<PAGE> 1
ANNUAL REPORT/JULY 31 1999
AIM MID CAP OPPORTUNITIES FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
------------------------------------
THE ARTIST'S GARDEN AT VETHEUIL BY CLAUDE MONET
A BEAUTIFUL GARDEN, SUCH AS THE ONE DEPICTED IN MONET'S CLASSIC
PAINTING, IS USUALLY A PLEASING COMBINATION OF MANY DIFFERENT
FLOWERING PLANTS. SIMILARLY, IN AIM MID CAP OPPORTUNITIES
FUND, WE SEEK TO OWN THE STOCKS OF A BROAD CROSS-SECTION OF
RAPIDLY GROWING MID-SIZED COMPANIES IN AN EFFORT TO PRODUCE
ATTRACTIVE TOTAL RETURN.
------------------------------------
AIM Mid Cap Opportunities Fund is for shareholders who seek long-term growth of
capital by investing in a portfolio consisting primarily of midsize-company
stocks which management believes involve "special opportunities."
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Mid Cap Opportunities Fund performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
When sales charges are included in performance figures, fund performance
reflects the maximum 5.50% sales charge. Had the advisor not absorbed fund
expenses, performance figures would have been lower.
o The fund's investment return and principal value will fluctuate so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Because the fund has been in existence for less than one year, total return
provided is cumulative total return that has not been annualized.
o The fund's cumulative total return, including sales charges, from 12/30/98
to 6/30/99, the most recent calendar quarter end, was 37.71%.
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 represent higher risks, but also
offer the potential for greater rewards. Short sales involve greater risk in
that they rely on the manger's ability to accurately anticipate the future
value of a security.
o The fund is available only for employees of A I M Advisors, Inc. and its
affiliates, and Texas residents. Additionally, the fund participates in the
Initial Public Offering ("IPO") market, and a significant portion of the
fund's return is attributable to its investments in IPOs, which have a
magnified impact due to the fund's small asset base. There is no guarantee
that the fund's performance would have been the same had the fund been
broadly distributed, or that as the fund's assets grow it will continue to
experience substantially similar performance by investing in IPOs.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Russell Midcap Index is a subset of the large-capitalization Russell
1000 Index. It measures the performance of the 800 smallest securities in
the Russell 1000 Index. These 800 securities represent approximately 35% of
the total market capitalization of the 1000.
o The Russell Midcap Growth Index measures the performance of those companies
in the Russell Midcap Index with higher price-to-book ratios and higher
forecasted growth values.
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THERE IS A RISK
THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM MID CAP OPPORTUNITIES FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
With only several months remaining in 1999, the question on
[PHOTO OF many of your minds may be, "How will the year 2000 computer
Charles T. issue affect AIM and my investments?" We would like you to
Bauer, feel comfortable. We are pleased to be able to report to you
Chairman of that as of June 1999 we achieved a major milestone toward
the Board of year 2000 compliance status: we have successfully completed
THE FUND the testing of all of our mission-critical systems.
APPEARS HERE] Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology systems
might be affected by the changeover to the year 2000 (Y2K).
Everything went as well as we had hoped; in general, the
industry sailed through the testing process with flying
colors. The financial industry has been seen as a leader in
planning for year 2000 concerns. Thus, it was no surprise to
most participants that the test was an overwhelming success.
The general purpose of the process was to test
electronic interfaces among financial industry members in the United States and
to follow transactions through a typical trading cycle-from order entry to the
settlement process. Investment banks, broker-dealers, custodian banks and mutual
fund companies all worked together to make this possible. Approximately 400
firms were involved in the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches-just 0.02% of the total number of transactions. All problems were
worked through quickly before the hypothetical trades were settled. Of course,
AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing the
year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
For a more comprehensive discussion of our Y2K efforts and for periodic
updates, please visit our Web site, www.aimfunds.com.
We are pleased to send you this report covering your fund's performance over
the period ending July 31, 1999. If you have any questions or comments, please
contact our Client Services department at 800-959-4246, or e-mail your inquiry
to us at [email protected]. You can access information about your account
through our automated AIM Investor Line at 800-246-5463 or at our Web site.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--. We appreciate your business.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
A I M Advisors, Inc.
------------------------------------
THE FINANCIAL INDUSTRY
HAS BEEN SEEN AS A
LEADER IN PLANNING FOR
YEAR 2000 CONCERNS.
------------------------------------
PLEASE NOTE THAT THE INFORMATION ABOUT THE YEAR 2000 IN THIS LETTER IS DEEMED
AIM'S YEAR 2000 READINESS DISCLOSURE.
AIM MID CAP OPPORTUNITIES FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND'S ALTERNATIVE INVESTMENT APPROACH
HELPS IT REGISTER OUTSTANDING GAINS
MID-CAP STOCKS RALLIED STRONGLY TOWARD THE END OF THE REPORTING PERIOD. HOW DID
AIM MID CAP OPPORTUNITIES FUND PERFORM?
From inception on December 30, 1998, through July 31, 1999, fund performance was
excellent. Excluding sales charges, cumulative total return was a phenomenal
57.80%. That was dramatically better than the 10.55% total return recorded by
the Russell Midcap Growth Index for the same period.
WHAT WERE MARKET CONDITIONS LIKE DURING THE REPORTING PERIOD?
During the first quarter of 1999, mega-cap growth stocks and Internet stocks
outperformed other issues by a wide margin. In a world of economic uncertainty,
exemplified by January's Brazilian currency crisis, U.S. investors favored
mega-cap stocks because of their relative safety and liquidity. This preference
for mega-cap stocks helped boost the Dow Jones Industrial Average to record
heights. Internet stocks were attractive because of the growth of the Web as a
medium of commerce, communication and entertainment.
However, in the second quarter, relatively expensive mega-cap and Internet
stocks lost much of their luster. Investors shifted their focus to mid- and
small-cap stocks and to value stocks. Additionally, the stocks of cyclical
industries such as energy, boosted by rising oil prices, came back into favor.
Financial markets were volatile, however, as it became increasingly apparent
the Federal Reserve Board (the Fed) would raise interest rates to slow strong
economic growth and contain inflation, which rose significantly in April. On
June 30, the central bank raised the federal funds rate from 4.75% to 5%.
