 4,579,153
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Schering A.G. (Pharmaceuticals) 5,130,855 -- 5,130,855
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Siemens A.G. (Industrial Conglomerates) 2,142,807 -- 2,142,807
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Suess MicroTec A.G. (Semiconductor Equipment) (a) -- 1,645,294 1,645,294
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Systeme, Anwendungen, Produkte in der Datenvernabeitung
(Application Software) (a) $ 2,052,342 -- $ 2,052,342
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Wella A.G.-Pfd. (Personal Products) -- 1,722,842 1,722,842
====================================================================== ========= =========== ============== ===============
45,556,681 29,516,555 75,073,236
====================================================================== ========= =========== ============== ===============
IRELAND-2.52%
Anglo Irish Bank Corp. PLC (Banks) -- 4,847,087 4,847,087
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
</Table>
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
-- 371,000 371,000 Bank of Ireland PLC (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 116,200 116,200 Ryanair Holdings PLC-ADR (Airlines)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
ITALY-5.04%
-- 430,000 430,000 Autostrade-Concessioni e Costruzioni Autostrade S.p.A
(Highways & Railtracks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
200,000 -- 200,000 Banca Fideuram S.p.A. (Diversified Financial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 193,100 193,100 Bulgari S.p.A. (Apparel & Accessories)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
250,000 274,414 524,414 ENI S.p.A. (Integrated Oil & Gas)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
800,000 -- 800,000 IntesaBci S.p.A. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
200,000 -- 200,000 Luxottica Group S.p.A.-ADR (Health Care Supplies)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
400,000 -- 400,000 Mediolanum S.p.A. (Diversified Financial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 92,600 92,600 Recordati S.p.A (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
500,000 -- 500,000 Telecom Italia Moile S.p.A. (Wireless Telecommunication Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
315,000 -- 315,000 Telecom Italia S.p.A. (Integrated Telecommunication Services)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
LUXEMBOURG-0.53%
153,568 -- 153,568 Theil Logistik (IT Consulting & Services)
============= =========== ============ ===========================================================================
NETHERLANDS-8.16%
300,000 -- 300,000 ABN AMRO Holding N.V. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
100,000 -- 100,000 Aegon N.V. (Life & Health Insurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
150,000 -- 150,000 ASM Lithography Holding N.V. (Semiconductor Equipment)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 59,500 59,500 Fugro N.V. (Oil & Gas Equipment & Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
270,000 -- 270,000 ING Groep N.V. (Diversified Financial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
150,000 183,400 333,400 Koninklijke Ahold N.V. (Food Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
Bank of Ireland PLC (Banks) -- 3,316,180 3,316,180
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Ryanair Holdings PLC-ADR (Airlines) (a) -- 5,431,188 5,431,188
====================================================================== ========= =========== ============== ===============
-- 13,594,455 13,594,455
====================================================================== ========= =========== ============== ===============
ITALY-5.04%
Autostrade-Concessioni e Costruzioni Autostrade S.p.A
(Highways & Railtracks) -- 2,701,710 2,701,710
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Banca Fideuram S.p.A. (Diversified Financial Services) 1,233,206 -- 1,233,206
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Bulgari S.p.A. (Apparel & Accessories) -- 1,477,461 1,477,461
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
ENI S.p.A. (Integrated Oil & Gas) 3,132,522 3,438,432 6,570,954
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
IntesaBci S.p.A. (Banks) 1,872,312 -- 1,872,312
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Luxottica Group S.p.A.-ADR (Health Care Supplies) 3,152,000 -- 3,152,000
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Mediolanum S.p.A. (Diversified Financial Services) 3,100,117 -- 3,100,117
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Recordati S.p.A (Pharmaceuticals) -- 1,732,094 1,732,094
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Telecom Italia Moile S.p.A. (Wireless Telecommunication Services) (a) 2,722,954 -- 2,722,954
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Telecom Italia S.p.A. (Integrated Telecommunication Services) 2,628,483 -- 2,628,483
====================================================================== ========= =========== ============== ===============
17,841,594 9,349,697 27,191,291
====================================================================== ========= =========== ============== ===============
LUXEMBOURG-0.53%
Theil Logistik (IT Consulting & Services) (a) 2,879,419 -- 2,879,419
====================================================================== ========= =========== ============== ===============
NETHERLANDS-8.16%
ABN AMRO Holding N.V. (Banks) (a) 4,579,963 -- 4,579,963
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Aegon N.V. (Life & Health Insurance) 2,511,419 -- 2,511,419
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
ASM Lithography Holding N.V. (Semiconductor Equipment) (a) 2,160,360 -- 2,160,360
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Fugro N.V. (Oil & Gas Equipment & Services) -- 3,039,469 3,039,469
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
ING Groep N.V. (Diversified Financial Services) 6,732,222 -- 6,732,222
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Koninklijke Ahold N.V. (Food Retail) 4,220,803 5,160,636 9,381,439
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
