<PAGE> 1
ANNUAL REPORT / JULY 31 1999
AIM SMALL CAP OPPORTUNITIES FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
------------------------------------
THE INDEPENDENCE DAY PARADE BY JANE WOOSTER SCOTT
JUST AS SMALL BUSINESSES ARE A KEY COMPONENT OF THIS FESTIVE PAINTING, SMALL
COMPANIES ARE AN IMPORTANT PART OF THE U.S. ECONOMIC LANDSCAPE. IN AIM SMALL
CAP OPPORTUNITIES FUND, WE ENDEAVOR TO OWN THE STOCKS OF SMALLER COMPANIES THAT
WE BELIEVE HAVE EXCITING POTENTIAL.
------------------------------------
AIM Small Cap Opportunities Fund is for shareholders who seek long-term growth
of capital by investing in a portfolio consisting primarily of small-company
stocks which management believes involve "special opportunities."
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Small Cap Opportunities Fund performance figures are historical and
reflect reinvestment of all 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 B shares and Class C shares
will differ from that of Class A shares due to differences in sales charge
structure and class expenses.
o Because Class C shares have been offered for less than one year, total
return provided is cumulative total return that has not been annualized.
o The fund's average annual total returns, including sales charges, for the
periods ended 6/30/99, the most recent calendar quarter end, were as
follows. For Class A shares, one year, 34.25%; date operations commenced
(6/29/98), 33.64%. For Class B shares, date sales commenced (7/13/98),
34.59%. For Class C shares, date sales commenced (12/30/98), 22.10%.
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.
o The fund participates in the Initial Public Offering("IPO") market, and a
significant portion of the fund's returns are attributable to its
investment in IPOs, which have a magnified impact due to the fund's
relatively small asset base. There is no guarantee that as the fund's
assets grow, it will continue to experience substantially similar
performance by investing in IPOs.
o Investing in smaller companies may involve greater risk and potential
reward than investing in more established companies.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lipper Small Cap Funds Index represents an average of the
performance of the 30 largest small-capitalization growth funds, tracked
by Lipper Inc., an independent mutual fund Performance Monitor.
o The unmanaged Russell 2000 Index is generally considered representative of
the performance of stocks of small-capitalization companies. The unmanaged
Russell 2000 Growth Index measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth
values.
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of
30 actively traded primarily industrial stocks
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the fund.
AIM SMALL CAP OPPORTUNITIES FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
[PHOTO OF With only several months remaining in 1999, the question on
Charles T. many of your minds may be, "How will the year 2000 computer
Bauer, issue affect AIM and my investments?" We would like you to
Chairman of feel comfortable. We are pleased to be able to report to
the Board of you that as of June 1999 we achieved a major milestone
THE FUND toward year 2000 compliance status: we have successfully
APPEARS HERE] completed the testing of all of our mission-critical
systems.
Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology systems might be affected
by the changeover to the year 2000 (Y2K). Everything went as well as we had
hoped; in general, the industry sailed through the testing process with flying
colors. The financial industry has been seen as a leader in planning for year
2000 concerns. Thus, it was no surprise to most participants that the test was
an overwhelming success.
The general purpose of the process was to test electronic interfaces among
financial industry members in the United States and to follow transactions
through a typical trading cycle--from order entry to the settlement process.
Investment banks, broker-dealers, custodian banks and mutual fund companies all
worked together to make this possible. Approximately 400 firms were involved in
the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches--just 0.02% of the total number of transactions. All problems
were worked through quickly before the hypothetical trades were settled. Of
course, AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing
the year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
For a more comprehensive discussion of our Y2K efforts and for periodic
updates, please visit our Web site, www.aimfunds.com.
We are pleased to send you this report covering your fund's performance
over the fiscal year. If you have any questions or comments, please contact our
Client Services department at 800-959-4246, or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
automated AIM Investor Line at 800-246-5463 or at our Web site.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--. We appreciate your business.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
A I M Advisors, Inc.
------------------------------------
THE FINANCIAL INDUSTRY HAS BEEN SEEN
AS A LEADER IN PLANNING FOR YEAR 2000 CONCERNS.
------------------------------------
PLEASE NOTE THAT THE INFORMATION ABOUT THE YEAR 2000 IN THIS LETTER IS DEEMED
AIM'S YEAR 2000 READINESS DISCLOSURE.
AIM SMALL CAP OPPORTUNITIES FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
ALTERNATIVE INVESTMENT STRATEGY HELPS
FUND POST OUTSTANDING RETURNS
SMALL-CAP STOCKS RALLIED STRONGLY TOWARD THE END OF THE FISCAL YEAR. HOW DID
AIM SMALL CAP OPPORTUNITIES FUND PERFORM?
For the year ended July 31, 1999, the fund's performance was excellent.
Excluding sales charges, total returns were 52.36% and 51.30% for Class A and B
shares, respectively. The fund dramatically outperformed both the Russell 2000
Growth Index and the Lipper Small Cap Funds Index, which recorded returns of
14.51% and 8.51%, respectively, for the fiscal year.
Class C shares began sales on December 30, 1998, and posted a cumulative
total return at net asset value of 29.31% through the end of the fiscal year.
Since our last report six months ago, the fund's total net assets have
grown from $287 million to $365 million. We expect to close the fund to new
investors when it reaches $500 million in net assets.
TOTAL RETURN
CLASS A AND CLASS B SHARES
7/31/98 - 7/31/99
================================================================================
Class 52.36%
A Shares
Class 51.30%
B Shares
Russell 14.51%
2000
Growth
Index
Lipper 8.51%
Small Cap
Funds Index
================================================================================
WHAT WERE MARKET CONDITIONS LIKE DURING THE FISCAL YEAR?
When the fiscal year began, the stock market was in steep decline because of
concerns about severe economic problems in Asia, Russia and Latin America. The
selloff continued until October 8 before the market began a strong recovery.
The Federal Reserve Board (the Fed) cut interest rates three times in the fall
of 1998, and these moves helped boost stock performance.
During the first quarter of 1999, mega-cap growth stocks and Internet stocks
outperformed other issues by a wide margin. In a world of economic uncertainty,
exemplified by January's Brazilian currency crisis, U.S. investors favored
mega-cap stocks because of their relative safety and liquidity. This preference
for mega-cap stocks helped boost the Dow Jones Industrial Average to record
heights. Internet stocks were attractive because of the growth of the Web as a
medium of commerce, communication and entertainment.
However, in the second quarter, relatively expensive mega-cap and Internet
stocks lost much of their luster. Investors shifted their focus to mid- and
small-cap stocks and to value stocks. Additionally, the stocks of cyclical
industries such as energy, which got a boost from rising oil prices, came back
into favor.
Financial markets were volatile, however, as it became increasingly apparent
the Fed would raise interest rates to slow strong economic growth and contain
inflation, which rose significantly in April. On June 30, the central bank
raised the federal funds rate from 4.75% to 5%. Uncertainty about the Fed's
future actions caused the stock market to falter as the fiscal year came to a
close in July.