Uncertainty about the Fed's future actions caused the stock market to falter as
the reporting period came to a close in July.
WHY DID THE PERFORMANCE OF MID-CAP STOCKS IMPROVE?
In recent years, mid-cap stocks have dramatically underperformed large-cap
stocks. Consequently, they were relatively cheap in comparison to large-cap
stocks. At the same time, mid-sized companies experienced more rapid earnings
growth than larger corporations. Mid-sized companies generally transact most of
their business in the United States, where the economy is booming, and thus they
tend to be less sensitive to economic downturns overseas than large,
multinational corporations. All these factors helped pique investor interest in
mid-cap stocks.
WHY WAS THE FUND'S PERFORMANCE SO STRONG?
We credit the fund's impressive gains to its alternative investment strategy,
designed to take advantage of rising and falling earnings trends. We believe
that earnings drive stock prices. The fund owns the stocks of companies expected
to experience rapid earnings growth, which we believe represent "special
opportunities." These special opportunities can include changes in management or
the competitive situation for a particular company.
The fund participates in the Initial Public Offering ("IPO") market, and a
significant portion of the fund's returns is attributable to its investment in
IPOs, which have a magnified impact due to the fund's relatively small asset
base. There is no guarantee that as the fund's assets grow, it will continue to
experience substantially similar performance by investing in IPOs.
HOW DO SHORT SELLING AND LEVERAGING WORK?
The fund borrows the stocks of companies expected to experience declining
earnings. These stocks (short positions) are subsequently sold, with the
intention of buying them at anticipated lower prices. A mixed portfolio of owned
and borrowed stocks (long and short positions) can potentially protect the fund
during market downturns while allowing it to take advantage of rallies. The fund
also may employ leveraging--borrowing money, typically to purchase additional
shares.
HOW WAS THE FUND STRUCTURED AT THE END OF THE REPORTING PERIOD?
As of July 31, 1999, the fund owned 123 stocks and had 30 short positions.
Technology and consumer-cyclical stocks made up 57% and 19% of the portfolio,
respectively. In recent months, we have dramatically increased our technology
holdings because of strong earnings growth of companies in this sector.
================================================================================
CUMULATIVE TOTAL RETURN
CLASS A SHARES
For the reporting period ended 7/31/99
AIM Mid Cap Opportunities Fund 57.80%
Russell Midcap Growth Index 10.55%
================================================================================
See important fund and index disclosures inside front cover.
AIM MID CAP OPPORTUNITIES FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 7/31/99, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================================================
TOP 10 STOCK HOLDINGS TOP 10 INDUSTRIES TOP 10 SHORT POSITIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. QUALCOMM, Inc. 3.26% 1. Computers (Software & Services) 16.22% 1. Sapient Corp. 2.88%
2. ADC Telecommunications, Inc. 2.79 2. Electronics (Semiconductors) 9.64 2. Whole Foods Markets, Inc. 1.01
3. PMC-Sierra, Inc. 1.96 3. Communications Equipment 9.41 3. First Sierra Financial, Inc. 0.92
4. Conexant Systems, Inc. 1.77 4. Oil & Gas (Drilling Equipment) 4.51 4. NextCard, Inc. 0.91
5. Lycos, Inc. 1.72 5. Retail (Specialty) 4.26 5. Newell Rubbermaid, Inc. 0.86
6. Check Point Software 1.43 6. Electrical Equipment 3.51 6. Excel Switching Corp. 0.85
Technologies Ltd. 7. Computers (Peripherals) 2.63 7. Quintiles Transnational Corp. 0.79
7. QLogic Corp. 1.39 8. Banks (Regional) 2.54 8. Clorox Co. 0.70
8. Compass Bancshares, Inc. 1.32 9. Health Care (Medical Products 9. Nordstrom, Inc. 0.66
9. C-Cor. Net Corp. 1.25 & Supplies) 2.26 10. Sunrise Assisted Living, Inc. 0.63
10. Burr-Brown Corp. 1.20 10. Computers (Networking) 2.03
Keep in mind that the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
===================================================================================================================================
</TABLE>
HOW DID TECHNOLOGY STOCKS FARE?
Although volatile, technology stocks generally recorded solid gains for the
year. This sector benefited from increased corporate spending on
information-technology systems and growing demand for personal computers and
communications equipment. The rapid growth of the U.S. economy in recent years
can be attributed in large part to the booming technology sector.
Tech stocks in the portfolio included QUALCOMM, a leading supplier of
digital wireless communications products and technologies; ADC
Telecommunications, a developer of systems that speed up the rate of
transmitting voice, data and video signals; and PMC-Sierra, a maker of
semiconductor components that accelerate transmission speed on the Internet.
Conexant Systems provides semiconductor products for the
communications-electronics industry, while Lycos is a leading online service
provider.
WHAT MADE CONSUMER-CYCLICAL STOCKS ATTRACTIVE?
Consumer cyclicals is a broad category that includes hotels, entertainment,
restaurants and certain retailers. This sector benefited from the booming
economy. Low unemployment and rising wages meant healthy consumer spending for
clothing, home furnishings, recreational products and leisure-time activities.
That helped boost the stocks of many companies in the consumer-cyclical
category.
Best Buy sells personal computers, consumer electronics, major appliances
and other products through its retail outlets; eToys sells toys over the
Internet; and Tiffany & Co. markets jewelry, sterling silverware, china and
other items.
WHAT IS YOUR OUTLOOK?
The climate appears favorable for stocks. The economy is growing at a healthy
pace and corporate profits are solid. Although there is still some question
about the Fed's future actions to keep inflation in check, we do not expect a
dramatic tightening of monetary policy.
Additionally, the Asian crisis, which has periodically jolted markets since
late 1997, appears to be receding as a threat as Pacific Rim economies begin to
recover.
Perhaps most significant has been the improvement in the performance of
mid-cap stocks. We remain optimistic about the long-term prospects for Mid-Cap
stocks because of their attractive valuations and the positive earnings-growth
projections for mid-sized companies.
