<PAGE> 1
SEMIANNUAL REPORT / JANUARY 31 1999
AIM SMALL CAP
OPPORTUNITIES FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 2
------------------------------------
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 A, B and 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 investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Investing in smaller companies may involve greater risk and potential
reward than investing in more established companies. Leveraging and short
selling, along with other hedging strategies, may present higher risks, but
also offer the potential for greater rewards. Short sales involve greater
risk in that they rely on the managers' ability to accurately anticipate
the future value of a security.
o Past performance cannot guarantee comparable future results.
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.
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 Standard & Poor's Composite Index of 500 stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general.
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 A PORTION 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
SEMIANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
As the period covered by this report opened, markets were in
[PHOTO OF the midst of a serious loss of confidence stemming from
Charles T. global financial crises and widespread decline in U.S.
Bauer, corporate earnings growth. From July till October, a major
Chairman of correction for equities, including previously market-leading
the Board of blue chips, bolstered U.S. Treasury issues, whose safety
THE FUND attracts investors in doubtful times. The reporting period
APPEARS HERE] would bring two particularly serious financial shocks, first
the debt default by Russia, and later the currency
devaluation by Brazil. The result was another six months of
market volatility here and abroad.
Beginning in late September, the U.S. Federal Reserve
Board intervened to pump liquidity and confidence into
markets. Investors responded favorably, and the reporting
period closed on a positive note with domestic equities
rallying and bonds displaying much less momentum.
Some stock indexes produced excellent total return for the six-month
reporting period, with the S&P 500 index of large-company stocks up a dramatic
15.02%. But focusing on one market benchmark may give you an incomplete view.
There was wide divergence among market segments during this reporting period.
For example, the Russell 2000 Index of small-company stocks rose only 2.40%
during the six months covered by this report. Even within the S&P 500, the
bigger the company, the better the performance.
HOW SHOULD INVESTORS RESPOND?
We understood how unnerving this level of volatility could have been. Of
course, our repeated message to you is to keep a long-term outlook on
investments rather than responding to short-term fluctuations. And we are
pleased to note that most mutual fund shareholders remained cool headed and did
not pull out of the markets. In the end, most were rewarded for their long-term
perspective.
In view of recent volatility and the divergent performance of market
sectors, this may be a very good time to meet with your financial consultant to
review your current asset allocation and the diversification of your portfolio.
Broad portfolio diversification remains one of the most fundamental principles
of investing, along with long-term thinking and realistic expectations.
YOUR FUND MANAGERS' COMMENTS
On the pages that follow, your Fund's managers, experienced professionals who
have weathered previous periods of market turbulence, offer more detailed
discussion of how markets behaved, how they managed the portfolio in light of
recent volatility, and what they foresee for markets and your Fund. We hope you
find their discussion informative.
YEAR 2000 CONCERN
Many of our shareholders have asked us about AIM's year 2000 readiness status.
We appreciate these concerns, and we take the year 2000 issue seriously.
AIM has devoted considerable effort to creating a comprehensive plan for
assessing, correcting and testing our in-house systems. We will also
participate in an industrywide testing effort scheduled to begin in March. But
no matter how well we prepare and test, no one can know for sure what the year
2000 will bring. Our industry's systems are connected in complex ways to many
third parties, and there may be unforeseen problems when the year 2000 actually
arrives. Though we cannot predict what all those problems might be, we are
working with our business recovery team to develop contingency plans
appropriate for a variety of year 2000 scenarios.
We are pleased to send you this report on your Fund's recent performance. 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
AIM Investor Line at 800-246-5463 or at our Web site, www.aimfunds.com. We
often post market updates on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
------------------------------------
. . . WE ARE PLEASED TO
NOTE THAT MOST MUTUAL
FUND SHAREHOLDERS
REMAINED COOL HEADED
AND DID NOT PULL OUT OF
THE MARKETS.
------------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
<PAGE> 4
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
FUND PASSES MARKET TESTS WITH FLYING COLORS
SMALL-CAP STOCKS EXPERIENCED BOTH "DOWN" AND "UP" MARKETS DURING THE REPORTING
PERIOD. HOW DID THE FUND PERFORM?
The Fund's alternative investment strategy, which can be adapted to rising or
declining markets, was severely tested during the reporting period and
performed admirably. Small-cap stocks, which were in sharp decline at the
outset of the reporting period, rebounded strongly toward its end. The Russell
2000 Growth Index and the Lipper Small Cap Funds Index ended the period with
gains of 9.45% and 0.98%, respectively, for the six months ended January 31,
1999.
The Fund's performance far exceeded both these indexes. For the reporting
period, cumulative total returns at net asset value, that is, without a sales
charge, were 24.78% for Class A shares and 24.24% for Class B shares. Class C
shares commenced sales on December 30, 1998, and posted a cumulative total
return at net asset value of 6.04% through the end of the reporting period.
WHAT WERE MARKET CONDITIONS LIKE DURING THE REPORTING PERIOD?
When the reporting period began on July 31, 1998, the Dow Jones Industrial
Average (the Dow) had just started a steep decline. Serious economic problems
in Russia and Latin America as well as Asia, combined with political
controversy in the United States, prompted the sell-off.
The market continued its slide until October 8, when it began an impressive
recovery. The Federal Reserve Board (the Fed) cut interest rates three times in
the fall. These Fed moves, combined with encouraging economic indicators,
sparked a strong rally in the stock market. The Dow soared to a record high on
November 23, but faltered in January amid concerns about Brazil's financial
woes. Still, the Dow ended the reporting period with a modest gain of 6.32%.
HOW DID SMALL-CAP STOCKS FARE IN THIS ENVIRONMENT?
Small-cap stocks had been in a severe downturn for several months before the
beginning of the reporting period, and this trend continued until October 8
when the Russell 2000 Index sank to its lowest level in more than two years. In
the unsettled market environment, investors favored more liquid assets,
particularly U.S. Treasury bonds.
During the last months of the reporting period, however, small-cap stocks
rallied strongly, benefiting from the Fed's interest rate cuts. Investors also
found small-cap stocks attractive because earnings growth projections for
smaller companies were greater than those for larger companies. Finally,
small-cap stocks represented good bargains as their prices relative to
large-cap stocks were at their lowest levels in decades.
===============================================================================
CUMULATIVE TOTAL RETURN
CLASS A AND CLASS B SHARES
For six months ended 1/31/99
- -------------------------------------------------------------------------------
Class A Shares 24.78%
Class B Shares 24.24%
Russell 2000 Growth Index 9.45%
Lipper Small Cap Funds Index 0.98%
===============================================================================
HOW THE FUND'S INVESTMENT STRATEGY WORKS
The Fund's investment strategy allows it to hold both long and short positions.