WHY DID THE PERFORMANCE OF SMALL-CAP STOCKS IMPROVE?
In recent years, small-cap stocks have dramatically underperformed large-cap
stocks. Consequently, they were relatively cheap in comparison to large-cap
stocks. At the same time, smaller companies were experiencing more rapid
earnings growth than larger corporations. Smaller companies generally transact
most of their business in the United States, where the economy is booming, and
thus they tend to be less sensitive to economic downturns overseas than large,
multinational corporations. All these factors helped pique investor interest in
small-cap stocks late in the fiscal year.
WHY WAS THE FUND'S PERFORMANCE SO STRONG?
We credit the fund's impressive gains to its alternative investment strategy,
designed to take advantage of rising and falling earnings trends. We believe
that earnings drive stock prices. The fund owns the stocks of companies
expected to experience rapid earnings growth and which we believe represent
"special opportunities." These special opportunities can include changes in
management or the competitive situation for a particular company.
The fund participates in the Initial Public Offering ("IPO") market, and a
significant portion of the fund's returns are attributable to its investment in
IPOs, which have a magnified impact due to the fund's relatively small asset
base. There is no guarantee that as the fund's assets grow, it will continue to
experience substantially similar performance by investing in IPOs.
Other strategies that the fund may employ include short selling and
leveraging.
See important fund and index disclosures inside front cover.
AIM SMALL CAP OPPORTUNITIES FUND
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 7/31/99, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================================
TOP 10 STOCK HOLDINGS TOP 10 INDUSTRIES TOP 10 SHORT POSITIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. QLogic Corp. 2.12% 1. Computers (Software & Services) 15.40% 1. Sapient Corp 2.93%
2. Harmonic, Inc. 1.85 2. Electronics (Semiconductors) 8.84 2. Whole Foods Market, Inc 1.20
3. PMC-Sierra, Inc. 1.71 3. Communications Equipment 7.86 3. Stewart Enterprises, Inc.-Class A 1.19
4. Bank United Corp.-Class A 1.58 4. Retail (Specialty) 7.62 4. E-Tek Dynamics, Inc. 1.15
5. Rational Software Corp. 1.55 5. Health Care 5.77 5. Excel Switching Corp. 1.12
6. DSP Communications, Inc. 1.44 (Medical Products & Services) 6. First Sierra Financial, Inc. 0.95
7. eToys, Inc. 1.37 6. Computers (Peripherals) 5.54 7. NextCard, Inc. 0.95
8. Zomax Media, Inc. 1.33 7. Restaurants 5.30 8. Newell Rubbermaid, Inc. 0.89
9. Burr-Brown Corp. 1.31 8. Electrical Equipment 4.80 9. I2 Technologies, Inc. 0.84
10. MIPS Technologies, Inc.-Class A 1.27 9. Banks (Regional) 4.14 10. Quintiles Transnational Corp. 0.78
10. Retail (Computers & Electronics) 3.32
Keep in mind that the fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
===================================================================================================================================
</TABLE>
HOW DOES SHORT SELLING WORK?
The fund borrows the stocks of companies expected to experience declining
earnings. These stocks (short positions) are subsequently sold, with the
intention of buying them at an anticipated lower price. A mixed portfolio of
owned and borrowed stocks (long and short positions) can potentially protect
the fund during market downturns while allowing it to take advantage of
rallies. The fund also may employ leveraging--borrowing money, typically to
purchase additional shares.
HOW WAS THE FUND STRUCTURED AT THE END OF THE REPORTING PERIOD?
As of July 31, 1999, the fund owned 131 stocks and had 34 short positions.
Technology and consumer-cyclical stocks made up 42% and 29% of the portfolio,
respectively. Since our last report on January 31, 1999, we have increased our
technology and consumer-cyclical holdings while reducing our exposure to
health-care stocks.
HOW DID TECHNOLOGY STOCKS FARE?
Although volatile, technology stocks generally recorded solid gains for the
fiscal year. This sector benefited from increased corporate spending on
information-technology systems and growing demand for personal computers and
communications equipment. The rapid growth of the U.S. economy in recent years
can be attributed in large part to the booming technology sector.
Tech stocks in the portfolio included PMC-Sierra, which makes semiconductor
components that enhance transmission speed on the Internet; Harmonic, which
supplies systems for delivering video, audio and data services over cable,
satellite and wireless networks; and DSP Communications, which provides
components that serve as the "brains" for digital cellular phones. QLogic makes
products for connecting peripheral devices to computers while Rational Software
provides products and services to improve the software development process.
WHAT MADE CONSUMER-CYCLICAL STOCKS ATTRACTIVE?
Consumer cyclicals is a broad category that includes hotels, entertainment,
restaurants and certain retailers. This sector benefited from the booming
economy. Low unemployment and rising wages meant healthy consumer spending for
clothing, home furnishings, recreational products and leisure-time activities.
That helped boost the stocks of many companies in this category.
Fossil sells fashion watches and accessories, while Sonic operates the
largest drive-in restaurant chain in the United States. Linens `n Things sells
towels, bedding and other household accessories, and Zomax makes compact discs
and digital video discs for software publishers and computer makers.
WHAT IS YOUR OUTLOOK?
The climate appears favorable for stocks. The economy is growing at a healthy
pace and corporate profits are solid. Although there is still some question
about the Fed's future actions to keep inflation in check, we don't expect a
dramatic tightening of monetary policy. Moreover, while interest rates
increased over the fiscal year, they remain relatively low.
Additionally, the Asian crisis, which has periodically jolted markets since
late 1997, appears to be receding as a threat as Pacific Rim economies begin to
recover.
Perhaps most significant has been the improvement in the performance of
small-cap stocks. We remain optimistic about long-term prospects for these
stocks because of their attractive valuations and the positive earnings-growth
projections for smaller companies.
See important fund and index disclosures inside front cover.
AIM SMALL CAP OPPORTUNITIES FUND
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM SMALL CAP OPPORTUNITIES FUND, CLASS A SHARES, VS. BENCHMARK INDEXES
6/29/98-7/31/99
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
AIM Small Cap Russell 2000 Russell 2000
Opportunities Growth Index Index
Fund, Class A
shares
- ------------------------------------------------------------------
In thousands
<S> <C> <C> <C>
6/29/98 $ 9,452 $10,000.00 $10,000.00
9/30/98 8,535 7,764.01 7,985.42
12/31/98 11,104 9,599.27 9,287.76
3/31/99 11,142 9,438.04 8,783.95
7/31/99 $14,055 $10,495.8 $ 9,871.51
==================================================================
</TABLE>
Past performance is no guarantee of comparable future results.