YOUR FUND'S PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM MID CAP OPPORTUNITIES FUND VS. BENCHMARK INDEXES
12/30/98-7/31/99
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AIM MID CAP
RUSSELL MIDCAP GROWTH INDEX RUSSELL MIDCAP INDEX OPPORTUNITIES FUND
- ---------------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C>
12/31/98 $ 10,300 $ 9,983 $ 10,312
2/28/99 9,796 9,651 9,849
3/31/99 10,342 9,953 11,257
4/30/99 10,813 10,688 12,476
5/31/99 10,674 10,658 13,119
6/30/99 11,419 11,034 13,771
7/31/99 11,055 10,731 14,915
=======================================================================================
Past performance cannot guarantee comparable future results.
=======================================================================================
</TABLE>
The chart compares the fund's Class A shares to benchmark indexes. It is
intended to give you a general idea of how the fund performed compared to the
stock market over the period 12/30/98-7/31/99. It is important to understand the
difference between your fund and an index. Your fund's total return is shown
with a sales charge and includes fund expenses and management fees. An index
measures the performance of a hypothetical portfolio, in this case the Russell
Midcap Growth Index and the Russell Midcap Index. Market indexes are not
managed, incurring no sales charges, expenses or fees. If you could buy all the
securities that make up a market index, you would incur expenses that would
affect your investment's return.
The fund participates in the Initial Public Offering (""IPO") market, and a
significant portion of the fund's returns is attributable to its investment in
IPOs, which have a magnified impact due to the fund's relatively small asset
base. There is no guarantee that as the fund's assets grow, it will continue to
experience substantially similar performance by investing in IPOs.
================================================================================
CUMULATIVE TOTAL RETURNS
As of 7/31/99, including sales charges
CLASS A SHARES
Since Inception (12/30/98) 49.15%*
*57.80%, excluding sales charges
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM
PERFORMANCE. RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE
HISTORICAL PERFORMANCE SHOWN.
See important fund and index disclosures inside front cover.
AIM MID CAP OPPORTUNITIES FUND
3
<PAGE> 6
SCHEDULE OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-86.26%
AUTO PARTS & EQUIPMENT-1.21%
Danaher Corp. 300 $ 17,119
- -------------------------------------------------------------
SPX Corp.(a) 200 17,000
- -------------------------------------------------------------
Tower Automotive, Inc.(a) 1,000 23,812
- -------------------------------------------------------------
57,931
- -------------------------------------------------------------
BANKS (REGIONAL)-2.54%
Bank United Corp.-Class A 600 23,100
- -------------------------------------------------------------
Compass Bancshares, Inc. 2,200 63,387
- -------------------------------------------------------------
First Tennessee National Corp. 600 21,975
- -------------------------------------------------------------
National Commerce Bancorporation 600 13,387
- -------------------------------------------------------------
121,849
- -------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.22%
Adolph Coors Co. 200 10,650
- -------------------------------------------------------------
BIOTECHNOLOGY-0.29%
Biogen, Inc.(a) 200 13,762
- -------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.58%
Univision Communications, Inc.(a) 400 27,700
- -------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.41%
ADC Telecommunications, Inc.(a) 3,000 133,500
- -------------------------------------------------------------
Comverse Technology, Inc.(a) 300 22,669
- -------------------------------------------------------------
Copper Mountain Networks, Inc.(a) 400 48,400
- -------------------------------------------------------------
General Instrument Corp.(a) 300 13,612
- -------------------------------------------------------------
JDS Uniphase Corp.(a) 400 36,150
- -------------------------------------------------------------
L-3 Communications Holdings, Inc.(a) 600 25,762
- -------------------------------------------------------------
QUALCOMM, Inc.(a) 1,000 156,000
- -------------------------------------------------------------
Scientific-Atlanta, Inc. 400 14,600
- -------------------------------------------------------------
450,693
- -------------------------------------------------------------
COMPUTERS (HARDWARE)-1.16%
Apple Computer, Inc.(a) 1,000 55,687
- -------------------------------------------------------------
COMPUTERS (NETWORKING)-2.03%
Gadzoox Networks, Inc.(a) 700 52,675
- -------------------------------------------------------------
VeriSign, Inc.(a) 600 44,475
- -------------------------------------------------------------
97,150
- -------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.63%
Adaptec, Inc.(a) 1,200 46,650
- -------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 200 12,600
- -------------------------------------------------------------
QLogic Corp.(a) 400 66,750
- -------------------------------------------------------------
126,000
- -------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-16.22%
Adobe Systems, Inc. 500 $ 42,875
- -------------------------------------------------------------
Check Point Software Technologies
Ltd.-ADR (Israel)(a) 1,000 68,437
- -------------------------------------------------------------
Citrix Systems, Inc.(a) 700 36,444
- -------------------------------------------------------------
Commerce One, Inc.(a) 800 39,800
- -------------------------------------------------------------
Electronic Arts, Inc.(a) 550 31,316
- -------------------------------------------------------------
Electronics for Imaging, Inc.(a) 900 49,331
- -------------------------------------------------------------
Gemstar International Group Ltd.(a) 400 26,500
- -------------------------------------------------------------
Intuit, Inc.(a) 400 32,725
- -------------------------------------------------------------
ISS Group, Inc.(a) 1,200 26,100
- -------------------------------------------------------------
Liquid Audio, Inc.(a) 1,250 35,156
- -------------------------------------------------------------
Lycos, Inc.(a) 2,000 82,625
- -------------------------------------------------------------
Macromedia, Inc.(a) 1,300 45,337
- -------------------------------------------------------------
Network Solutions, Inc.(a) 600 37,350
- -------------------------------------------------------------
Novell, Inc.(a) 1,100 28,325
- -------------------------------------------------------------
Portal Software, Inc.(a) 850 35,567
- -------------------------------------------------------------
Rational Software Corp.(a) 900 30,037
- -------------------------------------------------------------
RealNetworks, Inc.(a) 300 22,894
- -------------------------------------------------------------
Verio, Inc.(a) 700 49,919
- -------------------------------------------------------------
Veritas Software Corp.(a) 1,000 56,125
- -------------------------------------------------------------
776,863
- -------------------------------------------------------------
ELECTRIC COMPANIES-0.85%
Montana Power Co. 600 40,612
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT-3.51%
American Power Conversion Corp.(a) 1,500 31,125
- -------------------------------------------------------------
CommScope, Inc.(a) 750 25,641
- -------------------------------------------------------------
Conexant Systems, Inc.(a) 1,350 84,881
- -------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 1,250 26,719
- -------------------------------------------------------------
168,366
- -------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-1.25%
C-COR.net Corp.(a) 2,000 59,750
- -------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-1.08%
PE Corp-PE Biosystems Group 600 33,637
- -------------------------------------------------------------
Waters Corp.(a) 300 17,925
- -------------------------------------------------------------
51,562
- -------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-9.64%
ASM Lithography Holding N.V.-ADR
(Netherlands)(a) 200 12,150
- -------------------------------------------------------------
Altera Corp.(a) 1,000 36,250
- -------------------------------------------------------------
Burr-Brown Corp.(a) 1,500 57,375
- -------------------------------------------------------------
Flextronics International Ltd.(a) 500 22,437