Long positions consist of stocks that the Fund actually owns. Short positions
constitute stocks that have been borrowed with the intention of selling them
and purchasing them at a lower price.
We believe that earnings drive stock prices. With short sales, we seek to
take advantage of an expected fall in price of the stock of a company whose
earnings are decelerating. We sell the borrowed stock when we believe its price
will drop, intending to purchase the same stock at an anticipated lower price.
The strategy offers the potential for protection in a declining market, thereby
reducing risk. A mixed portfolio of long and short positions can potentially
produce lower volatility than an all-long portfolio.
When earnings are falling, the Fund will generally have a greater number of
short positions. When earnings are rising, the Fund typically will have more
long positions in the portfolio. For example, after small-cap stocks rebounded
in October, we reduced the number of short positions in the Fund to take
advantage of the market upswing.
Other strategies that the Fund may employ include leveraging-borrowing
money, typically to purchase additional securities.
See important Fund and index disclosures inside front cover.
AIM SMALL CAP OPPORTUNITIES FUND
2
<PAGE> 5
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 1/31/99, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================================
TOP 10 STOCK HOLDINGS TOP 10 INDUSTRIES TOP 10 SHORT POSITIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Chico's FAS, Inc. 1.31% 1. Computers (Software & Services) 17.61% 1. HEALTHSOUTH Corp. 0.71%
2. Osteotech, Inc. 1.27 2. Health Care (Medical Products & 2. WestPoint Stevens, Inc. 0.69
3. RF Micro Devices, Inc. 1.26 Supplies) 8.54 3. I2 Technologies, Inc. 0.61
4. Alpharma, Inc.-Class A 1.20 3. Electronics (Semiconductors) 6.02 4. Stryker Corp. 0.61
5. American Eagle Outfitters, Inc. 1.19 4. Retail (Specialty-Apparel) 5.57 5. King Pharmaceuticals, Inc. 0.59
6. Superior Consultant Holdings Corp. 1.15 5. Banks (Regional) 5.22 6. Adobe Systems Inc. 0.58
7. Global Crossing Ltd. 1.15 6. Health Care (Drugs-Generic & Other) 4.69 7. Dollar General Corp. 0.48
8. Express Scripts, Inc.-Class A 1.14 7. Restaurants 4.53 8. Anadigics, Inc. 0.46
9. Sonic Corp. 1.14 8. Communications Equipment 4.43 9. Enhance Financial Services
10. VISX, Inc. 1.12 9. Services (Data Processing) 4.33 Group Inc. 0.43
10. Retail (Specialty) 4.22 10. Beckman Coulter Inc. 0.43
Please 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>
WHY WAS THE FUND ABLE TO POST IMPRESSIVE GAINS, DESPITE A FLUCTUATING MARKET?
The Fund benefited from its alternative investment strategy, which seeks to
take advantage of both rising and falling earnings trends. For a description of
the Fund's investment strategy, please see the accompanying sidebar.
HOW WAS THE FUND STRUCTURED AT THE END OF THE REPORTING PERIOD?
As of January 31, 1999, the Fund owned 158 stocks and had 27 short positions.
Technology, consumer-cyclical and health-care stocks made up 35%, 22% and 16%
of the portfolio, respectively.
WHAT WAS BEHIND THE STRONG PERFORMANCE OF TECHNOLOGY STOCKS?
Investors flocked to Internet-related companies as they considered the
possibilities for explosive growth in the new medium. Technology companies also
benefited from consumer demand for computers costing less than $1,000 and the
need to upgrade computers to avoid complications associated with the so-called
"millennium bug."
The Fund's technology holdings included RF Micro Devices, a leading supplier
of standard and customized radio-frequency integrated circuits; Rational
Software, a producer of software that allows companies to develop their own
programs; Mindspring, an Internet service provider; and Infospace.com, a
leading distributor of content packages for Internet service providers.
WHERE WAS YOUR FOCUS IN THE CONSUMER-CYCLICAL SECTOR?
Our emphasis was on retail stocks. For the most part, the nation's retailers
benefited from healthy consumer spending, stemming from low unemployment and
rising wages. Sales were robust for the crucial holiday season, largely because
of a growth in Internet sales.
American Eagle Outfitters, one of companies represented in the portfolio,
sells casual wear for men and women. The Fund's other retail holdings included
Chico's FAS, a women's casual clothing chain, and Ann Taylor, which sells
upscale wear for women.
Another consumer-cyclical holding that we liked was Jakks Pacific, which
makes action figures for the World Wrestling Federation.
WHAT ABOUT HEALTH-CARE STOCKS?
While pharmaceutical-company stocks rose dramatically, the performance of other
stocks within the health-care sector was more restrained. Pharmaceutical
companies, which enjoyed robust earnings, continued to offer a wide range of
new products that were enthusiastically received by a health-conscious public.
The Fund benefited from owning the stocks of Osteotech, which provides
products for surgical procedures; Alpharma, a producer of generic drugs and
animal-health products; and VISX, maker of a laser vision-correction system.
WHAT IS YOUR OUTLOOK?
We expect the low-inflation, low-interest-rate environment that proved so
favorable to certain segments of the stock market in l998 to persist in the
months ahead. We also believe the economy will continue to grow, but perhaps at
a slower pace. Profits are expected to decline for larger companies while
remaining robust for small-cap companies. Moreover, small-cap stocks continue
to be relatively cheap in comparison to large-cap stocks. These factors could
make small-cap stocks increasingly attractive to investors and thus prove
beneficial to the Fund.
Given the unsettling economic problems in Asia, Russia and Latin America,
stock markets could remain volatile. In such an environment, investors would be
well advised to focus on their long-term financial goals, rather than
transitory market fluctuations.
See important Fund and index disclosures inside front cover.
AIM SMALL CAP OPPORTUNITIES FUND
3
<PAGE> 6
SEMIANNUAL REPORT / FOR CONSIDERATION
OF FINANCE AND THE FED
A few words from Federal Reserve Board Chairman Alan Greenspan can send the
markets into a frenzy or calm them down.
Why? In 1998, a year of record volatility in stock and bond markets, when
investors and analysts alike seemed genuinely puzzled as to what to do next,
the Federal Reserve Board became a constant in the midst of the unsettling
environment.
WHAT IS THE FED?
The Federal Reserve Board, or "The Fed," consists of seven presidential
appointees including Chairman Greenspan. In addition to overseeing the
country's Federal Reserve System--the central bank of the United
States--members of the Fed serve on the Federal Open Market Committee (FOMC),
which decides monetary policy. Other FOMC members include the chairman of the
New York Federal Reserve Bank and four other FOMC seats that are rotated among
the remaining 11 Federal Reserve Banks.