=================================================================
<TABLE>
<CAPTION>
=================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/99, including sales charges
CLASS A SHARES
<S> <C>
Inception (6/29/98) 36.75%
1 Year 43.95*
CLASS B SHARES
Inception (7/13/98) 40.28%
1 Year 46.30**
CLASS C SHARES
Inception (12/30/98) 28.31%***
*52.36% excluding sales charges
**51.30% excluding CDSC
***29.31 excluding CDSC. Total return is cumulative total return that has
not been annualized.
===============================================================================
</TABLE>
Sources: Lipper Analytical Services, Inc., Weisenberger--Registered Trademark--
The performance of Class B and Class C shares will differ from that of
Class A shares due to differing fees and expenses. For fund performance
calculations and descriptions of indexes cited on this page, please refer to
the inside front cover. Past performance cannot guarantee comparable future
results.
The fund participates in the Initial Public Offering ("IPO") market, and a
significant portion of the fund's returns are attributable to its investment in
IPOs, which have a magnified impact due to the fund's relatively small asset
base. There is no guarantee that as the fund's assets grow, it will continue to
experience substantially similar performance by investing in IPOs.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF
AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
The chart compares the fund's Class A shares to benchmark indexes. It is
intended to give you a general idea of how the fund performed compared to the
stock market over the period 6/29/98-7/31/99. Index returns are from
6/30/98-7/31/99. It is important to understand the difference between your fund
and an index. Your fund's total return is shown with a sales charge and
includes fund expenses and management fees. An index measures the performance
of a hypothetical portfolio, in this case the Russell 2000 Growth Index and the
Russell 2000 Index. Market indexes are not managed, incurring no sales charges,
expenses or fees. If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return.
AIM SMALL CAP OPPORTUNITIES FUND
<PAGE> 7
SCHEDULE OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-105.63%
AIR FREIGHT-0.93%
Atlas Air, Inc.(a) 49,500 $ 1,587,094
- --------------------------------------------------------------
Eagle USA Airfreight, Inc.(a) 50,000 1,818,750
- --------------------------------------------------------------
3,405,844
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.65%
Tower Automotive, Inc.(a) 100,000 2,381,250
- --------------------------------------------------------------
BANKS (REGIONAL)-4.14%
Bank United Corp.-Class A 150,000 5,775,000
- --------------------------------------------------------------
First Virginia Banks, Inc. 46,000 2,205,125
- --------------------------------------------------------------
Golden State Bancorp, Inc.(a) 75,000 1,659,375
- --------------------------------------------------------------
Greater Bay Bancorp 75,000 2,484,375
- --------------------------------------------------------------
Trustmark Corp. 125,000 3,007,812
- --------------------------------------------------------------
15,131,687
- --------------------------------------------------------------
BUILDING MATERIALS-1.47%
Elcor Corp. 93,000 3,824,625
- --------------------------------------------------------------
TJ International, Inc. 50,000 1,550,000
- --------------------------------------------------------------
5,374,625
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.17%
ChiRex, Inc.(a) 65,000 2,128,750
- --------------------------------------------------------------
Optical Coating Laboratory, Inc. 30,000 2,152,500
- --------------------------------------------------------------
4,281,250
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-7.86%
Copper Mountain Networks, Inc.(a) 30,000 3,630,000
- --------------------------------------------------------------
Davox Corp.(a) 125,000 2,015,625
- --------------------------------------------------------------
Digital Microwave Corp.(a) 125,000 1,484,375
- --------------------------------------------------------------
Dycom Industries, Inc.(a) 50,000 2,387,500
- --------------------------------------------------------------
Harmonic, Inc.(a) 85,000 6,757,500
- --------------------------------------------------------------
Juniper Networks, Inc.(a) 8,300 1,348,231
- --------------------------------------------------------------
L-3 Communications Holdings,
Inc.(a) 50,000 2,146,875
- --------------------------------------------------------------
Microwave Power Devices, Inc.(a) 155,000 2,111,875
- --------------------------------------------------------------
Polycom, Inc.(a) 75,000 2,512,500
- --------------------------------------------------------------
Proxim, Inc.(a) 80,000 4,345,000
- --------------------------------------------------------------
28,739,481
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-5.54%
DSP Communications, Inc.(a) 225,000 5,273,437
- --------------------------------------------------------------
QLogic Corp.(a) 46,500 7,759,687
- --------------------------------------------------------------
SanDisk Corp.(a) 52,500 4,029,375
- --------------------------------------------------------------
Xircom, Inc.(a) 100,000 3,193,750
- --------------------------------------------------------------
20,256,249
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE &
SERVICES)-15.40%
Clarify, Inc.(a) 85,000 $ 2,799,687
- --------------------------------------------------------------
Commerce One, Inc.(a) 26,900 1,338,275
- --------------------------------------------------------------
Concord Communications, Inc.(a) 40,000 1,640,000
- --------------------------------------------------------------
CoStar Group, Inc.(a) 60,000 2,295,000
- --------------------------------------------------------------
Digex, Inc.(a) 50,000 1,115,624
- --------------------------------------------------------------
DSP Group, Inc.(a) 85,000 3,373,437
- --------------------------------------------------------------
InfoSpace.com, Inc.(a) 35,000 1,607,812
- --------------------------------------------------------------
ISS Group, Inc.(a) 120,000 2,610,000
- --------------------------------------------------------------
Kronos, Inc.(a) 50,000 2,418,750
- --------------------------------------------------------------
Macromedia, Inc.(a) 100,000 3,487,500
- --------------------------------------------------------------
Macrovision Corp.(a) 30,000 2,100,000
- --------------------------------------------------------------
Mercury Interactive Corp.(a) 100,000 4,612,500
- --------------------------------------------------------------
Natural MicroSystems Corp.(a) 245,000 2,924,687
- --------------------------------------------------------------
Omega Research, Inc.(a) 200,000 2,025,000
- --------------------------------------------------------------
Portal Software, Inc.(a) 31,550 1,320,170
- --------------------------------------------------------------
QRS Corp.(a) 60,000 3,247,500
- --------------------------------------------------------------
RadiSys Corp.(a) 90,000 3,701,250
- --------------------------------------------------------------
Rational Software Corp.(a) 170,000 5,673,750
- --------------------------------------------------------------
Verio, Inc.(a) 60,000 4,278,750
- --------------------------------------------------------------
Verity, Inc.(a) 75,000 3,712,500
- --------------------------------------------------------------
56,282,192
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES &
GIFTS)-1.08%
Fossil, Inc.(a) 75,000 3,937,500
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.80%
CommScope, Inc.(a) 125,000 4,273,437
- --------------------------------------------------------------
DII Group, Inc.(a) 100,000 3,706,250
- --------------------------------------------------------------
Helix Technology Corp. 125,000 3,343,750
- --------------------------------------------------------------
Oak Industries, Inc.(a) 55,000 2,368,438
- --------------------------------------------------------------
Sawtek, Inc.(a) 60,000 3,840,000
- --------------------------------------------------------------
17,531,875
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.65%
Aeroflex, Inc.(a) 125,000 2,367,188
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-1.52%
Alpha Industries, Inc.(a) 70,000 3,570,000
- --------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(a) 85,000 1,976,250
- --------------------------------------------------------------
5,546,250
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-8.84%
Amkor Technology, Inc.(a) 125,000 1,921,875
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
Burr-Brown Corp.(a) 125,000 $ 4,781,250
- --------------------------------------------------------------
Flextronics International Ltd.(a) 55,000 2,468,125
- --------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 125,000 4,625,000
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 80,000 6,260,000