</Table>
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
140,000 -- 140,000 Koninklijke (Royal) Philips Electronics N.V. (Consumer Electronics)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 141,400 141,400 Nutreco Holding N.V. (Agricultural Products)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
160,000 -- 160,000 Teleplan International N.V. (Marine)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 76,600 76,600 Van der Moolen Holding N.V. (Diversified Financial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
81,890 -- 81,890 VNU N.V. (Publishing & Printing)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 36,200 36,200 Wolters Kluwer N.V. (Publishing & Printing)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
NORWAY-1.25%
-- 146,000 146,000 Tandberg A.S.A. (Electrical Equipment & Instruments)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 101,700 101,700 TGS Nopec Geophysical Co. A.S.A (Oil & Gas Equipment & Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
270,800 -- 270,800 Tomra Systems A.S.A. (Industrial Machinery)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
PORTUGAL-0.10%
-- 66,650 66,650 Portugal Telecom, SGPS, S.A. (Integrated Telecommunications Services)
============= =========== ============ ===========================================================================
SPAIN-6.70%
Aurea Concesiones des Infrastructuras S.A./Concesionaria del
-- 65,050 65,050 Estado S.A. (Highways & Railtracks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
250,000 63,300 313,300 Banco Bilbao Vizcaya Argentaria, S.A. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 108,600 108,600 Banco Popular Espanol S.A. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
350,000 -- 350,000 Banco Santander Central Hispano, S.A. (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 585,800 585,800 Grupo Dragados, S.A. (Construction & Engineering)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 299,600 299,600 Grupo Ferrovial, S.A. (Construction & Engineering)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
Koninklijke (Royal) Philips Electronics N.V. (Consumer Electronics) 3,180,770 -- 3,180,770
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Nutreco Holding N.V. (Agricultural Products) -- 5,161,253 5,161,253
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Teleplan International N.V. (Marine) (a) 2,289,982 -- 2,289,982
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Van der Moolen Holding N.V. (Diversified Financial Services) -- 1,844,452 1,844,452
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
VNU N.V. (Publishing & Printing) $ 2,388,310 -- $ 2,388,310
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Wolters Kluwer N.V. (Publishing & Printing) -- 759,892 759,892
====================================================================== ========= =========== ============== ===============
28,063,829 15,965,702 44,029,531
====================================================================== ========= =========== ============== ===============
NORWAY-1.25%
Tandberg A.S.A. (Electrical Equipment & Instruments) (a) -- 2,618,253 2,618,253
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
TGS Nopec Geophysical Co. A.S.A (Oil & Gas Equipment & Services) (a) -- 1,429,318 1,429,318
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Tomra Systems A.S.A. (Industrial Machinery) 2,694,573 -- 2,694,573
====================================================================== ========= =========== ============== ===============
2,694,573 4,047,571 6,742,144
====================================================================== ========= =========== ============== ===============
PORTUGAL-0.10%
Portugal Telecom, SGPS, S.A. (Integrated Telecommunications Services) -- 531,867 531,867
====================================================================== ========= =========== ============== ===============
SPAIN-6.70%
Aurea Concesiones des Infrastructuras S.A./Concesionaria del
Estado S.A. (Highways & Railtracks) -- 1,285,277 1,285,277
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Banco Bilbao Vizcaya Argentaria, S.A. (Banks) 2,797,216 708,255 3,505,471
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Banco Popular Espanol S.A. (Banks) -- 3,646,310 3,646,310
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Banco Santander Central Hispano, S.A. (Banks) 2,693,699 -- 2,693,699
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Grupo Dragados, S.A. (Construction & Engineering) -- 7,113,383 7,113,383
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Grupo Ferrovial, S.A. (Construction & Engineering) -- 5,555,510 5,555,510
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
</Table>
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
22,352 146,100 168,452 Industria de Diseno Textil, S.A. (Apparel Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 87,700 87,700 Prosegur, CIA de Seguridad S.A. (Diversified Commercial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
420,000 256,650 676,650 Telefonica, S.A. (Integrated Telecommunication Services)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
SWEDEN-4.18%
374,400 -- 374,400 Assa Abloy A.B.-Class B (Building Products)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 77,950 77,950 Biacore International A.B. (Health Care Equipment)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 89,500 89,500 Hennes & Mauritz A.B.-Class B (Apparel Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 50,800 50,800 Nobel Biocare A.B. (Health Care Supplies)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 280,250 280,250 Q-Med A.B. (Biotechnology)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 175,600 175,600 Securitas A.B.-Class B (Diversified Commercial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
428,988 -- 428,988 Skandia Forsakrings A.B. (Multi-Line Insurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 581,800 581,800 Swedish Match A.B. (Tobacco)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
SWITZERLAND-3.15%