The FOMC meets eight times a year. These meetings are preceded by the
release of the so-called "Beige Book" (see sidebar) and are always followed
with a great deal of interest because it is here that decisions on monetary
policy are made. The meetings traditionally feature reports on international
and domestic economic developments, conditions in financial markets, and
forecasts for the future. Policy options are then laid out and discussed, and a
vote is taken on whether the Fed will act, often by adjusting interest rates.
WHY ARE ADJUSTMENTS TO INTEREST RATES SO CLOSELY FOLLOWED?
Interest rate changes by the Fed are important for several reasons: (1) they
frequently reflect economic trends; (2) they immediately affect bond markets;
(3) they usually affect the stock market because when rates are high, people
tend to be less apt to take on the greater risks of stocks; and (4) they often
have a trickle-down effect.
For example, an interest rate hike was considered during the first half of
1998 when the U.S. economy seemed in danger of overheating and sparking
inflation. A rate hike would have helped slow things down by making borrowing
more expensive. Instead, myriad financial difficulties abroad affected markets
and slowed the U.S. economy enough to persuade the Fed to lower the federal
funds rate--the interest rate banks charge each other for overnight credit--in
September. When that rate cut did little to calm markets and loosen credit in
the U.S., the Fed cut both the federal funds rate and the discount rate--the
interest rate at which banks borrow emergency funds from the Federal
Reserve--in October and set off rallies in stock and bond markets. The Fed cut
both interest rates again in November 1998, citing continued strains in
financial markets and spurring another jump in the stock market as a whole.
Consumers feel the effect of interest rate adjustments as they trickle down
through the banking system. Rate cuts by the Fed often prompt rate reductions
on home mortgages, car loans, and variable-rate credit cards. Conversely, rate
hikes
-----------------
THE
BEIGE
BOOK
-----------------
WHAT IS THE BEIGE BOOK?
The Beige Book report is published about two weeks before each FOMC meeting.
The report contains anecdotal data on current economic conditions in each
Federal Reserve Bank district, summarizing the information by district and
sector. Interviews with key business people, economists, market experts and
other sources supply the details for the report. You can find out more about
the Fed's Beige Book and other interesting topics by visiting the Fed's Web
site at www.bog.frb.fed.us.
AIM SMALL CAP OPPORTUNITIES FUND
4
<PAGE> 7
SEMIANNUAL REPORT / FOR CONSIDERATION
make all forms of loans more expensive.
Although the Fed does not directly control the financial markets, its
influence over short-term interest rates makes it a potent force.
WHAT ELSE DOES THE FED DO?
The Fed is an integral part of the Federal Reserve System (FRS), created by
Congress in 1913. The FRS includes 12 regional Federal Reserve Banks in New
York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis,
Philadelphia, Richmond, St. Louis, and San Francisco. A Federal Reserve Bank
o clears checks,
o lends money to banks needing emergency reserves,
o issues currency, and
o holds reserve deposits of member banks.
A bank must hold a percentage of its loans as liquid reserves, meaning
readily available. The Fed decides what this percentage will be and can lower
it to inject more money into the economy or raise it to tighten credit.
The Fed also determines the margin requirements for securities investors and
traders and which securities may be purchased on margin. (Margin is the minimum
amount of cash that a customer is required to deposit on the purchase of
securities.) Known as Regulation T, this rule prevents the overextension of
credit in securities transactions.
While these other functions of the Federal Reserve System do not generate as
many headlines as its interest rate moves, they are crucial to the Fed's
purpose of keeping the nation's banking system safe, flexible and stable.
FED RATE CUTS AND THE DOW
Weekly closes, Dow Jones Industrial Average*
7/3/98-12/31/98
===============================================================================
Date DOW Close
- -------------------------------------------------------------------------------
7/10/98 9105.74 10/9/98 7899.52
7/17/98 9337.97 10/16/98 8416.76
7/24/98 8937.36 10/23/98 8452.29
7/31/98 8883.29 10/30/98 8592.1
8/7/98 8598.02 11/6/98 8975.46
8/14/98 8425 11/13/98 8919.59
8/21/98 8533.66 11/20/98 9159.55
8/28/98 8051.68 11/27/98 9333.08
9/4/98 7640.25 12/4/98 9016.14
9/11/98 7795.5 12/11/98 8821.76
9/18/98 7895.66 12/18/98 8903.63
9/25/98 8028.77 12/24/98 9217.99
10/2/98 7784.69 12/31/98 9181.43
This graph shows the weekly closing levels for the Dow from July 3 through
December 31, 1998. While the Fed does not control the Dow, which is affected by
innumerable factors, its influence is clearly reflected in the index's
behavior.
* The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
AIM SMALL CAP OPPORTUNITIES FUND
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-107.52%
AIR FREIGHT-0.59%
Atlas Air, Inc.(a) 33,000 $ 1,697,438
- ------------------------------------------------------------
AIRLINES-0.57%
COMAIR Holdings, Inc. 45,000 1,650,938
- ------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.77%
Midas, Inc. 65,000 2,205,938
- ------------------------------------------------------------
BANKS (REGIONAL)-5.22%
Bank United Corp.-Class A 51,500 2,060,000
- ------------------------------------------------------------
Centennial Bancorp(a) 104,500 1,724,250
- ------------------------------------------------------------
Centura Banks, Inc. 20,000 1,410,000
- ------------------------------------------------------------
CCB Financial Corp. 30,000 1,631,250
- ------------------------------------------------------------
Community First Bankshares,
Inc. 85,000 1,652,188
- ------------------------------------------------------------
First Virginia Banks, Inc. 46,000 2,173,500
- ------------------------------------------------------------
Golden State Bancorp, Inc.(a) 72,000 1,345,500
- ------------------------------------------------------------
Southwest Bancorporation of Texas,
Inc.(a) 50,000 662,500
- ------------------------------------------------------------
Sterling Bancshares, Inc. 70,000 778,750
- ------------------------------------------------------------
Trustmark Corp. 75,000 1,575,000
- ------------------------------------------------------------
15,012,938
- ------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.84%
Adolph Coors Co. 37,500 2,402,344
- ------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.85%
Emmis Broadcasting Corp.-Class
A(a) 47,500 2,434,375
- ------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.43%
Comverse Technology, Inc.(a) 37,000 3,108,000
- ------------------------------------------------------------
Dycom Industries, Inc.(a) 57,450 2,244,141
- ------------------------------------------------------------
Harmonic Lightwaves, Inc.(a) 75,000 1,837,500
- ------------------------------------------------------------
Periphonics Corp.(a) 200,000 2,625,000
- ------------------------------------------------------------
REMEC, Inc.(a) 75,000 1,500,000
- ------------------------------------------------------------
VideoServer, Inc.(a) 90,000 1,406,250
- ------------------------------------------------------------
12,720,891
- ------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.63%
Jabil Circuit, Inc.(a) 45,000 3,214,688