- -------------------------------------------------------------
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
GlobeSpan, Inc.(a) 500 $ 25,375
- -------------------------------------------------------------
LSI Logic Corp.(a) 700 35,219
- -------------------------------------------------------------
Micrel, Inc.(a) 400 31,600
- -------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 1,500 55,500
- -------------------------------------------------------------
National Semiconductor Corp.(a) 1,300 32,175
- -------------------------------------------------------------
PMC-Sierra, Inc.(a) 1,200 93,900
- -------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 400 25,550
- -------------------------------------------------------------
Xilinx, Inc.(a) 550 34,306
- -------------------------------------------------------------
461,837
- -------------------------------------------------------------
ENTERTAINMENT-0.70%
SFX Entertainment, Inc.(a) 750 33,609
- -------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.64%
KLA-Tencor Corp.(a) 500 33,875
- -------------------------------------------------------------
Terayon Communication Systems, Inc.(a) 600 44,737
- -------------------------------------------------------------
78,612
- -------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.40%
SEI Investments Co. 200 19,350
- -------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.79%
Allergan, Inc. 400 37,800
- -------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.00%
MedImmune, Inc.(a) 600 47,925
- -------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.15%
Trigon Healthcare, Inc.(a) 200 6,975
- -------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.26%
Bausch & Lomb, Inc. 400 28,725
- -------------------------------------------------------------
Biomet, Inc. 800 29,100
- -------------------------------------------------------------
VISX, Inc.(a) 500 50,625
- -------------------------------------------------------------
108,450
- -------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES-0.96%
Furniture Brands International, Inc.(a) 800 21,600
- -------------------------------------------------------------
La-Z-Boy, Inc. 1,000 24,437
- -------------------------------------------------------------
46,037
- -------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.64%
AFLAC, Inc. 200 9,275
- -------------------------------------------------------------
Protective Life Corp. 600 21,413
- -------------------------------------------------------------
30,688
- -------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.24%
TD Waterhouse Group, Inc.(a) 650 11,294
- -------------------------------------------------------------
INVESTMENT MANAGEMENT-0.36%
Federated Investors, Inc.-Class B 900 17,156
- -------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.59%
Callaway Golf Co. 1,000 $ 11,563
- -------------------------------------------------------------
Harley-Davidson, Inc. 300 16,613
- -------------------------------------------------------------
28,176
- -------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-4.51%
ENSCO International, Inc. 1,900 38,831
- -------------------------------------------------------------
Nabors Industries, Inc.(a) 1,800 41,963
- -------------------------------------------------------------
R&B Falcon Corporation(a) 3,000 30,188
- -------------------------------------------------------------
Rowan Companies, Inc.(a) 2,200 41,388
- -------------------------------------------------------------
Transocean Offshore, Inc. 800 24,550
- -------------------------------------------------------------
Weatherford International, Inc.(a) 1,000 39,188
- -------------------------------------------------------------
216,108
- -------------------------------------------------------------
PUBLISHING-0.36%
Reader's Digest Association,
Inc.-Class A 500 17,406
- -------------------------------------------------------------
RAILROADS-0.69%
Kansas City Southern Industries, Inc. 600 33,150
- -------------------------------------------------------------
RESTAURANTS-1.58%
Brinker International, Inc.(a) 900 25,088
- -------------------------------------------------------------
Outback Steakhouse, Inc.(a) 550 18,356
- -------------------------------------------------------------
Sonic Corp.(a) 1,000 32,125
- -------------------------------------------------------------
75,569
- -------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.95%
Best Buy Co., Inc.(a) 700 52,238
- -------------------------------------------------------------
Tandy Corp. 800 41,050
- -------------------------------------------------------------
93,288
- -------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.32%
Kohl's Corp.(a) 200 15,213
- -------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.62%
Dollar Tree Stores, Inc.(a) 700 29,619
- -------------------------------------------------------------
RETAIL (HOME SHOPPING)-1.21%
Lands' End, Inc.(a) 400 18,125
- -------------------------------------------------------------
Spiegel, Inc.-Class A(a) 4,400 39,875
- -------------------------------------------------------------
58,000
- -------------------------------------------------------------
RETAIL (SPECIALTY)-4.26%
Bed Bath & Beyond, Inc.(a) 900 30,544
- -------------------------------------------------------------
Claire's Stores, Inc. 900 21,375
- -------------------------------------------------------------
eToys, Inc.(a) 1,250 49,922
- -------------------------------------------------------------
Linens 'n Things, Inc.(a) 500 23,125
- -------------------------------------------------------------
Payless ShoeSource, Inc.(a) 200 10,800
- -------------------------------------------------------------
Tiffany & Co. 800 40,250
- -------------------------------------------------------------
Zale Corp.(a) 700 28,000
- -------------------------------------------------------------
204,016
- -------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-1.45%
Abercrombie & Fitch Co.-Class A(a) 280 $ 11,620
- -------------------------------------------------------------
American Eagle Outfitters, Inc.(a) 550 21,244
- -------------------------------------------------------------
Intimate Brands, Inc. 315 13,565
- -------------------------------------------------------------
TJX Companies, Inc. (The) 700 23,144
- -------------------------------------------------------------
69,573
- -------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.58%
Astoria Financial Corp. 300 11,419
- -------------------------------------------------------------
GreenPoint Financial Corp. 500 16,188
- -------------------------------------------------------------
27,607
- -------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.81%
Lamar Advertising Co.(a) 1,000 40,625
- -------------------------------------------------------------
Nielsen Media Research(a) 1,000 32,500
- -------------------------------------------------------------
Student Advantage, Inc.(a) 1,000 13,625
- -------------------------------------------------------------
86,750
- -------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.47%
Ariba, Inc.(a) 250 22,398
- -------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.70%
Critical Path, Inc.(a) 1,000 33,500
- -------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.19%
Fiserv, Inc.(a) 300 8,944
- -------------------------------------------------------------
SPECIALTY PRINTING-0.23%
Valassis Communications, Inc.(a) 300 11,175
- -------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-1.85%
Crown Castle International Corp.(a) 2,000 42,125
- -------------------------------------------------------------
Phone.com, Inc.(a) 750 46,641
- -------------------------------------------------------------
88,766
- -------------------------------------------------------------
TELEPHONE-0.32%
NTL, Inc.-ADR (United Kingdom)(a) 150 15,581
- -------------------------------------------------------------
TEXTILES (APPAREL)-0.81%
Jones Apparel Group, Inc.(a) 501 16,470
- -------------------------------------------------------------
Tommy Hilfiger Corp.(a) 600 22,163
- -------------------------------------------------------------
38,633
- -------------------------------------------------------------
Total Common Stocks (Cost
$3,414,158) 4,131,780
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES-4.95%
FEDERAL HOME LOAN MORTGAGE CORP.,
Disc. Notes, 4.97%, 08/02/99 (Cost
$236,967)(b) $237,000 236,934
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-8.94%
CALLS-1.06%
Amazon.com, Inc.