- --------------------------------------------------------------
RF Micro Devices, Inc.(a) 30,000 2,293,125
- --------------------------------------------------------------
S3, Inc.(a) 250,000 2,812,500
- --------------------------------------------------------------
SDL, Inc.(a) 30,000 2,038,125
- --------------------------------------------------------------
Semtech Corp.(a) 40,000 2,475,000
- --------------------------------------------------------------
TranSwitch Corp.(a) 60,000 2,632,500
- --------------------------------------------------------------
32,307,500
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-3.28%
Advanced Energy Industries, Inc.(a) 100,000 3,781,250
- --------------------------------------------------------------
Brooks Automation, Inc.(a) 150,000 4,068,750
- --------------------------------------------------------------
Credence Systems Corp.(a) 100,000 4,150,000
- --------------------------------------------------------------
12,000,000
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.25%
Advanta Corp.-Class B 150,000 2,643,750
- --------------------------------------------------------------
SEI Investments Co. 20,000 1,935,000
- --------------------------------------------------------------
4,578,750
- --------------------------------------------------------------
FOOTWEAR-0.44%
K-Swiss, Inc. 50,000 1,621,875
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-2.32%
Hollywood Park, Inc.(a) 175,000 3,237,500
- --------------------------------------------------------------
Isle of Capri Casinos, Inc.(a) 300,000 2,793,750
- --------------------------------------------------------------
Station Casinos, Inc.(a) 125,000 2,453,125
- --------------------------------------------------------------
8,484,375
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.77%
Alpharma, Inc.-Class A 75,000 2,784,375
- --------------------------------------------------------------
Jones Pharma, Inc. 85,000 3,689,531
- --------------------------------------------------------------
6,473,906
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-5.77%
CardioThoracic Systems, Inc.(a) 200,000 3,550,000
- --------------------------------------------------------------
Colorado MEDtech, Inc.(a) 175,000 3,412,500
- --------------------------------------------------------------
Eclipse Surgical Technologies,
Inc.(a) 200,000 2,737,500
- --------------------------------------------------------------
Laser Vision Centers, Inc.(a) 50,000 3,143,750
- --------------------------------------------------------------
Summit Technology, Inc.(a) 75,000 1,795,313
- --------------------------------------------------------------
VISX, Inc.(a) 23,000 2,328,750
- --------------------------------------------------------------
Xomed Surgical Products, Inc.(a) 90,000 4,100,625
- --------------------------------------------------------------
21,068,438
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED
SERVICES)-1.63%
Hooper Holmes, Inc. 150,000 $ 2,962,500
- --------------------------------------------------------------
Techne Corp.(a) 100,000 3,000,000
- --------------------------------------------------------------
5,962,500
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.10%
Investment Technology Group, Inc. 75,000 2,657,813
- --------------------------------------------------------------
Southwest Securities Group, Inc. 33,000 1,359,188
- --------------------------------------------------------------
4,017,001
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-0.65%
Federated Investors, Inc.-Class B 125,000 2,382,813
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-2.49%
National R.V. Holdings, Inc.(a) 75,000 1,870,313
- --------------------------------------------------------------
THQ Inc.(a) 85,000 2,385,313
- --------------------------------------------------------------
Zomax Media, Inc.(a) 90,000 4,848,750
- --------------------------------------------------------------
9,104,376
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.78%
Dril-Quip, Inc.(a) 130,000 2,835,625
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-2.47%
Cal Dive International, Inc.(a) 80,000 2,710,000
- --------------------------------------------------------------
Patterson Energy, Inc.(a) 300,000 2,887,500
- --------------------------------------------------------------
Precision Drilling Corp.-ADR
(Canada)(a) 150,000 3,431,250
- --------------------------------------------------------------
9,028,750
- --------------------------------------------------------------
RESTAURANTS-5.30%
Brinker International, Inc.(a) 100,000 2,787,500
- --------------------------------------------------------------
CEC Entertainment, Inc.(a) 50,000 1,575,000
- --------------------------------------------------------------
Foodmaker, Inc.(a) 125,000 3,421,875
- --------------------------------------------------------------
O'Charley's, Inc.(a) 175,000 2,690,625
- --------------------------------------------------------------
RARE Hospitality International,
Inc.(a) 125,000 2,789,063
- --------------------------------------------------------------
Sonic Corp.(a) 120,000 3,855,000
- --------------------------------------------------------------
Taco Cabana-Class A(a) 250,000 2,250,000
- --------------------------------------------------------------
19,369,063
- --------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-3.32%
CDW Computer Centers, Inc.(a) 70,000 3,465,000
- --------------------------------------------------------------
REX Stores Corp.(a) 70,000 2,603,125
- --------------------------------------------------------------
Tweeter Home Entertainment Group,
Inc.(a) 100,000 3,331,250
- --------------------------------------------------------------
Ultimate Electronics, Inc.(a) 150,000 2,728,125
- --------------------------------------------------------------
12,127,500
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.63%
Ames Department Stores, Inc.(a) 56,300 2,308,300
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.99%
Spiegel, Inc.-Class A(a) 400,000 3,625,000
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-7.62%
Cheap Tickets, Inc.(a) 50,000 $ 2,893,750
- --------------------------------------------------------------
Claire's Stores, Inc. 125,000 2,968,750
- --------------------------------------------------------------
eToys, Inc.(a) 125,000 4,992,188
- --------------------------------------------------------------
Footstar, Inc.(a) 100,000 3,600,000
- --------------------------------------------------------------
Genesco, Inc.(a) 250,000 3,015,625
- --------------------------------------------------------------
Hollywood Entertainment Corp.(a) 170,000 2,996,250
- --------------------------------------------------------------
Linens 'n Things, Inc.(a) 75,000 3,468,750
- --------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 52,000 2,216,500
- --------------------------------------------------------------
Sunglass Hut International, Inc.(a) 125,000 1,703,125
- --------------------------------------------------------------
27,854,938
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-2.61%
AnnTaylor Stores Corp.(a) 75,000 2,878,125
- --------------------------------------------------------------
Catherines Stores Corp.(a) 175,000 2,296,875
- --------------------------------------------------------------
Chico's Fas, Inc.(a) 86,000 2,236,000
- --------------------------------------------------------------
Deb Shops, Inc. 100,000 2,112,500
- --------------------------------------------------------------
9,523,500
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-2.09%
ACNielsen Corp.(a) 100,000 2,893,750
- --------------------------------------------------------------
Lamar Advertising Co.(a) 95,000 3,859,375
- --------------------------------------------------------------
Student Advantage, Inc.(a) 65,000 885,625
- --------------------------------------------------------------
7,638,750
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-2.31%
Championship Auto Racing Teams,
Inc.(a) 100,000 3,300,000
- --------------------------------------------------------------
Coinstar, Inc.(a) 100,000 2,625,000
- --------------------------------------------------------------
Copart, Inc.(a) 105,000 2,520,000
- --------------------------------------------------------------
8,445,000
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.25%
CSG Systems International, Inc.(a) 98,000 2,180,500
- --------------------------------------------------------------
FactSet Research Systems, Inc. 60,000 2,992,500
- --------------------------------------------------------------
MedQuist, Inc.(a) 70,000 3,036,250
- --------------------------------------------------------------
8,209,250
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.51%
Viatel, Inc.(a) 50,000 1,850,000
- --------------------------------------------------------------
Total Common Stocks (Cost
$289,695,481) 386,052,601
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-8.34%
CALLS-0.97%
Amazon.com, Inc.