- ------------------------------------------------------------
Network Appliance, Inc.(a) 30,000 1,590,000
- ------------------------------------------------------------
QLogic Corp.(a) 10,000 1,378,750
- ------------------------------------------------------------
SMART Modular Technologies,
Inc.(a) 75,000 1,537,500
- ------------------------------------------------------------
Xircom, Inc.(a) 60,000 2,715,000
- ------------------------------------------------------------
10,435,938
- ------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-17.21%
Advanced Fibre Communications,
Inc.(a) 75,000 885,938
- ------------------------------------------------------------
Allaire Corp.(a) 32,000 1,644,000
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
American Management Systems,
Inc.(a) 70,000 $ 2,568,125
- ------------------------------------------------------------
Axent Technologies, Inc.(a) 62,000 2,108,000
- ------------------------------------------------------------
Business Objects S.A.-ADR(a)
(France) 50,000 1,725,000
- ------------------------------------------------------------
Check Point Software
Technologies Ltd. (Israel) 57,500 2,788,750
- ------------------------------------------------------------
Completed Business Solutions,
Inc.(a) 40,000 1,200,000
- ------------------------------------------------------------
Computer Management Sciences,
Inc.(a) 125,000 1,945,313
- ------------------------------------------------------------
Concord EFS, Inc.(a) 56,000 2,275,000
- ------------------------------------------------------------
Concur Technologies, Inc.(a) 35,000 1,102,500
- ------------------------------------------------------------
EarthLink Network, Inc.(a) 10,000 798,750
- ------------------------------------------------------------
Gemstar International Group
Ltd.(a) 15,000 868,125
- ------------------------------------------------------------
InfoCure Corp.(a) 58,500 2,106,000
- ------------------------------------------------------------
Informix Corp.(a) 150,000 1,640,625
- ------------------------------------------------------------
InfoSpace.com, Inc.(a) 30,000 1,725,000
- ------------------------------------------------------------
Macromedia, Inc.(a) 70,000 2,454,375
- ------------------------------------------------------------
Medical Manager Corp.(a) 45,000 1,563,750
- ------------------------------------------------------------
Mercury Interactive Corp.(a) 20,000 1,262,500
- ------------------------------------------------------------
MindSpring Enterprises,
Inc.(a) 15,000 1,530,000
- ------------------------------------------------------------
QRS Corp.(a) 35,000 1,750,000
- ------------------------------------------------------------
QuadraMed Corp.(a) 100,000 2,837,500
- ------------------------------------------------------------
Rational Software Corp.(a) 95,000 3,140,938
- ------------------------------------------------------------
Secure Computing Corp.(a) 80,000 1,895,000
- ------------------------------------------------------------
Structural Dynamics Research
Corp.(a) 125,000 2,468,750
- ------------------------------------------------------------
USWeb Corp.(a) 100,000 3,050,000
- ------------------------------------------------------------
Verity, Inc.(a) 50,000 1,700,000
- ------------------------------------------------------------
Wind River Systems(a) 13,400 442,200
- ------------------------------------------------------------
49,476,139
- ------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES, & GIFTS)-0.47%
Fossil, Inc.(a) 45,000 1,334,531
- ------------------------------------------------------------
CONSUMER FINANCE-0.42%
Doral Financial Corp. 60,000 1,201,875
- ------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-1.03%
Patterson Dental Co.(a) 70,000 2,966,250
- ------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.55%
Aeroflex Inc.(a) 90,000 1,591,875
- ------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-6.02%
Applied Micro Circuits
Corp.(a) 30,000 1,260,000
- ------------------------------------------------------------
Flextronics International Ltd. 60,000 2,542,500
- ------------------------------------------------------------
Level One Communications,
Inc.(a) 65,000 2,567,500
- ------------------------------------------------------------
Microchip Technology, Inc.(a) 55,000 1,588,125
- ------------------------------------------------------------
PMC-Sierra, Inc.(a) 25,000 1,857,813
- ------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
RF Micro Devices, Inc.(a) 50,000 $ 3,618,750
- ------------------------------------------------------------
Semtech Corp.(a) 35,000 1,251,250
- ------------------------------------------------------------
Sipex Corp.(a) 50,000 1,337,500
- ------------------------------------------------------------
TranSwitch Corp.(a) 32,500 1,275,625
- ------------------------------------------------------------
17,299,063
- ------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.92%
ARM Financial Group,
Inc.-Class A 70,000 1,290,625
- ------------------------------------------------------------
NCO Group, Inc.(a) 55,000 1,938,750
- ------------------------------------------------------------
SEI Investments Co. 20,000 2,302,500
- ------------------------------------------------------------
5,531,875
- ------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.59%
IVAX Corp.(a) 125,000 1,695,313
- ------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-4.69%
Alpharma, Inc.-Class A 100,000 3,462,500
- ------------------------------------------------------------
Anesta Corp.(a) 100,000 2,843,750
- ------------------------------------------------------------
Barr Laboratories, Inc.(a) 50,000 1,971,875
- ------------------------------------------------------------
Inhale Therapeutic Systems,
Inc.(a) 50,000 1,668,750
- ------------------------------------------------------------
Jones Pharma, Inc. 66,400 2,116,500
- ------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 20,000 1,422,500
- ------------------------------------------------------------
13,485,875
- ------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-1.14%
Express Scripts, Inc.-Class
A(a) 50,000 3,287,500
- ------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-8.50%
Biomatrix, Inc.(a) 40,000 2,415,000
- ------------------------------------------------------------
CardioThoracic Systems,
Inc.(a) 31,000 298,375
- ------------------------------------------------------------
Colorado MEDtech, Inc.(a) 125,000 1,625,000
- ------------------------------------------------------------
Heartport, Inc.(a) 250,000 1,953,125
- ------------------------------------------------------------
MiniMed, Inc.(a) 100,000 1,086,250
- ------------------------------------------------------------
Osteotech, Inc.(a) 70,000 3,640,000
- ------------------------------------------------------------
Perclose, Inc.(a) 40,000 1,650,000
- ------------------------------------------------------------
PSS World Medical, Inc.(a) 10,000 1,562,500
- ------------------------------------------------------------
ResMed, Inc.(a) 20,000 985,000
- ------------------------------------------------------------
SangStat Medical Corp.(a) 100,000 2,759,375
- ------------------------------------------------------------
VISX, Inc.(a) 53,000 3,233,000
- ------------------------------------------------------------
Xomed Surgical Products,
Inc.(a) 89,500 3,210,813
- ------------------------------------------------------------
24,418,438
- ------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-4.01%
First Consulting Group,
Inc.(a) 100,000 2,162,500
- ------------------------------------------------------------