(Retail-Internet) 10 $120 Sep-99 $ 5,500
- ---------------------------------------------------------------------
Conoco, Inc. (Oil &
Gas-Exploration &
Production) 25 25 Aug-99 4,297
20 27.5 Aug-99 1,125
- ---------------------------------------------------------------------
OSX Index (Oil &
Gas-Services) 75 80 Aug-99 30,469
15 80 Sep-99 9,750
- ---------------------------------------------------------------------
51,141
- ---------------------------------------------------------------------
PUTS-7.88%
S & P 500 Index 21 1325 Sep-99 87,150
6 1350 Sep-99 31,500
5 1375 Sep-99 32,937
27 1350 Dec-99 225,788
- ---------------------------------------------------------------------
377,375
- ---------------------------------------------------------------------
Total Options Purchased (Cost $325,841) 428,516
- ---------------------------------------------------------------------
TOTAL INVESTMENTS-100.15% 4,797,230
- ---------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(0.15%) (7,355)
- ---------------------------------------------------------------------
NET ASSETS-100.00% $4,789,875
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(c)
1-800 CONTACTS, Inc. 1,000 $ 20,500
- ------------------------------------------------------------
Advanced Micro Devices, Inc. 1,600 27,500
- ------------------------------------------------------------
autobytel.com Inc. 600 10,762
- ------------------------------------------------------------
Carrier Access Corp. 700 23,100
- ------------------------------------------------------------
Clorox Co. (The) 300 33,600
- ------------------------------------------------------------
Complete Business Solution, Inc. 750 14,250
- ------------------------------------------------------------
Deere & Company 400 15,300
- ------------------------------------------------------------
Duane Reade Inc. 800 25,400
- ------------------------------------------------------------
Enhance Financial Services Group, Inc. 700 14,525
- ------------------------------------------------------------
Excel Switching Corp. 1,500 40,875
- ------------------------------------------------------------
First Health Group Corp. 900 21,375
- ------------------------------------------------------------
First Sierra Financial, Inc. 2,200 43,863
- ------------------------------------------------------------
IMRglobal Corp. 500 8,562
- ------------------------------------------------------------
Jabil Circuit, Inc. 500 21,031
- ------------------------------------------------------------
Lincare Holdings, Inc. 250 7,500
- ------------------------------------------------------------
MapQuest.com, Inc. 750 11,203
- ------------------------------------------------------------
Net.B@nk, Inc. 250 5,375
- ------------------------------------------------------------
Newell Rubbermaid, Inc. 950 41,088
- ------------------------------------------------------------
NextCard, Inc. 1,200 43,350
- ------------------------------------------------------------
Nordstrom, Inc. 1,000 31,438
- ------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(c)-(CONTINUED)
Quintiles Transnational Corp. 1,000 $ 38,000
- ------------------------------------------------------------
Safescience, Inc. 1,000 20,500
- ------------------------------------------------------------
Sapient Corp. 2,500 138,125
- ------------------------------------------------------------
Shared Medical Systems Corp. 300 17,963
- ------------------------------------------------------------
SMART Modular Technologies, Inc. 1,400 26,075
- ------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 1,000 12,437
- ------------------------------------------------------------
SECURITIES SOLD SHORT(c)-(CONTINUED)
Sunrise Assisted Living, Inc. 1,000 $ 30,187
- ------------------------------------------------------------
Terayon Communication Systems, Inc. 300 11,737
- ------------------------------------------------------------
Wesley Jessen VisionCare, Inc. 700 22,138
- ------------------------------------------------------------
Whole Foods Market, Inc. 1,100 48,400
- ------------------------------------------------------------
$826,159
============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
DISC - Discount
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security is traded on a discount basis. The interest rate shown represents
the rate of discount paid or received at the time of purchase by the Fund.