120,000 -- 120,000 Credit Suisse Group (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 26,700 26,700 Nestle S.A.-Class B (Packaged Foods)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 1,700 1,700 Serono S.A.-Class B (Biotechnology)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
65,000 -- 65,000 STMicroelectronics N.V. (Semiconductors)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 5,940 5,940 Synthes Stratec, Inc. (Health Care Equipment)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
UNITED KINGDOM-12.67%
-- 400,200 400,200 Amey PLC (Diversified Commercial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 641,100 641,100 BP PLC (Integrated Oil & Gas)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 712,800 712,800 Capita Group PLC (Employment Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
Industria de Diseno Textil, S.A. (Apparel Retail) (a)(c) 416,487 2,722,297 3,138,784
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Prosegur, CIA de Seguridad S.A. (Diversified Commercial Services) -- 1,073,627 1,073,627
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Telefonica, S.A. (Integrated Telecommunication Services) (a) 5,043,360 3,081,853 8,125,213
====================================================================== ========= =========== ============== ===============
10,950,762 25,186,512 36,137,274
====================================================================== ========= =========== ============== ===============
SWEDEN-4.18%
Assa Abloy A.B.-Class B (Building Products) 4,265,076 -- 4,265,076
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Biacore International A.B. (Health Care Equipment) (a) -- 2,126,786 2,126,786
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Hennes & Mauritz A.B.-Class B (Apparel Retail) (a) -- 1,565,008 1,565,008
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Nobel Biocare A.B. (Health Care Supplies) -- 1,929,005 1,929,005
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Q-Med A.B. (Biotechnology) (a) -- 4,151,618 4,151,618
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Securitas A.B.-Class B (Diversified Commercial Services) (a) -- 2,922,386 2,922,386
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Skandia Forsakrings A.B. (Multi-Line Insurance) 2,574,185 -- 2,574,185
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Swedish Match A.B. (Tobacco) -- 3,000,206 3,000,206
====================================================================== ========= =========== ============== ===============
6,839,261 15,695,009 22,534,270
====================================================================== ========= =========== ============== ===============
SWITZERLAND-3.15%
Credit Suisse Group (Banks) (a) $ 4,384,333 -- $ 4,384,333
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Nestle S.A.-Class B (Packaged Foods) -- 5,539,351 5,539,351
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Serono S.A.-Class B (Biotechnology) -- 1,343,146 1,343,146
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
STMicroelectronics N.V. (Semiconductors) (a) 1,837,206 -- 1,837,206
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Synthes Stratec, Inc. (Health Care Equipment) -- 3,896,989 3,896,989
====================================================================== ========= =========== ============== ===============
6,221,539 10,779,486 17,001,025
====================================================================== ========= =========== ============== ===============
UNITED KINGDOM-12.67%
Amey PLC (Diversified Commercial Services) -- 1,794,926 1,794,926
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
BP PLC (Integrated Oil & Gas) -- 5,177,754 5,177,754
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Capita Group PLC (Employment Services) -- 4,512,110 4,512,110
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
</Table>
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
-- 157,900 157,900 easyJet PLC (Airlines)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 11,842 11,842 easyJet PLC (Airlines)-Rts., expiring 11/20/01
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 1,476,100 1,476,100 Electronics Boutique PLC (Computer & Electronics Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 161,600 161,600 Galen Holdings PLC (Pharmaceuticals)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 330,400 330,400 Jardine Lloyd Thompson Group PLC (Insurance Brokers)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 395,400 395,400 JJB Sports PLC (Apparel Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 250,800 250,800 Luminar PLC (Restaurants)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 432,900 432,900 Man Group PLC (Diversified Financial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 81,140 81,140 Matalan PLC (Apparel Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 987,400 987,400 Morrison (William) Supermarkets PLC (Food Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 263,800 263,800 Next PLC (Department Stores)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 132,900 132,900 PizzaExpress PLC (Restaurants)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 301,100 301,100 Reckitt Benckiser PLC (Household Products)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 1,005,400 1,005,400 Rentokil Initial PLC (Diversified Commercial Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 269,300 269,300 Royal Bank of Scotland Group PLC (Banks)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 617,800 617,800 Shell Transport & Trading Co. PLC (Integrated Oil & Gas)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 377,700 377,700 Smith & Nephew PLC (Health Care Supplies)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 330,700 330,700 St. James's Place Capital PLC (Life & Health Insurance)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 562,500 562,500 Tesco PLC (Food Retail)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
1,078,121 -- 1,078,121 Vodafone Group PLC (Wireless Telecommunication Services)
- ------------- ----------- ------------ ---------------------------------------------------------------------------
-- 53,000 53,000 Willis Group Holdings Ltd. (Insurance Brokers)