Hooper Holmes, Inc. 82,000 2,378,000
- ------------------------------------------------------------
Renal Care Group, Inc.(a) 75,000 2,325,000
- ------------------------------------------------------------
Superior Consultant Holdings
Corp.(a) 40,000 1,665,000
- ------------------------------------------------------------
Techne Corp.(a) 75,000 1,893,750
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)-(CONTINUED)
Veterinary Centers of America,
Inc.(a) 59,900 $ 1,093,175
- ------------------------------------------------------------
11,517,425
- ------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.37%
Penn Treaty American Corp.(a) 45,000 1,063,125
- ------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.38%
Alfa Corp. 50,000 1,100,000
- ------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.34%
HCC Insurance Holdings, Inc. 50,000 971,875
- ------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.70%
EVEREN Capital Corp. 83,000 2,023,125
- ------------------------------------------------------------
INVESTMENT MANAGEMENT-0.84%
Federated Investors,
Inc.-Class B 125,000 2,421,875
- ------------------------------------------------------------
LEISURE TIME (PRODUCTS)-2.06%
Acclaim Entertainment, Inc.(a) 150,000 1,387,500
- ------------------------------------------------------------
JAKKS Pacific, Inc.(a) 175,000 2,800,000
- ------------------------------------------------------------
THQ, Inc.(a) 70,000 1,741,250
- ------------------------------------------------------------
5,928,750
- ------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.16%
Superior TeleCom Inc. 75,000 3,318,750
- ------------------------------------------------------------
OFFICE EQUIPMENT &
SUPPLIES-0.55%
School Specialty, Inc.(a) 65,000 1,568,125
- ------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.43%
Cal Dive International,
Inc.(a) 80,000 1,240,000
- ------------------------------------------------------------
PERSONAL CARE-1.10%
D & K Healthcare Resources,
Inc.(a) 50,000 1,237,500
- ------------------------------------------------------------
NBTY, Inc.(a) 325,000 1,909,375
- ------------------------------------------------------------
3,146,875
- ------------------------------------------------------------
PUBLISHING-0.49%
Scholastic Corp.(a) 25,000 1,415,625
- ------------------------------------------------------------
RESTAURANTS-4.53%
Brinker International, Inc.(a) 50,000 1,375,000
- ------------------------------------------------------------
CKE Restaurants, Inc. 49,500 1,175,625
- ------------------------------------------------------------
Foodmaker, Inc.(a) 75,000 1,734,375
- ------------------------------------------------------------
O'Charley's Inc.(a) 145,000 2,011,875
- ------------------------------------------------------------
Papa John's International,
Inc.(a) 40,000 1,627,500
- ------------------------------------------------------------
Sonic Corp.(a) 130,000 3,282,500
- ------------------------------------------------------------
Taco Cabana-Class A(a) 200,000 1,812,500
- ------------------------------------------------------------
13,019,375
- ------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.21%
CDW Computer Centers, Inc.(a) 27,000 2,392,875
- ------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (COMPUTERS & ELECTRONICS)-(CONTINUED)
CompUSA, Inc.(a) 85,000 $ 1,073,125
- ------------------------------------------------------------
3,466,000
- ------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.77%
99 Cents Only Stores(a) 50,000 2,218,750
- ------------------------------------------------------------
RETAIL (DRUG STORES)-0.67%
Longs Drug Stores Corp. 50,000 1,915,625
- ------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.88%
Micro Warehouse, Inc.(a) 65,000 2,535,000
- ------------------------------------------------------------
RETAIL (SPECIALTY)-4.22%
CSK Auto Corp.(a) 80,000 2,700,000
- ------------------------------------------------------------
General Nutrition Companies,
Inc.(a) 150,000 2,418,750
- ------------------------------------------------------------
Hollywood Entertainment
Corp.(a) 32,000 1,082,000
- ------------------------------------------------------------
Linens 'N Things, Inc.(a) 65,000 2,396,875
- ------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 32,000 1,588,000
- ------------------------------------------------------------
Rent-A-Center, Inc.(a) 60,000 1,935,000
- ------------------------------------------------------------
12,120,625
- ------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-5.57%
American Eagle Outfitters,
Inc.(a) 50,000 3,418,750
- ------------------------------------------------------------
Ann Taylor Stores Corp.(a) 80,000 3,100,000
- ------------------------------------------------------------
Bebe Stores, Inc.(a) 65,000 2,348,125
- ------------------------------------------------------------
Chico's Fas, Inc.(a) 120,100 3,753,125
- ------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 73,600 2,180,400
- ------------------------------------------------------------
Urban Outfitters, Inc.(a) 75,000 1,223,437
- ------------------------------------------------------------
16,023,837
- ------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-2.49%
Abacus Direct Corp.(a) 25,000 1,262,500
- ------------------------------------------------------------
ACNielsen Corp.(a) 70,000 1,601,250
- ------------------------------------------------------------
CMGI Inc.(a) 16,000 1,952,000
- ------------------------------------------------------------
Lamar Advertising Co.(a) 60,000 2,355,000
- ------------------------------------------------------------
7,170,750
- ------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.95%
Championship Auto Racing Teams,
Inc.(a) 60,000 1,620,000
- ------------------------------------------------------------
G & K Services, Inc.-Class A 20,000 1,095,000
- ------------------------------------------------------------
Regis Corp. 70,000 2,887,500
- ------------------------------------------------------------
5,602,500
- ------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.62%
Insight Enterprises, Inc.(a) 50,000 1,543,750
- ------------------------------------------------------------
Sykes Enterprises, Inc.(a) 62,500 3,125,000
- ------------------------------------------------------------
4,668,750
- ------------------------------------------------------------
SERVICES (DATA PROCESSING)-4.33%
CSG Systems International,
Inc.(a) 35,000 2,620,625
- ------------------------------------------------------------
FactSet Research Systems, Inc. 40,000 2,960,000
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING)-(CONTINUED)
Fair, Issac, and Company, Inc. 50,000 $ 2,525,000
- ------------------------------------------------------------
MedQuist, Inc.(a) 70,000 2,423,750
- ------------------------------------------------------------
National Computer Systems,
Inc. 50,000 1,912,500
- ------------------------------------------------------------
12,441,875
- ------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.54%
Data Processing Resources
Corp.(a) 65,000 1,560,000
- ------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-1.12%
Cornell Corrections, Inc.(a) 75,000 1,471,875
- ------------------------------------------------------------
Tetra Tech, Inc.(a) 71,250 1,745,625
- ------------------------------------------------------------
3,217,500
- ------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.90%
Metro One Telecommunications,
Inc.(a) 140,000 2,590,000
- ------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.63%
Global Crossing Ltd.