(c) Collateral on short sales was segregated by the Fund in the amount of
$852,718 which represents 100% of the market value of securities sold short
as of 07/31/99.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,976,966) $4,797,230
- ---------------------------------------------------------
Receivables for:
Investments sold 43,354
- ---------------------------------------------------------
Investments sold short 827,993
- ---------------------------------------------------------
Fund shares sold 5,155
- ---------------------------------------------------------
Amount due from advisor 29,034
- ---------------------------------------------------------
Dividends 527
- ---------------------------------------------------------
Other assets 10,634
- ---------------------------------------------------------
Investment for deferred compensation plan 1,475
- ---------------------------------------------------------
Total assets 5,715,402
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 21,555
- ---------------------------------------------------------
Options written (premiums received $19,586) 23,506
- ---------------------------------------------------------
Amount due to broker 36,192
- ---------------------------------------------------------
Short positions covered 580
- ---------------------------------------------------------
Deferred compensation plan 1,475
- ---------------------------------------------------------
Market value of securities sold short
(proceeds from short sales $827,993) 826,159
- ---------------------------------------------------------
Accrued administrative services fees 7,199
- ---------------------------------------------------------
Accrued distribution fees 1,926
- ---------------------------------------------------------
Accrued trustees' fees 654
- ---------------------------------------------------------
Accrued transfer agent fees 202
- ---------------------------------------------------------
Accrued operating expenses 6,079
- ---------------------------------------------------------
Total liabilities 925,527
- ---------------------------------------------------------
Net assets applicable to shares outstanding $4,789,875
- ---------------------------------------------------------
NET ASSETS:
Class A $4,789,875
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 303,481
- ---------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 15.78
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $15.78 / 94.50%) $ 16.70
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period December 30, 1998 (date operations commenced)
through July 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 14,172
- ---------------------------------------------------------
Dividend 3,369
- ---------------------------------------------------------
Total investment income 17,541
- ---------------------------------------------------------
EXPENSES:
Advisory fees 16,036
- ---------------------------------------------------------
Administrative services fees 50,801
- ---------------------------------------------------------
Legal fees 10,564
- ---------------------------------------------------------
Custodian fees 7,228
- ---------------------------------------------------------
Transfer agent fees 995
- ---------------------------------------------------------
Trustees' fees 4,457
- ---------------------------------------------------------
Distribution fees 5,613
- ---------------------------------------------------------
Interest expense 528
- ---------------------------------------------------------
Registration and filing fees 9,030
- ---------------------------------------------------------
Printing fees 12,786
- ---------------------------------------------------------
Dividends on short sales 899
- ---------------------------------------------------------
Other 2,226
- ---------------------------------------------------------
Total expenses 121,163
- ---------------------------------------------------------
Less: Expenses paid indirectly (6,404)
- ---------------------------------------------------------
Fees waived and reimbursed by advisor (84,548)
- ---------------------------------------------------------
Net expenses 30,211
- ---------------------------------------------------------
Net investment income (loss) (12,670)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 476,294
- ---------------------------------------------------------
Futures contracts 2,195
- ---------------------------------------------------------
Securities sold short (39,027)
- ---------------------------------------------------------
Option contracts written 15,377
- ---------------------------------------------------------
454,839
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 820,263
- ---------------------------------------------------------
Securities sold short 1,834
- ---------------------------------------------------------
Option contracts written (3,919)
- ---------------------------------------------------------
818,178
- ---------------------------------------------------------
Net gain from investment securities,
securities sold short, futures and
option contracts 1,273,017
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $1,260,347
=========================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the period December 30, 1998 (date operations commenced)
through July 31, 1999
<TABLE>
<S> <C>
OPERATIONS:
Net investment income (loss) $ (12,670)
- ------------------------------------------------------------------------
Net realized gain from investment securities, securities
sold short, futures and option contracts 454,839
- ------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, securities sold short, futures and option
contracts 818,178
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,260,347
- ------------------------------------------------------------------------
Share transactions-net:
Class A 3,529,528
- ------------------------------------------------------------------------
Net increase in net assets 4,789,875
- ------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------
End of period $4,789,875
========================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,529,528
- ------------------------------------------------------------------------
Undistributed net investment income (loss) --
- ------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, securities sold short, futures and option
contracts 442,169
- ------------------------------------------------------------------------
Unrealized appreciation of investment securities,
securities sold short, futures and option contracts 818,178
- ------------------------------------------------------------------------
$4,789,875
========================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
July 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Mid 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 December 30, 1998. The
Fund currently offers Class A shares to employees of A I M Management Group
Inc., AMVESCAP PLC and their affiliates, to any current or retired officer,
director or trustee of The AIM Family of Funds and to residents of Texas. Class
B and Class C shares of the Fund are not currently available. Class A shares are
sold with a front-end sales charge. Matters affecting each portfolio or class
are voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is long-term capital appreciation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or, absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted prices
and may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by any
of the above methods are valued based upon quotes furnished by independent
sources and are valued at the last bid price in the case of equity securities
and in the case of debt obligations, the mean between the last bid and asked
prices. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value.
B. Accounting for Securities Sold Short -- When the Fund sells common stock
short, an amount equal to the proceeds of the sale is recorded as an asset.
This asset is offset by a liability (representing the borrowed security)
recorded on the books of the Fund at the market value of the common stock
determined each day in accordance with the procedures for security valuations
discussed in section "A" above. 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
9
<PAGE> 12
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 anytime exceed 25% of the Fund's net assets.
C. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income, dividend expense on
short sales and distributions to shareholders are recorded on the ex-dividend
date. On July 31, 1999 undistributed net investment income was increased by
$12,670 and undistributed net realized gains was decreased by $12,670 in
order to comply with the requirements of the American Institute of Certified
Public Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Call Options -- The Fund may write and buy call options, including securities
index options. Options written by the Fund normally will have expiration
dates between three and nine months from the date written. The exercise price
of a call option may be below, equal to, or above the current market value of
the underlying security at the time the option is written. When the Fund
writes a call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the liability
is subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
An option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying stock index on
the exercise date, multiplied by a fixed "index multiplier." A securities
index fluctuates with changes in the market values of the securities included
in the index. In the purchase of securities index options the principal risk
is that the premium and transaction costs paid by the Fund in purchasing an
option will be lost if the changes in the level of the index do not exceed
the cost of the option. In writing securities index options, the principal
risk is that the Fund could bear a loss on the options that would be only
partially offset (or not offset at all) by the increased value or reduced
cost of hedged securities. Moreover, in the event the Fund were unable to
close an option it had written, it might be unable to sell the securities
used as cover.
The Fund will not write options if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 50% of the total assets of the
Fund.