============= =========== ============ ===========================================================================
============= =========== ============ ===========================================================================
Total Foreign Stocks & Other Equity Interests (Cost $520,407,414)
============= =========== ============ ===========================================================================
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
easyJet PLC (Airlines) (a)(b)(c) -- 870,851 870,851
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
easyJet PLC (Airlines)-Rts., expiring 11/20/01 (d) -- -- --
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Electronics Boutique PLC (Computer & Electronics Retail) (c) -- 2,427,263 2,427,263
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Galen Holdings PLC (Pharmaceuticals) -- 1,739,770 1,739,770
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Jardine Lloyd Thompson Group PLC (Insurance Brokers) -- 2,811,265 2,811,265
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
JJB Sports PLC (Apparel Retail) -- 2,571,976 2,571,976
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Luminar PLC (Restaurants) -- 2,987,232 2,987,232
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Man Group PLC (Diversified Financial Services) -- 6,979,913 6,979,913
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Matalan PLC (Apparel Retail) (a) -- 427,488 427,488
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Morrison (William) Supermarkets PLC (Food Retail) -- 2,902,466 2,902,466
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Next PLC (Department Stores) -- 3,335,932 3,335,932
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
PizzaExpress PLC (Restaurants) -- 1,493,764 1,493,764
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Reckitt Benckiser PLC (Household Products) -- 4,206,343 4,206,343
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Rentokil Initial PLC (Diversified Commercial Services) -- 3,621,069 3,621,069
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Royal Bank of Scotland Group PLC (Banks) -- 6,446,514 6,446,514
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Shell Transport & Trading Co. PLC (Integrated Oil & Gas) -- 4,629,966 4,629,966
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Smith & Nephew PLC (Health Care Supplies) -- 2,125,690 2,125,690
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
St. James's Place Capital PLC (Life & Health Insurance) -- 1,535,139 1,535,139
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Tesco PLC (Food Retail) (a) -- 1,984,984 1,984,984
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Vodafone Group PLC (Wireless Telecommunication Services) 2,494,522 -- 2,494,522
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
Willis Group Holdings Ltd. (Insurance Brokers) -- 1,234,370 1,234,370
====================================================================== ========= =========== ============== ===============
2,494,522 65,816,785 68,311,307
====================================================================== ========= =========== ============== ===============
Total Foreign Stocks & Other Equity Interests (Cost $520,407,414) 226,824,799 272,259,323 499,084,122
====================================================================== ========= =========== ============== ===============
</Table>
<Table>
<Caption>
Shares
- --------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
SHARES SHARES
MONEY MARKET FUNDS---6.05%
4,414,157 11,910,798 16,324,955 STIC Liquid Assets Portfolio
- ------------- ----------- ------------ ---------------------------------------------------------------------------
4,414,157 11,910,798 16,324,955 STIC Prime Portfolio
============= =========== ============ ===========================================================================
Total Money Market Funds (Cost $32,649,910)
============= =========== ============ ===========================================================================
TOTAL INVESTMENTS--98.59% (Cost$553,057,324)
============= =========== ============ ===========================================================================
OTHER ASSETS LESS LIABILITIES-1.41%
============= =========== ============ ===========================================================================
NET ASSETS--100.00%
============= =========== ============ ===========================================================================
<Caption>
Market Value
------------------------------------------------
AIM AIM AIM European
Euroland European Growth Pro
Growth Growth Forma
Fund Fund Combining
MARKET MARKET
VALUE VALUE
MONEY MARKET FUNDS---6.05%
STIC Liquid Assets Portfolio (e) $ 4,414,157 $ 11,910,798 $ 16,324,955
- ---------------------------------------------------------------------- --------- ----------- -------------- ---------------
STIC Prime Portfolio (e) 4,414,157 11,910,798 16,324,955
====================================================================== ========= =========== ============== ===============
Total Money Market Funds (Cost $32,649,910) 8,828,314 23,821,596 32,649,910
====================================================================== ========= =========== ============== ===============
TOTAL INVESTMENTS--98.59% (Cost$553,057,324) 235,653,113 296,080,919 531,734,032
====================================================================== ========= =========== ============== ===============
OTHER ASSETS LESS LIABILITIES-1.41% 8,106,612 (502,270) 7,604,342
====================================================================== ========= =========== ============== ===============
NET ASSETS--100.00% 243,759,725 $295,578,649 539,338,374
====================================================================== ========= =========== ============== ===============
</Table>
Investment Abbreviations:
ADR - American Depositary Receipt
Pfd. - Preferred
Rts. - Rights
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) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144a under the Securities Act of
1933, as amended.
(d) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Accompanying Notes to Pro Forma Combining Financial Statements.