(Bermuda)(a) 62,500 3,304,681
- ------------------------------------------------------------
Viatel, Inc. 75,000 1,368,750
- ------------------------------------------------------------
4,673,431
- ------------------------------------------------------------
TELEPHONE-0.78%
GeoTel Communications Corp.(a) 57,500 2,246,094
- ------------------------------------------------------------
TEXTILES (APPAREL)-1.61%
Quicksilver, Inc.(a) 75,100 2,525,238
- ------------------------------------------------------------
Tarrant Apparel Group(a) 50,000 2,100,000
- ------------------------------------------------------------
4,625,238
- ------------------------------------------------------------
TEXTILES (SPECIALTY)-0.45%
Happy Kids, Inc.(a) 105,000 1,286,250
- ------------------------------------------------------------
WASTE MANAGEMENT-0.38%
KTI, Inc.(a) 48,800 1,079,700
- ------------------------------------------------------------
Total Common Stocks (Cost
$239,621,385) 309,026,384
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-1.59%
CALLS-1.39%
Amex Biotech Index 995 200 Mar-99 920,375
- ----------------------------------------------------------------------
Baxter International
Inc. (Health
Care-Medical
Products & Supplies) 2,800 70 Feb-99 787,500
- ----------------------------------------------------------------------
Fore Systems, Inc. 1,000 17.50 Apr-99 250,000
(Computers-Networking) 2,280 20 Apr-99 370,500
- ----------------------------------------------------------------------
Iomega Corp.
(Computers-Peripherals) 5,500 10 Feb-99 85,938
- ----------------------------------------------------------------------
KBW Banks Index 35 825 Mar-99 139,563
65 850 Mar-99 182,812
- ----------------------------------------------------------------------
Rational Software Co.
(Computers-Software
& Services) 2,000 30 Apr-99 1,150,000
- ----------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
CALLS-(CONTINUED)
SunRise Assisted
Living, Inc.
(Healthcare-Medical
Products &
Supplies) 1,000 45 Feb-99 $ 106,250
- ----------------------------------------------------------------------
3,992,938
- ----------------------------------------------------------------------
PUTS-0.20%
Lernout & Hasupie Speech Products N.V.
(Services-Commercial
& Consumer) 1,000 40 Feb-99 587,500
- ----------------------------------------------------------------------
S & P 500 Index 125 925 Feb-99 1,562
- ----------------------------------------------------------------------
589,062
- ----------------------------------------------------------------------
Total Options Purchased (Premiums
paid $4,897,554) 4,582,000
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
WARRANTS-0.44%
BANKS (REGIONAL)-0.44%
Golden State Bancorp, Litigation
Warrants, expiring 01/01/01
(Cost $1,471,875) 300,000 1,265,625
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-2.42%(b)
Dean Witter Reynolds, Inc.,
4.78%, 02/01/99(c) $6,965,025 6,965,025
- -----------------------------------------------------------
TOTAL INVESTMENTS-111.97% 321,839,034
- -----------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(11.97)% (34,404,609)
- -----------------------------------------------------------
NET ASSETS-100.00% $287,434,425
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)
Adobe Systems, Inc. 35,000 $ 1,671,250
- ----------------------------------------------------------
Advanced Micro Devices, Inc. 45,000 1,032,187
- ----------------------------------------------------------
Anadigics, Inc. 75,100 1,323,637
- ----------------------------------------------------------
Beckman Coulter Inc. 25,000 1,246,875
- ----------------------------------------------------------
Brite Voice Systems, Inc. 56,100 561,000
- ----------------------------------------------------------
CONMED Corp. 30,000 982,500
- ----------------------------------------------------------
Dollar General Corp. 55,000 1,371,563
- ----------------------------------------------------------
Duane Reade, Inc. 11,000 330,000
- ----------------------------------------------------------
J. D. Edwards & Co. 50,000 1,015,625
- ----------------------------------------------------------
Enhance Financial Service Group
Inc. 50,000 1,250,000
- ----------------------------------------------------------
Harmon Industries, Inc. 30,000 675,000
- ----------------------------------------------------------
HEALTHSOUTH Corp. 150,000 2,034,375
- ----------------------------------------------------------
HealthCare Financial Partners, Inc. 10,000 308,125
- ----------------------------------------------------------
IDEC Pharmaceuticals Corp. 15,000 757,500
- ----------------------------------------------------------
Information Management Resources,
Inc. 45,000 1,141,875
- ----------------------------------------------------------
InterVoice, Inc. 40,000 437,500
- ----------------------------------------------------------
I2 Technologies, Inc. 50,000 1,743,750
- ----------------------------------------------------------
King Pharmaceuticals, Inc. 70,500 1,700,813
- ----------------------------------------------------------
Lernout & Hasupie Speech Products
N.V. 10,000 355,000
- ----------------------------------------------------------
Ocular Sciences, Inc. 7,200 166,500
- ----------------------------------------------------------
ProBusiness Services, Inc. 15,000 541,875
- ----------------------------------------------------------
Profit Recovery Group
International, Inc. 35,000 1,207,500
- ----------------------------------------------------------
Stryker Corp. 37,500 1,739,064
- ----------------------------------------------------------
Tenet Healthcare Corp. 50,000 1,046,875
- ----------------------------------------------------------
United Asset Management Corp. 50,000 1,162,500
- ----------------------------------------------------------
WestPoint Stevens, Inc. 75,000 1,994,531
- ----------------------------------------------------------
Whole Foods Market, Inc. 19,500 625,218
- ----------------------------------------------------------
$28,422,638
- ----------------------------------------------------------
</TABLE>
- ---------------
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 as being 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 01/29/99 with a maturing value of
$300,119,500. Collateralized by $304,204,000 U.S. Treasury obligations, 0%
due 02/04/99 to 02/20/07 with an aggregate market value at 01/31/99 of
$306,000,685.
(d) Collateral on short sales was segregated by the Fund in the amount of
$30,194,093 which represents 106.23% of market value of securities sold short.