F. Put Options -- The Fund may purchase and write put options including
securities index options. By purchasing a put option, the Fund obtains the
right (but not the obligation) to sell the options' underlying instrument at
a fixed strike price. In return for this right, a Fund pays an option
premium. The option's underlying instrument may be a security, securities
index, or a futures contract. Put options may be used by a Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedge. The Fund may write put options to earn
additional income in the form of option premiums if it expects the price of
the underlying securities to remain stable or rise during the option period
so that the option will not be exercised. The risk in this strategy is that
the price of the underlying securities may decline by an amount greater than
the premium received. The Fund will not purchase options if, at the time of
the investment, the aggregate premiums paid for outstanding options will
exceed 25% of the Fund's total assets.
G. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in
10
<PAGE> 13
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 between
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 for the first $1 billion of net assets and 0.95%
of the Fund's average daily net assets above $1 billion. During the period
December 30, 1998 (date operations commenced) through July 31, 1999, AIM waived
fees of $16,036 and reimbursed expenses of $68,512.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the period December 30, 1998 (date
operations commenced) through July 31, 1999, AIM was paid $50,801 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 period December 30, 1998
(date operations commenced) through July 31, 1999, AFS was paid $656 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. As of July 31, 1999, Class B and
Class C Shares are not currently available. During the period December 30, 1998
(date operations commenced) through July 31, 1999, Class A paid AIM Distributors
$5,613 as compensation under the Plan. AIM Distributors received commissions of
$279 from sales of the Class A shares of the Fund during the period December 30,
1998 (date operations commenced) through July 31, 1999. Such commissions are not
an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
Certain officers and trustees of the Trust are officers and directors of AIM,
AIM Distributors and AFS. During the year ended July 31, 1999, the Fund paid
legal fees of $1,758 for services rendered by Kramer, Levin, Naftalis & Frankel
LLP as counsel to the Board of Trustees. A member of that firm is a trustee of
the Trust.
NOTE 3-INDIRECT EXPENSES
During the period December 30, 1998 (date operations commenced) through July 31,
1999, the Fund received reductions in transfer agency fees from AFS (an
affiliate of AIM) and reductions in custodian fees of $16 and $6,388,
respectively under expense offset arrangements. The effect of the above
arrangements resulted in a reduction of the Fund's total expenses of $6,404
during the period December 30, 1998 (date operations commenced) through July 31,
1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust may invest trustees' fees, if so elected
by a trustee, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $240,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the period
December 30, 1998 (date operations commenced) through July 31, 1999, the average
outstanding daily balance of bank loans for the Fund was $11,268 with a weighted
average interest rate of 5.45%. Interest expense (excluding commitment fees) for
the Fund for the period ended July 31, 1999 was $362. 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.
11
<PAGE> 14
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the period December 30, 1998 (date
operations commenced) through July 31, 1999 was $6,357,151 and $3,621,567,
respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of July 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $ 921,619
- --------------------------------------------------------
Securities sold short 38,335
- --------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (108,615)
- --------------------------------------------------------
Securities sold short (36,501)
- --------------------------------------------------------
Net unrealized appreciation of investment
securities $ 814,838
========================================================
</TABLE>
Cost of investments for tax purposes is $3,984,226.
Proceeds from securities sold short for tax purposes is $827,993.
NOTE 7-CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the period ending July 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period -- --
- ----------------------------------------------------------------------------------
Opened 64 $ 27,740
- ----------------------------------------------------------------------------------
Closed (63) (27,605)
- ----------------------------------------------------------------------------------
Expired (1) (135)
- ----------------------------------------------------------------------------------
End of year -- --
==================================================================================
</TABLE>
NOTE 8-PUT OPTIONS WRITTEN
Transactions in put options written during the period ending July 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Beginning of period -- --
- -----------------------------------------------------------------------------------
Opened 27 $ 23,279
- -----------------------------------------------------------------------------------
Closed (6) (3,693)
- -----------------------------------------------------------------------------------
End of year 21 $ 19,586
===================================================================================
</TABLE>
Open put options written at July 31, 1999 are as follows:
<TABLE>
<CAPTION>
NUMBER UNREALIZED
CONTRACT STRIKE OF PREMIUMS JULY 31, 1999 APPRECIATION
MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
ISSUE -------- ----------- --------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX SEP-99 $ 1,025 2 $ 444 $ 481 $ (37)
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX SEP-99 1,050 2 468 625 (157)
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX DEC-99 1,025 11 13,329 15,950 (2,621)
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX DEC-99 975 6 5,345 6,450 (1,105)
- ---------------------------------------------------------------------------------------------------------------------------------
21 $ 19,586 $ 23,506 $ (3,920)
=================================================================================================================================
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares Class A outstanding during the period December 30, 1998 (date
operations commenced) through July 31, 1999 are as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 331,198 $3,867,041
- ----------------------------------------------------------------------------------
Reacquired (27,717) (337,513)
- ----------------------------------------------------------------------------------
303,481 $3,529,528
==================================================================================
</TABLE>
12
<PAGE> 15
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the period December 30, 1998 (date operations commenced) through July 31,
1999.
<TABLE>
<CAPTION>
<S> <C>
Net asset value, beginning of period $ 10.00
- ------------------------------------------------------------ --------
Income from investment operations:
Net investment income (loss) (0.04)
- ------------------------------------------------------------ --------
Net gains on securities (both realized and unrealized) 5.82
- ------------------------------------------------------------ --------
Total from investment operations 5.78
- ------------------------------------------------------------ --------
Net asset value, end of period $ 15.78
============================================================ ========
Total return(a) 57.80%
============================================================ ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,790
============================================================ ========
Ratio of expenses to average net assets excluding interest
expense:
Including waivers and reimbursements 2.25%(b)
- ------------------------------------------------------------ --------
Excluding waivers and reimbursements 7.52%(b)
============================================================ ========
Ratio of net investment income (loss) to average net
assets(c) (0.79)%(b)
============================================================ ========
Ratio of interest expense to average net assets 0.03%(b)
============================================================ ========
Portfolio turnover rate 135%
============================================================ ========
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are annualized and based on average net assets of $2,735,067.
(c) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements was (6.06)% (annualized).