(Retail-Specialty) 790 $ 120 Sep-99 $ 434,500
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
CALLS-(CONTINUED)
Conoco, Inc. (Oil &
Gas-Exploration &
Production) 1,480 $ 27.5 Aug-99 $ 83,250
1,975 25 Aug-99 339,453
- -----------------------------------------------------------------------
OSX Index (Oil &
Gas-Services) 2,935 80 Aug-99 1,192,344
1,500 80 Sep-99 975,000
- -----------------------------------------------------------------------
S & P 500 Index 445 1,360 Aug-99 534,000
- -----------------------------------------------------------------------
3,558,547
- -----------------------------------------------------------------------
PUTS-7.37%
S & P 500 Index 550 1,350 Sep-99 2,887,500
912 1,375 Sep-99 6,007,800
545 1,350 Dec-99 4,557,562
880 1,375 Dec-99 8,338,000
483 1,400 Dec-99 5,137,913
- -----------------------------------------------------------------------
26,928,775
- -----------------------------------------------------------------------
Total Options Purchased
(Cost
$21,782,210) 30,487,322
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-2.25%(b)
Warburg Dillon Read LLC, 5.13%,
08/02/99 (Cost $8,243,752)(c) $8,243,752 $ 8,243,752
- --------------------------------------------------------------
TOTAL INVESTMENTS-116.22% 424,783,675
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(16.22%) (59,292,345)
- --------------------------------------------------------------
NET ASSETS-100.00% $365,491,330
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)
1-800 CONTACTS, Inc. 99,000 $ 2,029,500
- -------------------------------------------------------------
Advanced Micro Devices, Inc. 130,000 2,234,375
- -------------------------------------------------------------
autobytel.com Inc. 54,100 970,419
- -------------------------------------------------------------
Blue Rhino Corp. 56,000 539,000
- -------------------------------------------------------------
Carrier Access Corp. 44,500 1,468,500
- -------------------------------------------------------------
Complete Business Solution, Inc. 75,000 1,425,000
- -------------------------------------------------------------
Covance, Inc. 100,000 1,962,500
- -------------------------------------------------------------
Duane Reade, Inc. 60,300 1,914,525
- -------------------------------------------------------------
E-Tek Dynamics, Inc. 100,000 4,193,750
- -------------------------------------------------------------
Enhance Financial Services Group, Inc. 104,300 2,164,225
- -------------------------------------------------------------
Excel Switching Corp. 150,000 4,087,500
- -------------------------------------------------------------
First Health Group Corp. 104,500 2,481,875
- -------------------------------------------------------------
First Sierra Financial, Inc. 175,000 3,489,062
- -------------------------------------------------------------
I2 Technologies, Inc. 100,000 3,075,000
- -------------------------------------------------------------
IMRglobal Corp. 50,000 856,250
- -------------------------------------------------------------
Ingram Micro, Inc.-Class A 80,000 2,275,000
- -------------------------------------------------------------
Jabil Circuit, Inc. 50,000 2,103,125
- -------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)-(CONTINUED)
Lernout & Hasupie Speech Products N.V. 10,000 $ 329,375
- -------------------------------------------------------------
Lincare Holdings, Inc. 30,900 927,000
- -------------------------------------------------------------
MapQuest.com, Inc. 75,000 1,120,312
- -------------------------------------------------------------
Net.B@nk, Inc. 25,000 537,500
- -------------------------------------------------------------
Newell Rubbermaid, Inc. 75,000 3,243,750
- -------------------------------------------------------------
NextCard, Inc. 96,000 3,468,000
- -------------------------------------------------------------
Nordstrom, Inc. 75,000 2,357,813
- -------------------------------------------------------------
ProBusiness Services, Inc. 35,000 1,115,625
- -------------------------------------------------------------
Quintiles Transnational Corp. 75,000 2,850,000
- -------------------------------------------------------------
Sapient Corp. 193,500 10,690,875
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)-(CONTINUED)
Shared Medical Systems Corp. 25,000 $ 1,496,875
- -------------------------------------------------------------
SMART Modular Technologies, Inc. 100,000 1,862,500
- -------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 349,000 4,340,688
- -------------------------------------------------------------
Sunrise Assisted Living, Inc. 75,000 2,264,063
- -------------------------------------------------------------
Terayon Communication Systems, Inc. 32,200 1,259,825
- -------------------------------------------------------------
Wesley Jessen VisionCare, Inc. 74,300 2,349,737
- -------------------------------------------------------------
Whole Foods Market, Inc. 99,500 4,378,000
- -------------------------------------------------------------
$81,861,544
=============================================================
</TABLE>
Abbreviation
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, include the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 07/30/99 with a maturing value of
$500,213,750. Collateralized by U.S. Treasury obligations.
(d) Collateral on short sales was segregated by the Fund in the amount of
$84,480,376 which represents 103.20% of market value.