Abbreviation:
ADR - American Depositary Receipt
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$252,955,839) $321,839,034
- ---------------------------------------------------------
Cash 3,727,497
- ---------------------------------------------------------
Receivables for:
Investments sold 2,597,413
- ---------------------------------------------------------
Investments sold short 27,276,177
- ---------------------------------------------------------
Fund shares sold 1,630,084
- ---------------------------------------------------------
Dividends and interest 7,462
- ---------------------------------------------------------
Investment for deferred compensation plan 2,835
- ---------------------------------------------------------
Other assets 587,295
- ---------------------------------------------------------
Total assets 357,667,797
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 10,224,141
- ---------------------------------------------------------
Fund shares reacquired 761,613
- ---------------------------------------------------------
Deferred compensation plan 2,835
- ---------------------------------------------------------
Loans 30,000,000
- ---------------------------------------------------------
Market value of securities sold short
(proceeds from sales $27,276,177) 28,422,638
- ---------------------------------------------------------
Options written (premiums received
$287,128) 257,109
- ---------------------------------------------------------
Accrued advisory fees 236,298
- ---------------------------------------------------------
Accrued distribution fees 156,544
- ---------------------------------------------------------
Accrued trustees' fees 842
- ---------------------------------------------------------
Accrued transfer agent fees 30,983
- ---------------------------------------------------------
Accrued operating expenses 140,369
- ---------------------------------------------------------
Total liabilities 70,233,372
- ---------------------------------------------------------
Net assets applicable to shares outstanding $287,434,425
- ---------------------------------------------------------
NET ASSETS:
Class A $165,174,376
- ---------------------------------------------------------
Class B $121,535,734
- ---------------------------------------------------------
Class C $ 724,315
- ---------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 13,577,596
- ---------------------------------------------------------
Class B 10,028,884
- ---------------------------------------------------------
Class C 59,762
- ---------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 12.17
- ---------------------------------------------------------
Offering price per share:
(Net asset value of
$12.17 divided by 94.50%) $ 12.88
- ---------------------------------------------------------
Class B:
Net asset value and offering price per
share $ 12.12
- ---------------------------------------------------------
Class C:
Net asset value and offering price per
share $ 12.12
- ---------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 750,743
- ---------------------------------------------------------
Dividends 167,362
- ---------------------------------------------------------
Total investment income 918,105
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,106,069
- ---------------------------------------------------------
Administrative services fees 64,128
- ---------------------------------------------------------
Custodian fees 26,908
- ---------------------------------------------------------
Interest expense 177,922
- ---------------------------------------------------------
Transfer agent fees-Class A 102,102
- ---------------------------------------------------------
Transfer agent fees-Class B 87,822
- ---------------------------------------------------------
Transfer agent fees-Class C 153
- ---------------------------------------------------------
Trustees' fees 4,636
- ---------------------------------------------------------
Distribution fees-Class A 220,826
- ---------------------------------------------------------
Distribution fees-Class B 474,873
- ---------------------------------------------------------
Distribution fees-Class C 263
- ---------------------------------------------------------
Other 184,711
- ---------------------------------------------------------
Total expenses 2,450,413
- ---------------------------------------------------------
Less: Expenses paid indirectly (12,413)
- ---------------------------------------------------------
Net expenses 2,438,000
- ---------------------------------------------------------
Net investment income (loss) (1,519,895)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Futures contracts (6,060,564)
- ---------------------------------------------------------
Investment securities (11,502,276)
- ---------------------------------------------------------
Securities sold short 1,182,572
- ---------------------------------------------------------
Option contracts (1,740,866)
- ---------------------------------------------------------
(18,121,134)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 73,186,912
- ---------------------------------------------------------
Securities sold short (1,223,603)
- ---------------------------------------------------------
Futures contracts 3,348,202
- ---------------------------------------------------------
Option contracts (252,753)
- ---------------------------------------------------------
75,058,758
- ---------------------------------------------------------
Net gain from investment securities,
securities sold short, futures and
option contracts 56,937,624
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 55,417,729
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND THE PERIOD JUNE 29, 1998 (DATE
OPERATIONS COMMENCED) THROUGH JULY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,519,895) $ 148,549
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (18,121,134) 1,217,379
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, securities sold short, futures and option
contracts 75,058,758 (7,292,005)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 55,417,729 (5,926,077)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (102,771) --
- -----------------------------------------------------------------------------------------
Class B (48,776) --
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 25,668,581 110,724,862
- -----------------------------------------------------------------------------------------
Class B 13,966,004 86,925,398
- -----------------------------------------------------------------------------------------
Class C 709,475 --
- -----------------------------------------------------------------------------------------
Net increase in net assets 95,610,242 191,724,183
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 191,824,183 100,000
- -----------------------------------------------------------------------------------------
End of period 287,434,425 191,824,183
- -----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $238,091,945 $197,747,885
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (1,520,518) 150,924
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, securities sold short, futures and option
contracts (16,903,755) 1,217,379
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, securities sold short, futures and option
contracts 67,766,753 (7,292,005)
- -----------------------------------------------------------------------------------------
$287,434,425 $191,824,183
- -----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(UNAUDITED)
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 commenced operations on June 29, 1998. 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
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. 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 at the
mean between the last bid and asked prices based upon quotes furnished by
independent sources. 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.
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 any time during the option period. During the option period, in
12
<PAGE> 15
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 reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended January 31, 1999,
AIM was reimbursed $64,128 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 six months ended January 31,
1999, AFS was paid $97,764 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 period ended January 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $220,826,
$474,873, and $263, respectively, as compensation under the Plans.
13
<PAGE> 16
AIM Distributors received commissions of $126,592 from sales of the Class A
shares of the Fund during the six months ended January 31, 1999. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of Class A shares. During the year ended
December 31, 1998, AIM Distributors received $8,758 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 six months ended January 31, 1999, the Fund paid legal fees of $686 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the six months ended January 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $1,223 and $11,190, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $12,413 during the six months ended January 31, 1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is 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. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended January 31, 1999, the maximum amount outstanding
during the period was $35,000,000 while borrowings averaged $7,092,391 per day
with a weighted average interest rate of 4.98%. Interest expense for the period
ended January 31, 1999, was $177,922. 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 six months ended January 31, 1999 was
$373,158,274 and $209,358,890, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of January 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $75,188,543
- ---------------------------------------------------------
Securities sold short 1,336,074
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (7,361,935)
- ---------------------------------------------------------
Securities sold short (2,482,535)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $66,680,147
- ---------------------------------------------------------
Cost of investments for tax purposes is $254,012,426.