13
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Mid Cap Opportunities Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Mid Cap Opportunities Fund (a series
of AIM Special Opportunities Funds) including the
schedule of investments, as of July 31, 1999, and the
related statement of operations, changes in net assets,
and financial highlights for the period December 30, 1998
(dated operations commenced) through July 31, 1999. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of July 31, 1999, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Mid Cap
Opportunities Fund as of July 31, 1999, the results of
its operations, changes in its net assets and financial
highlights for the period December 30, 1998 (date
operations commenced) through July 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
September 3, 1999
Houston, Texas
14
<PAGE> 17
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Edgar M. Larsen
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Melville B. Cox
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Mary J. Benson Boston, MA 02110
Chief Executive Officer Assistant Vice President and
Texana Global, Inc.; Assistant Treasurer COUNSEL TO THE FUND
Formerly Member
of the U.S. House of Representatives Sheri Morris Ballard Spahr
Assistant Vice President and Andrews & Ingersoll, LLP
Carl Frischling Assistant Treasurer 1735 Market Street
Partner Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel LLP Renee A. Friedli
Assistant Secretary COUNSEL TO THE TRUSTEES
Robert H. Graham
President and Chief Executive Officer P. Michelle Grace Kramer, Levin, Naftalis & Frankel LLP
A I M Management Group Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
Prema Mathai-Davis Jeffrey H. Kupor
Chief Executive Officer, YWCA of the U.S.A.; Assistant Secretary DISTRIBUTOR
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors, Nancy L. Martin A I M Distributors, Inc.
Metropolitan Transportation Authority of Assistant Secretary 11 Greenway Plaza
New York State Suite 100
Ofelia M. Mayo Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney AUDITORS
Lisa A. Moss
Louis S. Sklar Assistant Secretary KPMG LLP
Executive Vice President 700 Louisiana
Hines Interests Kathleen J. Pflueger Houston, TX 77002
Limited Partnership Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
<PAGE> 18
AIM FUNDS(SM) KEEPS YOU
POSTED ON YOUR INVESTMENT
We inform our shareholders about their investments with regular mailings
throughout the year. Here is a description of the documents you will receive
concerning your account and fund.
o DAILY CONFIRMATION STATEMENTS. A record of the transactions you initiate.
For example, if you transfer part or all of your investment from one AIM
fund to another, you will receive a statement confirming that the
transaction took place.
o QUARTERLY STATEMENTS. These show you how your account has performed over the
fiscal quarter and provide information on any applicable dividend payments.
Statement inserts that sometimes accompany these mailings may give specific
information about your fund or may contain educational information of
general interest.
o PROXY. As a shareholder of an AIM fund, you have the right to vote on any
change to a fund's published bylaws or objectives. If the fund's board of
directors proposes such a change, AIM will send a proxy to the shareholders.
The proxy allows you to direct an authorized person to cast your vote
according to your instructions. You can vote your proxy by mail, phone or
e-mail.
o PROSPECTUS. AIM sends you an updated version of your fund's prospectus every
year. Your prospectus contains valuable information about your fund's
objectives, risks, management and fees. Because this information is
important, you should keep your prospectus with your other fund records.
o ANNUAL AND SEMIANNUAL REPORTS. AIM fund reports are sent to you twice a
year, the semiannual covering the first six months of the fiscal year for a
fund and the annual covering the entire fiscal year. These reports give you
an idea of how your fund performed compared to the market in general. The
reports also give you information about the holdings in your fund's
portfolio and how market conditions and management decisions have affected
your fund.
o YEAR-END TAX INFORMATION. This includes your year-end account statement,
cost-basis statement and any tax forms pertinent to your AIM account. The
tax forms report distributions you have received from your AIM funds,
redemptions or exchanges you have made and any contributions you have made
to tax-advantaged retirement accounts. It is important to retain the latter,
IRS Form 5498, if you need to track deductible vs. nondeductible IRA
contributions. The cost-basis information is also important to retain
because it can be very useful for calculating capital gains or losses if you
use the "average basis single category" method of calculating cost basis.
Year-end tax information will be accompanied by tax communications from AIM
to help you fill out your tax forms. Your tax advisor can assist you in
sorting through your year-end statements and other tax communications.
------------------------------------
WE INFORM
OUR SHAREHOLDERS ABOUT
THEIR INVESTMENTS
WITH REGULAR MAILINGS
THROUGHOUT THE YEAR.
------------------------------------
<PAGE> 19
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Money Market Fund leadership in the mutual-fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately $121
AIM Capital Development Fund billion in assets for more than 6.3 million
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS shareholders, including individual investors
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund corporate clients and financial institutions
AIM Large Cap Growth Fund AIM Asian Growth Fund as of June 30, 1999.
AIM Mid Cap Equity Fund AIM Developing Markets Fund The AIM Family of Funds--Registered
AIM Select Growth Fund AIM Euroland Growth Fund(A) Trademark-- is distributed nationwide, and
AIM Small Cap Growth Fund AIM European Development Fund AIM today is the 10th-largest mutual-fund
AIM Small Cap Opportunities Fund AIM International Equity Fund complex in the United States in assets under
AIM Value Fund AIM Japan Growth Fund management, according to Strategic Insight,
AIM Weingarten Fund AIM Latin American Growth Fund an independent mutual-fund monitor.
AIM New Pacific Growth Fund
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund
AIM High Yield Fund II AIM Global Government Income Fund
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund
AIM High Income Municipal Fund AIM Global Financial Services Fund
AIM Municipal Bond Fund AIM Global Health Care Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund
AIM Tax-Free Intermediate Fund AIM Global Resources Fund
AIM Global Telecommunications and Technology Fund(B)
AIM Global Trends Fund(C)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (A)
On September 1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth
Fund. (B) On June 1, 1999, AIM Global Telecommunications Fund was renamed AIM
Global Telecommunications and Technology Fund. (C) Effective August 27, 1999,
AIM Global Trends Fund was restructured to operate as a traditional mutual fund.
Prior to August 27, 1999, the fund operated as a fund of funds. For more
complete information about any AIM fund(s), including sales charges and
expenses, ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money. If used as sales material after October 20, 1999, this report must
be accompanied by a current Quarterly Review of Performance for AIM Funds.
[AIM FUNDS LOGO APPEARS HERE] INVEST WITH DISCIPLINE--Registered Trademark--