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$319,721,443) $424,783,675
- ---------------------------------------------------------
Receivables for:
Investments sold 6,230,259
- ---------------------------------------------------------
Investments sold short 83,160,426
- ---------------------------------------------------------
Fund shares sold 1,251,508
- ---------------------------------------------------------
Dividends and interest 34,574
- ---------------------------------------------------------
Investment for deferred compensation plan 4,409
- ---------------------------------------------------------
Other assets 424,047
- ---------------------------------------------------------
Total assets 515,888,898
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Cash to broker 561,250
- ---------------------------------------------------------
Investments purchased 4,307,523
- ---------------------------------------------------------
Fund shares reacquired 1,278,581
- ---------------------------------------------------------
Deferred compensation plan 4,409
- ---------------------------------------------------------
Loans 60,000,000
- ---------------------------------------------------------
Short position covered 48,349
- ---------------------------------------------------------
Market value of securities sold short
(proceeds from sales $83,160,426) 81,861,544
- ---------------------------------------------------------
Options written (premiums received
$1,266,631) 1,524,675
- ---------------------------------------------------------
Accrued advisory fees 299,603
- ---------------------------------------------------------
Accrued distribution fees 198,200
- ---------------------------------------------------------
Accrued trustees' fees 819
- ---------------------------------------------------------
Accrued transfer agent fees 16,471
- ---------------------------------------------------------
Accrued operating expenses 296,144
- ---------------------------------------------------------
Total liabilities 150,397,568
- ---------------------------------------------------------
Net assets applicable to shares outstanding $365,491,330
- ---------------------------------------------------------
NET ASSETS:
Class A $205,720,739
=========================================================
Class B $153,793,107
=========================================================
Class C $ 5,977,484
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 13,848,576
=========================================================
Class B 10,428,103
=========================================================
Class C 404,564
=========================================================
Class A:
Net asset value and redemption price per
share $ 14.86
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $14.86
divided by 94.50%) $ 15.72
=========================================================
Class B:
Net asset value and offering price per
share $ 14.75
=========================================================
Class C:
Net asset value and offering price per
share $ 14.78
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended July 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 1,905,385
- ---------------------------------------------------------
Dividends 438,350
- ---------------------------------------------------------
Total investment income 2,343,735
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,594,463
- ---------------------------------------------------------
Administrative services fees 109,921
- ---------------------------------------------------------
Custodian fees 56,674
- ---------------------------------------------------------
Interest expense 1,456,556
- ---------------------------------------------------------
Transfer agent fees-Class A 182,036
- ---------------------------------------------------------
Transfer agent fees-Class B 160,849
- ---------------------------------------------------------
Transfer agent fees-Class C 1,786
- ---------------------------------------------------------
Trustees' fees 9,366
- ---------------------------------------------------------
Distribution fees-Class A 516,599
- ---------------------------------------------------------
Distribution fees-Class B 1,106,186
- ---------------------------------------------------------
Distribution fees-Class C 12,281
- ---------------------------------------------------------
Dividends on short sales 119,433
- ---------------------------------------------------------
Other 531,400
- ---------------------------------------------------------
Total expenses 6,857,550
- ---------------------------------------------------------
Less: Expenses paid indirectly (19,022)
- ---------------------------------------------------------
Net expenses 6,838,528
- ---------------------------------------------------------
Net investment income (loss) (4,494,793)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 27,586,081
- ---------------------------------------------------------
Securities sold short (2,444,340)
- ---------------------------------------------------------
Futures contracts (6,577,308)
- ---------------------------------------------------------
Option contracts written 494,853
- ---------------------------------------------------------
Option contracts purchased (10,070,868)
- ---------------------------------------------------------
8,988,418
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 100,335,190
- ---------------------------------------------------------
Securities sold short 1,231,833
- ---------------------------------------------------------
Futures contracts 3,348,202
- ---------------------------------------------------------
Option contracts written (322,484)
- ---------------------------------------------------------
Option contracts purchased 8,802,335
- ---------------------------------------------------------
113,395,076
- ---------------------------------------------------------
Net gain from investment securities,
securities sold short, futures and
option contracts 122,383,494
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $117,888,701
=========================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the year ended July 31, 1999 and the period June 29, 1998 (date operations
commenced) through July 31, 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,494,793) $ 148,549
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities, securities
sold short, futures and option contracts 8,988,418 1,217,379
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, securities sold short, futures
and option contracts 113,395,076 (7,292,005)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 117,888,701 (5,926,077)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (102,881) --
- -----------------------------------------------------------------------------------------
Class B (48,732) --
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 30,818,297 110,724,862
- -----------------------------------------------------------------------------------------
Class B 19,845,339 86,925,398
- -----------------------------------------------------------------------------------------
Class C 5,266,423 --
- -----------------------------------------------------------------------------------------
Net increase in net assets 173,667,147 191,724,183
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 191,824,183 100,000
- -----------------------------------------------------------------------------------------
End of period $365,491,330 $191,824,183
=========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $253,662,739 $197,747,885
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (97,371) 150,924
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, securities sold short, futures and option
contracts 5,822,891 1,217,379
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, securities sold short, futures and option
contracts 106,103,071 (7,292,005)
- -----------------------------------------------------------------------------------------
$365,491,330 $191,824,183
=========================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF CASH FLOWS
For the year ended July 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATIONS:
Interest and dividends $ 2,343,735
- ---------------------------------------------------------------------------
Expenses (6,838,528)
- ---------------------------------------------------------------------------
Net investment income (loss) (4,494,793)
- ---------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INVESTMENT INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATIONS:
Change in receivable for investments sold (5,975,467)
- ---------------------------------------------------------------------------
Change in receivable for fund shares sold 5,512,384
- ---------------------------------------------------------------------------
Change in receivable for dividends and interest (20,993)
- ---------------------------------------------------------------------------
Change in other assets (397,918)
- ---------------------------------------------------------------------------
Change in payables for investments purchased (18,635,702)
- ---------------------------------------------------------------------------
Change in payables for fund shares reacquired 706,435
- ---------------------------------------------------------------------------
Change in accrued expenses 653,379
- ---------------------------------------------------------------------------
Proceeds from sales of securities* 680,068,332
- ---------------------------------------------------------------------------
Short sales activity* (2,395,991)
- ---------------------------------------------------------------------------
Purchases of securities* (884,986,394)
- ---------------------------------------------------------------------------
Net proceeds on short-term securities 115,161,314
- ---------------------------------------------------------------------------
Futures activity (4,603,556)
- ---------------------------------------------------------------------------
Options written activity 1,626,262
- ---------------------------------------------------------------------------
Net cash used in operations (117,782,708)
- ---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to shareholders (151,613)
- ---------------------------------------------------------------------------
Dividends reinvested 137,874
- ---------------------------------------------------------------------------
Capital stock sold 154,523,491
- ---------------------------------------------------------------------------
Capital stock reacquired (98,731,306)
- ---------------------------------------------------------------------------
Borrowings 60,000,000
- ---------------------------------------------------------------------------
Net cash provided by financing activities 115,778,446
- ---------------------------------------------------------------------------
Net increase (decrease) in cash (2,004,262)
- ---------------------------------------------------------------------------
Cash at beginning of period 1,443,012
- ---------------------------------------------------------------------------
Cash at end of period $ (561,250)
===========================================================================
</TABLE>
* Other than short-term securities
See Notes to Financial Statements.
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
July 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Opportunities Fund (the "Fund") is a series portfolio of AIM
Special Opportunities Funds (the "Trust"). The Trust is a Delaware business
trust registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of two
investment portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C. Class A shares are sold with
a front-end sales charge. Class B and Class C shares are sold with a contingent
deferred sales charge. Matters affecting each portfolio or class are voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term capital appreciation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or, absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations either 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.
B. Accounting for Securities Sold Short -- When the Fund sells common stock
short, an amount equal to the proceeds of the sale is recorded as an asset.