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 six months ended January 31, 1999 and
the period June 29, 1998 (date operations commenced) through July 31, 1998 were
as follows:
<TABLE>
<CAPTION>
JANUARY 31, 1999 JULY 31, 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 5,851,161 $ 58,525,689 11,173,989 $112,285,297
- ----------------------------------------------------------------------------
Class B* 2,532,799 25,055,157 8,700,960 87,549,103
- ----------------------------------------------------------------------------
Class C* 59,762 709,475 -- --
- ----------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 8,676 96,297 -- --
- ----------------------------------------------------------------------------
Class B* 3,754 41,577 -- --
- ----------------------------------------------------------------------------
Reacquired:
Class A (3,300,415) (32,953,405) (155,815) (1,560,435)
- ----------------------------------------------------------------------------
Class B* (1,146,130) (11,130,730) (62,499) (623,705)
- ----------------------------------------------------------------------------
4,009,607 $ 40,344,060 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 six months ended January 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 2,476 1,700,837
- -------------------------------------------------------------------------------------
Closed (2,951) (1,551,018)
- -------------------------------------------------------------------------------------
Expired (200) (29,399)
- -------------------------------------------------------------------------------------
End of period 100 $ 192,194
- -------------------------------------------------------------------------------------
</TABLE>
Open call option contracts written at January 31, 1999 are summarized as
follows:
<TABLE>
<CAPTION>
JANUARY 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 Mar 1,325 100 $192,194 $251,250 $(59,056)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9-PUT OPTION CONTRACTS
Transactions in put option contracts written during the six months ended January
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 640 495,585
- --------------------------------------------------------------------------------------
Closed (315) (265,206)
- --------------------------------------------------------------------------------------
Expired (300) (198,893)
- --------------------------------------------------------------------------------------
End of period 125 $ 94,934
- --------------------------------------------------------------------------------------
</TABLE>
Open put option contracts written at January 31, 1999 were as follows:
<TABLE>
<CAPTION>
JANUARY 31,
1999
CONTRACT STRIKE NUMBER OF PREMIUM MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
- ----- -------- ------ --------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index Feb 1,025 125 $94,934 $ 5,859 $89,075
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the six months ended January 31, 1999 and the period June 29, 1998 (date
operations commenced) through July 31, 1998, for a share of Class B outstanding
during the period July 13, 1998 (date sales commenced) through January 31, 1999,
and for a share of Class C outstanding during the period December 30, 1998 (date
sales commenced) through January 31, 1999.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------------- ---------------------- -----------
JANUARY 31, JULY 31, JANUARY 31, JULY 31, JANUARY 31,
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) (0.04)(a) 0.02(a) (0.08)(a) 0.01(a) (0.02)(a)
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 2.46 (0.26) 2.45 (0.32) 0.44
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Total from investment operations 2.42 (0.24) 2.37 (0.31) 0.42
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Dividends from net investment income (0.01) -- (0.01) -- --
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Net asset value, end of period $ 12.17 $ 9.76 $ 12.12 $ 9.76 $ 12.12
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Total return(b) 24.78% (2.40)% 24.24% (3.08)% 6.04%
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $165,174 $107,540 $121,536 $84,285 $ 724
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Ratio of expenses to average net assets 1.67%(c) 1.59% 2.38%(c) 2.30% 2.38%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Ratio of net investment income (loss) to average net assets (0.84)%(c) 2.00% (1.55)%(c) 1.29% (1.74)%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Portfolio turnover rate 102% 13% 102% 13% 102%
- ------------------------------------------------------------ -------- -------- -------- ------- -------
</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 $125,157,832,
$94,200,350, and $400,351 for Class A, Class B and Class C shares,
respectively.
15
<PAGE> 18
BOARD OF TRUSTEES
Charles T. Bauer
Chairman
A I M Management Group Inc.
Bruce L. Crockett
Director
ACE Limited;
Formerly Director, President, and
Chief Executive Officer
COMSAT Corporation
Owen Daly II
Director
Cortland Trust Inc.
Edward K. Dunn Jr.
Chairman, Mercantile Mortgage Corp.;
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares
Jack Fields
Chief Executive Officer
Texana Global, Inc.;
Formerly Member
of the U.S. House of Representatives
Carl Frischling
Partner
Kramer, Levin, Naftalis & Frankel LLP
Robert H. Graham
President and Chief Executive Officer
A I M Management Group Inc.
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.,
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of
New York State
Lewis F. Pennock
Attorney
Ian W. Robinson
Consultant; Formerly Executive
Vice President and
Chief Financial Officer
Bell Atlantic Management
Services, Inc.
Louis S. Sklar
Executive Vice President
Hines Interests
Limited Partnership
OFFICERS
Charles T. Bauer
Chairman
Robert H. Graham
President
John J. Arthur
Senior Vice President and Treasurer
Carol F. Relihan
Senior Vice President and Secretary
Gary T. Crum
Senior Vice President
Dana R. Sutton
Vice President and Assistant Treasurer
Melville B. Cox
Vice President
Karen Dunn Kelley
Vice President
Mary J. Benson
Assistant Vice President
and Assistant Treasurer
Sheri Morris
Assistant Vice President
and Assistant Treasurer
Renee A. Friedli
Assistant Secretary
P. Michelle Grace
Assistant Secretary
Jeffrey H. Kupor
Assistant Secretary
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
OFFICE OF THE FUND
11 Greenway Plaza
Suite 100
Houston, TX 77046
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
TRANSFER AGENT
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
CUSTODIAN
Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
COUNSEL TO THE FUND
Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE TRUSTEES
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
16
<PAGE> 19
HOW AIM~MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $10,000. Subsequent investments can be made for only $1,000.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time,
the power of compounding can significantly increase the value of your
assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $1,000 or more can
be drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may
be more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds--Registered Trademark--. The exchange privilege may be
modified or discontinued for any of the AIM funds. Certain restrictions
apply.
o RETIREMENT PLANS. You may purchase shares of an AIM fund for your
Individual Retirement Account (IRA), Roth IRA, or any other type of
retirement plan, and earn tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o www.aimfunds.com. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
------------------------------------
CURRENT SHAREHOLDERS
CAN CALL OUR
AIM INVESTOR LINE AT
800-246-5463
FOR 24-HOUR-A-DAY
ACCOUNT INFORMATION.
------------------------------------
<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
AIM Capital Development Fund $109 billion in assets for more than 6.2
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS million shareholders, including individual
AIM Mid Cap Equity Fund(2)(A) AIM Advisor International Value Fund investors, corporate clients, and financial
AIM Mid Cap Opportunities Fund AIM Asian Growth Fund institutions, as of December 31, 1998.
AIM Select Growth Fund(3) AIM Developing Markets Fund(2) The AIM Family of Funds--Registered
AIM Small Cap Growth Fund(2)(B) AIM Europe Growth Fund(2) Trademark-- is distributed nationwide, and
AIM Small Cap Opportunities Fund AIM European Development Fund AIM today is the 10th-largest mutual fund
AIM Value Fund AIM International Equity Fund complex in the U.S. in assets under
AIM Weingarten Fund AIM Japan Growth Fund(2) management, according to Strategic Insight,
AIM Latin American Growth Fund(2) an independent mutual fund monitor.
GROWTH & INCOME FUNDS AIM New Pacific Growth Fund(2)
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund GLOBAL GROWTH FUNDS
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund(2)(C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(2)(D)
AIM High Yield Fund II AIM Global Government Income Fund(2)
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund(2)
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund(2)
AIM High Income Municipal Fund AIM Global Financial Services Fund(2)
AIM Municipal Bond Fund AIM Global Health Care Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2)(E)
</TABLE>
(1)AIM~Aggressive Growth Fund reopened to new investors November 16, 1998.
(2)Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3)On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A)On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B)On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C)On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D)On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E)On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. 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.