AIM EUROPEAN GROWTH FUND
AIM EUROLAND GROWTH FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2001
(UNAUDITED)
<Table>
<Caption>
AIM
AIM AIM EUROPEAN
EUROLAND EUROPEAN GROWTH
GROWTH GROWTH PRO FORMA
FUND FUND ADJUSTMENTS COMBINING
------------ ------------ ------------ ------------
ASSETS:
Investments, at market value $235,653,113 $296,080,919 $ -- $531,734,032
(cost $259,189,620-AIM Euroland Growth Fund)*
(cost $293,867,704-AIM European Growth Fund)**
(cost $553,057,324-Pro Forma Combining)
------------ ------------ ------------ ------------
Foreign currencies, at value 4,200,167 160,937 -- 4,361,104
(cost $4,170,536-AIM Euroland Growth Fund)
(cost $162,897-AIM European Growth Fund)
(cost $4,333,433-Pro Forma Combining)
------------ ------------ ------------ ------------
Receivables for:
Investments sold 3,827,816 4,699,779 -- 8,527,595
------------ ------------ ------------ ------------
Capital stock/Fund shares sold 20,119 296,676 -- 316,795
------------ ------------ ------------ ------------
Dividends and interest 939,074 362,875 -- 1,301,949
------------ ------------ ------------ ------------
Investment for deferred compensation plan -- 21,892 -- 21,892
------------ ------------ ------------ ------------
Collateral for securities loaned 53,534,862 12,778,726 -- 66,313,588
------------ ------------ ------------ ------------
Other assets 3,489 22,943 -- 26,432
============ ============ ============ ============
Total assets 298,178,640 314,424,747 -- 612,603,387
============ ============ ============ ============
LIABILITIES:
Payables for:
Investments purchased -- 3,259,819 -- 3,259,819
------------ ------------ ------------ ------------
Capital stock/Fund shares reacquired 474,474 2,237,548 -- 2,712,022
------------ ------------ ------------ ------------
Deferred compensation plan -- 21,892 -- 21,892
------------ ------------ ------------ ------------
Collateral upon return of securities loaned 53,534,862 12,778,726 -- 66,313,588
------------ ------------ ------------ ------------
Accrued distribution fees 184,802 251,204 -- 436,006
------------ ------------ ------------ ------------
Accrued directors'/trustees' fees 756 1,028 -- 1,784
------------ ------------ ------------ ------------
Accrued transfer agent fees 117,824 160,159 -- 277,983
------------ ------------ ------------ ------------
Accrued operating expenses 106,197 135,722 -- 241,919
============ ============ ============ ============
Total liabilities 54,418,915 18,846,098 -- 73,265,013
============ ============ ============ ============
Net assets applicable to shares outstanding $243,759,725 $295,578,649 -- $539,338,374
============ ============ ============ ============
NET ASSETS:
Class A $207,463,521 $157,650,544 $ -- $365,114,065
============ ============ ============ ============
Class B $ 33,818,428 $105,324,387 $ -- $139,142,815
============ ============ ============ ============
Class C $ 2,477,776 $ 32,603,718 $ -- $ 35,081,494
============ ============ ============ ============
CAPITAL STOCK/FUND SHARES, $0.01 PAR VALUE PER SHARE OF
AIM EUROLAND GROWTH FUND:
CAPITAL STOCK/FUND SHARES, $0.001 PAR VALUE PER SHARE
AIM EUROPEAN GROWTH
FUND: Class A:
Authorized -- 200,000,000 -- 200,000,000
------------ ------------ ------------ ------------
Outstanding 21,244,356 9,543,012 12,564,005 22,107,017
============ ============ ============ ============
Class B:
Authorized -- 200,000,000 -- 200,000,000
------------ ------------ ------------ ------------
Outstanding 3,641,592 6,553,435 2,105,189 8,658,624
============ ============ ============ ============
Class C:
Authorized -- 200,000,000 -- 200,000,000
------------ ------------ ------------ ------------
Outstanding 266,887 2,026,798 153,929 2,180,727
============ ============ ============ ============
Class A :
Net asset value per share $ 9.77 $ 16.52 $ -- $ 16.52
------------ ------------ ------------ ------------
Offering price per share:
(Net asset value of $9.77 / 94.50%-AIM Euroland Growth Fund)
(Net asset value of $16.52 / 94.50%-AIM European Growth Fund) $ 10.34 $ 17.48 $ -- $ 17.48
============ ============ ============ ============
Class B :
Net asset value and offering price per share $ 9.29 $ 16.07 $ -- $ 16.07
============ ============ ============ ============
Class C :
Net asset value and offering price per share $ 9.28 $ 16.09 $ -- $ 16.09
============ ============ ============ ============
</Table>
* At October 31, 2001, securities with an aggregate market value of
$51,031,633 were on loan to brokers.
** At October 31, 2001, securities with an aggregate market value of
$12,179,487 were on loan to brokers.
See Accompanying Notes to Pro Forma Combining Financial Statements.