This asset is offset by a liability (representing the borrowed security)
recorded on the books of the Fund at the market value of the common stock
determined each day in accordance with the procedures for security
valuations discussed in section "A". The Fund's risk is that the value of
the security will increase rather than decline and thus an unrealized loss
will be recorded. When the Fund closes out a short position by delivering
the stock sold short, the Fund will realize a gain or loss and the liability
related to such short position will be eliminated. The Fund is required to
segregate cash or securities as collateral at a level that is equal to the
current market value of the securities sold short to secure its obligation
to the broker who delivered such securities to the buyer on behalf of the
Fund. The amount segregated as collateral deposits will not at any time
exceed 25% of the Fund's net assets.
C. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income, dividend expense on
short sales and distributions to shareholders are recorded on the
ex-dividend date. On July 31, 1999, undistributed net income increased by
$4,398,111, undistributed net realized gain decreased by $4,382,906 and
capital stock decreased by $15,205 in order to comply with the requirements
of the American Institute of Certified Public Accountants Statement of
Position 93-2. Net assets of the fund were unaffected by the
reclassifications discussed above.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Call Options -- The Fund may write and buy call options, including
securities index options. Options written by the Fund normally will have
expiration dates between three and nine months from the date written. The
exercise price of a call option may be below, equal to, or above the current
market value of the underlying security at the time the option is written.
When the Fund writes a call option, an amount equal to the premium received
by the Fund is recorded as an asset and an equivalent liability. The amount
of the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the sale
are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at
12
<PAGE> 15
any time during the option period. During the option period, in return for
the premium paid by the purchaser of the option, the Fund has given up the
opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the risk
of loss should the price of the underlying security decline. During the
option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation
is terminated upon the expiration of the option period or at such earlier
time at which the Fund effects a closing purchase transaction by purchasing
(at a price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
An option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying stock index on
the exercise date, multiplied by a fixed "index multiplier." A securities
index fluctuates with changes in the market values of the securities
included in the index. In the purchase of securities index options the
principal risk is that the premium and transaction costs paid by the Fund in
purchasing an option will be lost if the changes in the level of the index
do not exceed the cost of the option. In writing securities index options,
the principal risk is that the Fund could bear a loss on the options that
would be only partially offset (or not offset at all) by the increased value
or reduced cost of hedged securities. Moreover, in the event the Fund were
unable to close an option it had written, it might be unable to sell the
securities used as cover.
The Fund will not write options if, immediately thereafter, the
aggregate value of the securities underlying all such options, determined as
of the dates such options were written, would exceed 50% of the total assets
of the Fund.
F. Put Options -- The Fund may purchase and write put options including
securities index options. By purchasing a put option, the Fund obtains the
right (but not the obligation) to sell the options' underlying instrument at
a fixed strike price. In return for this right, a Fund pays an option
premium. The option's underlying instrument may be a security, securities
index, or a futures contract. Put options may be used by a Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or
a portion of the Fund's resulting losses. At the same time, because the
maximum the Fund has at risk is the cost of the option, purchasing put
options does not eliminate the potential for the Fund to profit from an
increase in the value of the securities hedge. The Fund may write put
options to earn additional income in the form of option premiums if it
expects the price of the underlying securities to remain stable or rise
during the option period so that the option will not be exercised. The risk
in this strategy is that the price of the underlying securities may decline
by an amount greater than the premium received. The Fund will not purchase
options if, at the time of the investment, the aggregate premiums paid for
outstanding options will exceed 25% of the Fund's total assets.
G. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
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 or cash 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 the change in the value of the
contracts may not correlate with changes in the value of the Fund's
portfolio being hedged.
H. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 1% of the
Fund's average daily net assets.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended July 31, 1999, AIM was
paid $109,921 for such services.
The Fund, pursuant to a transfer agency and shareholder service agreement,
has agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency shareholder services to the Fund. During the year ended July 31, 1999,
AFS was paid $197,079 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
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. The Fund pursuant to the Class B Plan, pays AIM Distributors
compensation at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of these amounts, the Fund may pay a service
fee of 0.25% of the average daily net assets of the Class A, Class B or Class C
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the fiscal period or year
ended July 31, 1999, the Class A, Class B and Class C shares paid AIM
Distributors $516,599, $1,106,186, and $12,281, respectively, as compensation
under the Plans.
13
<PAGE> 16
AIM Distributors received commissions of $212,220 from sales of the Class A
shares of the Fund during the year ended July 31, 1999. Such commissions are not
an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended July 31, 1999, AIM
Distributors received $6,932 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS. During the year ended
July 31, 1999, the Fund paid legal fees of $2,606 for services rendered by
Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A
member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended July 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$2,962 and $16,060, respectively under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $19,022 during the year ended July 31, 1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust may invest 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 The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $240,000,000 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 July 31, 1999, the maximum amount outstanding during the period and also
outstanding at the end of the period was $60,000,000 while borrowings averaged
$24,774,247 per day with a weighted average interest rate of 5.46%. Interest
expense (excluding commitment fees) for the year ended July 31, 1999 was
$1,353,601. The funds which are parties to the line of credit are charged a
commitment fee of 0.06% on the unused balance of the committed line. The
commitment fee is allocated among such funds based on their respective average
net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended July 31, 1999 was
$757,782,934 and $584,474,098, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of July 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $112,321,750
- ---------------------------------------------------------
Securities sold short 4,337,489
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (7,523,256)
- ---------------------------------------------------------
Securities sold short (3,038,607)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $106,097,376
=========================================================
Cost of investments for tax purposes is $319,985,181.
Proceeds from securities sold short for tax purposes is
the same for tax and financial reporting purposes.
</TABLE>
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the year ended July 31, 1999 and the period
June 29, 1998 (date operations commenced) through July 31, 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 9,086,718 $ 99,751,555 11,173,989 $112,285,297
- ----------------------------------------------------------------------------
Class B* 4,403,590 48,831,913 8,700,960 87,549,103
- ----------------------------------------------------------------------------
Class C* 463,451 5,940,023 -- --
- ----------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 8,677 96,302 -- --
- ----------------------------------------------------------------------------
Class B* 3,755 41,572 -- --
- ----------------------------------------------------------------------------
Reacquired:
Class A (6,264,993) (69,029,559) (155,815) (1,560,435)
- ----------------------------------------------------------------------------
Class B* (2,617,703) (29,028,148) (62,499) (623,705)
- ----------------------------------------------------------------------------
Class C (58,887) (673,599) -- --
- ----------------------------------------------------------------------------
5,024,608 $ 55,930,059 19,656,635 $197,650,260
============================================================================
</TABLE>
* Class B and Class C shares commenced sales on July 13, 1998 and December 30,
1998, respectively.