CAPITALIZATION
EUROPEAN DEVELOPMENT FUND-PRO-FORMA COMBINED
10/31/2001
(UNAUDITED)
<Table>
<Caption>
AIM
AIM AIM EUROPEAN
EUROLAND EUROPEAN GROWTH
GROWTH GROWTH PRO FORMA
FUND FUND COMBINING
------------ ------------ ------------
CLASS A
Net Assets $207,463,521 $157,650,544 $365,114,065
Shares Outstanding $ 21,244,356 $ 9,543,012 $ 22,107,017
Net Asset Value Per Share $ 9.77 $ 16.52 $ 16.52
CLASS B
Net Assets $ 33,818,428 $105,324,387 $139,142,815
Shares Outstanding $ 3,641,592 $ 6,553,435 $ 8,658,624
Net Asset Value Per Share $ 9.29 $ 16.07 $ 16.07
CLASS C
Net Assets $ 2,477,776 $ 32,603,718 $ 35,081,494
Shares Outstanding $ 266,887 $ 2,026,798 $ 2,180,727
Net Asset Value Per Share $ 9.28 $ 16.09 $ 16.09
Checks:
Net Assets $243,759,725 $295,578,649 82%
</Table>
AIM EUROPEAN GROWTH FUND
AIM EUROLAND GROWTH FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
OCTOBER 31, 2001
(UNAUDITED)
<Table>
<Caption>
AIM
AIM AIM EUROPEAN
EUROLAND EUROPEAN GROWTH
GROWTH GROWTH PRO FORMA
FUND FUND ADJUSTMENTS COMBINING
-------------- -------------- -------------- --------------
INVESTMENT INCOME:
Dividends $ 3,643,482 $ 4,556,503 $ -- $ 8,199,985
(net of $462,846 foreign withholding tax-AIM
Euroland Growth Fund)
(net of $542,472 foreign withholding tax-AIM
European Growth Fund)
-------------- -------------- -------------- --------------
Dividends from affiliated money market funds 532,759 1,075,182 -- 1,607,941
-------------- -------------- -------------- --------------
Interest 218,522 24,311 -- 242,833
-------------- -------------- -------------- --------------
Security lending income 167,977 278,960 -- 446,937
============== ============== ============== ==============
Total investment income 4,562,740 5,934,956 -- 10,497,696
============== ============== ============== ==============
EXPENSES:
Advisory fees 3,442,768 3,723,648 (210,810) 6,955,606
-------------- -------------- -------------- --------------
Administrative services fees 90,620 98,393 (55,880) 133,133
-------------- -------------- -------------- --------------
Custodian fees 303,320 414,424 -- 717,744
-------------- -------------- -------------- --------------
Distribution fees--Class A 1,016,004 744,355 -- 1,760,359
-------------- -------------- -------------- --------------
Distribution fees--Class B 589,952 1,362,388 -- 1,952,340
-------------- -------------- -------------- --------------
Distribution fees--Class C 38,222 430,512 -- 468,734
-------------- -------------- -------------- --------------
Transfer agent fees 1,106,059 1,252,100 -- 2,358,159
-------------- -------------- -------------- --------------
Interest 1,417 -- -- 1,417
-------------- -------------- -------------- --------------
Directors'/Trustees' fees 16,894 8,584 -- 25,478
-------------- -------------- -------------- --------------
Other expenses 230,390 341,905 -- 572,295
============== ============== ============== ==============
Total expenses 6,835,646 8,376,309 (266,690) 14,945,265
============== ============== ============== ==============
Less: Fees waived (415) (741) -- (1,156)
-------------- -------------- -------------- --------------
Expenses paid indirectly (4,713) (6,908) -- (11,621)
============== ============== ============== ==============
Net expenses 6,830,518 8,368,660 (266,690) 14,932,488
============== ============== ============== ==============
Net investment income (loss) (2,267,778) (2,433,704) 266,690 (4,434,792)
============== ============== ============== ==============
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (29,067,147) (67,671,590) -- (96,738,737)
-------------- -------------- -------------- --------------
Foreign currencies 1,380,966 (222,638) -- 1,158,328
============== ============== ============== ==============
(27,686,181) (67,894,228) -- (95,580,409)
============== ============== ============== ==============
Change in net unrealized appreciation (depreciation) of:
Investment securities (157,502,771) (72,137,054) -- (229,639,825)
-------------- -------------- -------------- --------------
Foreign currencies 274,676 51,324 -- 326,000
============== ============== ============== ==============
(157,228,095) (72,085,730) -- (229,313,825)
============== ============== ============== ==============
Net gain (loss) from investment securities
and foreign currencies: (184,914,276) (139,979,958) -- (324,894,234)
============== ============== ============== ==============
Net increase (decrease) in net assets resulting
from operations (187,182,054) $ (142,413,662) $ 266,690 $ (329,329,026)
============== ============== ============== ==============
</Table>
See Accompanying Notes to Pro Forma Financial Statements.
AIM EUROLAND GROWTH FUND
Statement of Operations - Support
Year ended October 31, 2001
<Table>
<Caption>
FOR THE YEAR NOVEMBER & FOR THE YEAR
ENDED DECEMBER ENDED
INVESTMENT INCOME: 12/31/00 10/31/00 2000 12/31/01
------------- ------------- ------------- -------------
Dividend $ 3,167,070 $ 3,542,823 $ (375,753) $ 3,730,636
Dividends from affiliated money market funds 700,222 593,702 106,520 $ 465,948
Interest 68,737 49,754 18,983 $ 202,600
Security lending income -- -- -- $ 193,823
------------- ------------- ------------- -------------
Total investment income (loss) 3,936,029 4,186,279 (250,250) 4,593,007
------------- ------------- ------------- -------------
EXPENSES TO COME FROM EXPENSE ACCOUNTING
REALIZED AND UNREALIZED GAIN (LOSS) FROM
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 22,310,101 22,473,664 (163,563) (31,569,077)
Foreign currencies (737,931) (1,272,764) 534,833 716,666
------------- ------------- ------------- -------------
21,572,170 21,200,900 371,270 (30,852,411)
------------- ------------- ------------- -------------
Change in net unrealized appreciation (depreciation) of:
Investment securities -- 133,966,264 --
Foreign currencies -- (235,065) --
------------- ------------- ------------- -------------
-- 133,731,199 -- --
------------- ------------- ------------- -------------
Net gain from investment securities and
foreign currencies 21,572,170 154,932,099 371,270 (30,852,411)
------------- ------------- ------------- -------------
<Caption>
NOVEMBER & FOR THE 12
DECEMBER MONTHS ENDED
Investment income: 10/31/01 2001 10/31/01
------------- ------------- -------------
Dividend $ 4,019,235 $ (288,599) $ 3,643,482
Dividends from affiliated money market funds 426,239 39,709 $ 532,759
Interest 199,539 3,061 $ 218,522
Security lending income 167,977 25,846 $ 167,977
------------- ------------- -------------
Total investment income (loss) 4,812,990 (219,983) 4,562,740
------------- ------------- -------------
EXPENSES TO COME FROM EXPENSE ACCOUNTING
REALIZED AND UNREALIZED GAIN (LOSS) FROM
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (28,903,584) (2,665,492.91) (29,067,147)
Foreign currencies 846,133 (129,466.95) 1,380,966
------------- ------------- -------------
(28,057,451) (2,794,960) (27,686,181)
------------- ------------- -------------
Change in net unrealized appreciation (depreciation) of:
Investment securities (23,536,507) (157,502,771)
Foreign currencies 39,611 274,676
------------- ------------- -------------
(23,496,896) -- (157,228,095)
------------- ------------- -------------
Net gain from investment securities and
foreign currencies (51,554,347) (2,794,960) (184,914,276)
------------- ------------- -------------
</Table>
<Table>
<Caption>
10/31/00 10/31/01
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) OF: 520 133,966,264 (23,536,507)
521
522
523
524
535
578 --
579 30
584 (155,956) 29,631
585 11,561 29,790
586 --
592
593
598 (18,664) 4,747
599 (72,005) (235,065) (24,587) 39,611
(23,496,896)
</Table>
AIM EUROPEAN GROWTH FUND
AIM EUROLAND GROWTH FUND
NOTES TO PRO FORM COMBINING FINANCIAL STATEMENTS
OCTOBER 31, 2001
(UNAUDITED)
Note 1 - Basis of Pro Forma Presentation
The pro forma financial statements and the accompanying pro forma schedule of
investments give effect to the proposed Agreement and Plan of Reorganization
between AIM Euroland Growth Fund and AIM International Funds, Inc. and the
consummation of the transactions contemplated therein to be accounted for as a
tax-free reorganization of investment companies. At the February 7, 2002 Board
Meeting, the Board approved changing the name of AIM European Development Fund
to AIM European Growth Fund in connection with AIM's implementation of the Fund
Names Rule effective July 1, 2002. The Agreement and Plan of Reorganization
would be accomplished by an exchange of shares of AIM European Growth Fund for
the net assets of AIM Euroland Growth Fund and the distribution of AIM European
Growth Fund shares to AIM Euroland Growth Fund shareholders. If the Agreement
and Plan of Reorganization were to have taken place at October 31, 2001, AIM
Euroland Growth Fund Class A shareholders would have received 12,564,005 shares
of AIM European Growth Fund - Class A shares, AIM Euroland Growth B shareholders
would have received 2,105,189 shares of AIM European Growth Fund
Class B shares, and AIM Euroland Growth Fund Class C shareholders would have
received 153,929 shares of AIM European Growth Fund - Class C shares.
Note 2 - Pro Forma Adjustments
Management fees have been reduced by $210,810 to reflect the management fee
rates payable to AIM by AIM European Growth Fund, based on pro forma combined
assets for the year. Administrative fees have been reduced by $55,880 to reflect
administration fees payable to AIM based on pro forma combined assets for the
year.
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.
(f) Articles Supplementary, dated December 17, 2001, to Articles
of Incorporation were filed electronically as an Exhibit to
Post-effective Amendment No. 25 on April 4, 2002, and are
hereby incorporated by reference.
(g) Articles Supplementary, dated March 12, 2002, to Articles of
Incorporation were filed electronically as an Exhibit to
Post-effective Amendment No. 25 on April 4, 2002, and are
hereby incorporated by reference.
1
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 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 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.
7 (a) (1) 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.
(2) Amendment No. 1, dated March 15, 2002, to the Second
Amended and Restated Master Distribution Agreement, dated July
1, 2000, between Registrant (on behalf of Registrant's Class A
and Class C shares and Institutional Class shares) and A I M
Distributors, Inc. were filed electronically as an Exhibit to
Post-effective Amendment No. 25 on April 4, 2002, and are
hereby incorporated by reference.
(b) First Amended and Restated Master Distribution Agreement,
dated December 31, 2000, between Registrant (on behalf of the
Registrant's Class B shares) and A I M Distributors, Inc. were
filed electronically as an Exhibit to Post-effective Amendment
No. 22 on February 22, 2001, and are hereby incorporated by
reference.
(c) 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.
(d) 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
of March 8, 1994, as restated September 18, 1995, March 7,
2000, and October 1, 2001, was filed as an Exhibit to
Post-effective Amendment No. 23, on December 28, 2001, and is
hereby incorporated by reference.