14
<PAGE> 17
NOTE 8-CALL OPTION CONTRACTS
Transactions in call options written during the year ended July 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 775 $ 71,774
- ------------------------------------------------ --------- -----------
Written 9,268 4,479,947
- ------------------------------------------------ --------- -----------
Closed (9,642) (4,495,288)
- ------------------------------------------------ --------- -----------
Expired (401) (56,433)
- ------------------------------------------------ --------- -----------
End of period -- $ --
================================================ ========= ===========
</TABLE>
NOTE 9-PUT OPTION CONTRACTS
Transactions in put option contracts written during the year ended July 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 100 $ 63,448
- ------------------------------------------------ --------- -----------
Written 3,148 2,245,778
- ------------------------------------------------ --------- -----------
Closed (1,265) (843,702)
- ------------------------------------------------ --------- -----------
Expired (300) (198,893)
- ------------------------------------------------ --------- -----------
End of period 1,683 $ 1,266,631
================================================ ========= ===========
</TABLE>
Open put option contracts written at July 31, 1999 were as follows:
<TABLE>
<CAPTION>
JULY 31,
1999 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ----- -------- ------ --------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index SEP 99 $1,025 200 $ 44,398 $ 48,125 $ (3,727)
SEP 99 1,050 444 104,039 138,750 (34,711)
DEC 99 1,025 589 717,347 854,050 (136,703)
DEC 99 975 450 400,847 483,750 (82,903)
---------- ---------- ---------
1,683 $1,266,631 $1,524,675 $(258,044)
============== ====== ====== ===== ========== ========== =========
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the year ended July 31, 1999 and the period June 29, 1998 (date sales
commenced) through July 31, 1998, for a share of Class B outstanding during the
year ended July 31, 1999 and the period July 13, 1998 (date sales commenced)
through July 31, 1998, and for a share of Class C outstanding during the period
December 30, 1998 (date sales commenced) through July 31, 1999.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------- ------------------- -------
1999 1998 1999 1998 1999
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.76 $ 10.00 $ 9.76 $ 10.07 $11.70
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Income from investment operations:
Net investment income (loss) (0.09)(a) 0.02(a) (0.17)(a) 0.01(a) (0.11)(a)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) 5.20 (0.26) 5.17 (0.32) 3.19
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Total from investment operations 5.11 (0.24) 5.00 (0.31) 3.08
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Dividends from net investment income (0.01) -- (0.01) -- --
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Net asset value, end of period $ 14.86 $ 9.76 $ 14.75 $ 9.76 $14.78
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Total return(b) 52.36% (2.40)% 51.30% (3.08)% 29.31%
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $205,721 $107,540 $153,793 $84,285 $5,977
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratio of expenses to average net assets, excluding interest 1.79%(c) 1.59%(d) 2.47%(c) 2.30%(d) 2.47%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratio of interest expense to average net assets 0.56%(c) -- 0.56%(c) -- 0.56%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratio of net investment income (loss) to average net assets (1.44)%(c) 2.00%(d) (2.12)%(c) 1.29%(d) (2.12)%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Portfolio turnover rate 220% 13% 220% 13% 220%
- ------------------------------------------------------------ -------- -------- -------- ------- ------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are annualized and based on average net assets of $147,599,614,
$110,618,591, and $2,094,655 for Class A, Class B and Class C shares,
respectively.
(d) Annualized.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Small Cap Opportunities Fund:
We have audited the accompanying statement of assets and
liabilities of the AIM Small Cap Opportunities Fund (a
series of AIM Special Opportunities Funds) including the
schedule of investments, as of July 31, 1999, and the
related statement of operations and cash flows for the
year then ended, the statements of changes in net assets
and financial highlights for the year then ended and for
the period June 29, 1998 (date operations commenced)
through July 31, 1998. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audit.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of July 31, 1999, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Small
Cap Opportunities Fund as of July 31, 1999, the results
of its operations and cash flows for the year then ended,
the statements of changes in its net assets and the
financial highlights for the year then ended and for the
period June 29, 1998 (date operations commenced) through
July 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
September 3, 1999
Houston, Texas
16
<PAGE> 19
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Edgar M. Larsen
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Melville B. Cox
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Mary J. Benson Boston, MA 02110
Chief Executive Officer Assistant Vice President and
Texana Global, Inc.; Assistant Treasurer COUNSEL TO THE FUND
Formerly Member
of the U.S. House of Representatives Sheri Morris Ballard Spahr
Assistant Vice President and Andrews & Ingersoll, LLP
Carl Frischling Assistant Treasurer 1735 Market Street
Partner Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel LLP Renee A. Friedli
Assistant Secretary COUNSEL TO THE TRUSTEES
Robert H. Graham
President and Chief Executive Officer P. Michelle Grace Kramer, Levin, Naftalis & Frankel LLP
A I M Management Group Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
Prema Mathai-Davis Jeffrey H. Kupor
Chief Executive Officer, YWCA of the U.S.A. Assistant Secretary DISTRIBUTOR
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors Nancy L. Martin A I M Distributors, Inc.
Metropolitan Transportation Authority of Assistant Secretary 11 Greenway Plaza
New York State Suite 100
Ofelia M. Mayo Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney AUDITORS
Lisa A. Moss
Louis S. Sklar Assistant Secretary KPMG LLP
Executive Vice President 700 Louisiana
Hines Interests Kathleen J. Pflueger Houston, TX 77002
Limited Partnership Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Money Market Fund leadership in the mutual-fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately $121
AIM Capital Development Fund billion in assets for more than 6.3 million
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS shareholders, including individual
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund investors, corporate clients and financial
AIM Large Cap Growth Fund AIM Asian Growth Fund institutions, as of June 30, 1999.
AIM Mid Cap Equity Fund AIM Developing Markets Fund The AIM Family of Funds--Registered
AIM Select Growth Fund AIM Euroland Growth Fund(A) Trademark-- is distributed nationwide, and
AIM Small Cap Growth Fund AIM European Development Fund AIM today is the 10th-largest mutual-fund
AIM Small Cap Opportunities Fund AIM International Equity Fund complex in the United States in assets
AIM Value Fund AIM Japan Growth Fund under management, according to Strategic
AIM Weingarten Fund AIM Latin American Growth Fund Insight, an independent mutual-fund
AIM New Pacific Growth Fund monitor.
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund
AIM High Yield Fund II AIM Global Government Income Fund
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund
AIM High Income Municipal Fund AIM Global Financial Services Fund
AIM Municipal Bond Fund AIM Global Health Care Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund
AIM Tax-Free Intermediate Fund AIM Global Resources Fund
AIM Global Telecommunications and Technology Fund(B)
AIM Global Trends Fund(C)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (A)
On September 1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth
Fund. (B) On June 1, 1999, AIM Global Telecommunications Fund was renamed AIM
Global Telecommunications and Technology Fund. (C) Effective August 27, 1999,
AIM Global Trends Fund was restructured to operate as a traditional mutual
fund. Prior to August 27, 1999, the fund operated as a fund of funds. For more
complete information about any AIM fund(s), including sales charges and
expenses, ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money. If used as sales material after October 20, 1999, this report must
be accompanied by a current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE
--Registered Trademark--