(b) Form of AIM Funds Director Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors, as amended September
28, 2001, was filed as an Exhibit to Post-effective Amendment
No. 23, on December 28, 2001, and is hereby incorporated by
reference.
2
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.
(3) Amendment, dated as of June 29, 2001, to Master Custodian
Contract, dated May 1, 2000, between Registrant and State
Street Bank and Trust Company were filed electronically as an
Exhibit to Post-effective Amendment No. 23 on December 28,
2001, and are hereby 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.
(3) Foreign Assets Delegation Agreement, dated June 29, 2001,
between A I M Advisors, Inc. and Registrant were filed
electronically as an Exhibit to Post-effective Amendment No.
24 on February 22, 2002, and are hereby incorporated by
reference.
10 (a) 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.
(b) Third Amended and Restated Master Distribution Plan, dated
December 31, 2000, for Registrant's Class B shares were filed
electronically as an Exhibit to Post-effective Amendment No.
22 on February 22, 2001, and are 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) Form of Service Agreement for Certain Retirement Plans (for
the Institutional Classes) to be used in connection with
Registrant's Master Distribution Plan were filed
electronically as an Exhibit to Post-effective Amendment No. 9
on February 28, 1996, and are hereby incorporated by
reference.
3
(g) 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.
(h) 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.
(i) 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.
(j) First Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R) effective as of March 4, 2002, was filed
electronically as an Exhibit to Post-effective Amendment No.
25 on April 4, 2002, 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 Ballard Spahr Andrews & Ingersoll, LLP, supporting
the tax matters and consequences to shareholders 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.
(5) Amendment No. 4, dated March 4, 2002, to the Transfer
Agency and Service Agreement, dated November 1, 1994, between
Registrant and A I M Fund Services, Inc. were filed
electronically as an Exhibit to Post-effective Amendment No.
25 on April 4, 2002, and are 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.
4
(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) 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.
5
(13) Letter Agreement, dated August 17, 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. 24 on February 22, 2002, and are
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. 22 on February 22, 2001, and
is hereby incorporated by reference.
(d) (1) 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.
(2) Amendment No. 1, dated May 9, 2001, to the Master
Administrative Services 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. 23 on December 28, 2001, and are hereby
incorporated by reference.
(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.
(f) (1) Memorandum of Agreement, regarding securities lending,
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.
(2) Memorandum of Agreement, regarding advisory fee waiver,
dated July 1, 2001, between Registrant, on behalf of AIM
International Equity Fund, and A I M Advisors, Inc. was filed
as an Exhibit to Post-effective Amendment No. 23 on December
28, 2001, and is hereby incorporated by reference.
(3) Memorandum of Agreement, regarding expense limitations,
dated July 1, 2001, between Registrant, on behalf of AIM
Global Income Fund and A I M Advisors, Inc. was filed as an
Exhibit to Post-effective Amendment No. 23 on December 28,
2001, and is hereby incorporated by reference.
(g) Interfund Loan Agreement, dated September 18, 2001, between
A I M Advisors, Inc. and Registrant
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.
6
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.
7
SIGNATURES
Pursuant to the requirements of 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 17th day of May, 2002.
REGISTRANT: AIM INTERNATIONAL FUNDS, INC.
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.
<Table>
<Caption>
SIGNATURES TITLE DATE
---------- ----- ----
/s/ ROBERT H. GRAHAM Chairman, Director & President May 17, 2002
- ----------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ FRANK S. BAYLEY Director May 17, 2002
- -----------------------
(Frank S. Bayley)
/s/ BRUCE L. CROCKETT Director May 17, 2002
- -----------------------
(Bruce L. Crockett)
/s/ ALBERT R. DOWDEN Director May 17, 2002
- -----------------------
(Albert R. Dowden)
/s/ EDWARD K. DUNN, JR. Director May 17, 2002
- -----------------------
(Edward K. Dunn, Jr.)
/s/ JACK M. FIELDS Director May 17, 2002
- -----------------------
(Jack M. Fields)
/s/ CARL FRISCHLING Director May 17, 2002
- -----------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Director May 17, 2002
- -----------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Director May 17, 2002
- -----------------------
(Lewis F. Pennock)
/s/ RUTH H. QUIGLEY Director May 17, 2002
- -----------------------
(Ruth H. Quigley)
/s/ LOUIS S. SKLAR Director May 17, 2002
- -----------------------
(Louis S. Sklar)
/s/ DANA R. SUTTON Vice President & Treasurer May 17, 2002
- ----------------------- (Principal Financial and
(Dana R. Sutton) Accounting Officer)
</Table>
EXHIBIT INDEX
<Table>
<Caption>
Exhibit
Number Description
- ------- -----------
11 Opinion of Counsel and Consent of Ballard Spahr Andrews &
Ingersoll, LLP, as to the legality of the securities being
registered.
14(a) Consent of KPMG LLP
14(b) Consent of PricewaterhouseCoopers LLP
17 Form of Proxy
</Table>