<PAGE> 1
[PHOTO APPEARS HERE]
AIM VALUE FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31, 1996
<PAGE> 2
----------------------------
AIM VALUE FUND
For shareholders
who seek
long-term growth of capital
through a portfolio
that consists primarily of
stocks of companies that are
undervalued relative to
the stock market as a whole.
----------------------------
[PHOTO APPEARS HERE]
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Value Fund's performance figures are historical and reflect reinvestment
of all distributions and changes in net asset value. Unless otherwise
indicated, the Fund's performance is computed at net asset value without a
sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B 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 performance of the Fund's Class B shares will differ from that of
Class A shares due to differing fees and expenses.
o During the year ended 12/31/96, the Fund paid distributions on Class A and
Class B shares of $1.502 and $1.302, respectively.
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 Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poor's 500 (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 (DJIA) is a price-weighted average of 30
actively traded primarily industrial stocks.
o The Lipper Growth Funds Index represents an average of the performance of
the 30 largest growth funds. It is compiled by Lipper Analytical Services,
Inc., an independent mutual fund performance monitor.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Shareholder:
Financial markets produced another noteworthy year in 1996.
[PHOTO OF Stocks surged again to enthusiastic levels, but the advance
Charles T. was marked by dramatic volatility and confined mainly to the
Bauer, performance of a select few large-company stocks. Still, most
Chairman of investors in stock funds were rewarded with double-digit
the Board of returns for the year. Bonds had a difficult time until
THE FUND, encouraging economic reports triggered a fall rally that
APPEARS HERE] helped restore prices and bring yields back down to near 1995
levels.
As we begin 1997, the parallels to last year are striking. The economy is
growing at a moderate rate, corporate earnings remain healthy, and inflation is
modest. Such an environment is ideal for financial investments.
Still, many suggest, as we do, that 1997 will be marked by continued
uncertainty and short-term volatility. And as the market's performance
continues to exceed historical averages, some advise that a correction is
overdue.
We believe the best way to achieve your investment goals in uncertain
markets is to follow a few basic strategies. First, you should keep a long-term
outlook. If you leave your money invested over the long term, you can help
avoid the results of the volatility that generally accompanies financial
markets over the short term. Those who try to "time the market"--move money in
and out of the market based on some gauge of future market performance--tend to
be less successful than investors using disciplined, long-term investment
strategies. That's because no one, not even expert market watchers, can
consistently predict what the market will do next.
Another strategy, diversification, may help you cushion the effects of a
volatile market and enhance your return potential. A mutual fund is already
diversified because it invests in many securities. You can diversify even
further by placing some of your assets in several different types of domestic
and international funds that may include stocks, bonds, and money market
securities.
Finally, no matter what your investment goals or time horizon, it makes good
sense to review your portfolio regularly with your financial consultant. In
rapidly changing markets, you need an investment professional on your side who
can explain what is happening and how your portfolio may be affected.
Your financial consultant can help you create and follow a regular
investment plan--investing a certain amount of money at regular intervals--that
can help you stay on track regardless of day-to-day market activity.
In 1997, and in the years ahead, we at AIM plan to meet the challenge of
changing financial markets through the consistent application of disciplined
investment strategies that have served our shareholders well for more than 20
years. We are pleased that AIM funds, overall, have turned in attractive, and
often impressive performance when measured against benchmark indexes and peer
group performance.
We appreciate the trust you have placed in us and we look forward to our
continued close association. If you have any questions or comments about this
report, we invite you to call Client Services at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line at 800-246-5463.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-----------------------------------
In rapidly changing markets,
you need
an investment professional
on your side
who can explain
what is happening and
how your portfolio may be affected.
-----------------------------------
<PAGE> 4
The Managers' Overview
HIGH-VALUE MARKET LEADS TO
PORTFOLIO CHANGES, IMPROVING PERFORMANCE
A roundtable discussion with the Fund management team for AIM Value Fund for
the fiscal year ended December 31, 1996.
- --------------------------------------------------------------------------------
Q. HOW DID AIM VALUE FUND PERFORM DURING THE FISCAL YEAR THAT ENDED DECEMBER 31,
1996?
A. The Fund's total return for the period was 14.52% for Class A shares and
13.57% for Class B shares. Given the challenging environment we faced, we are
pleased with this performance. As many of our shareholders know, Fund
performance was off its historical pace at times during the fiscal year. Like
many investments, the Fund suffered when the market, led by a steep drop in
technology stocks, declined during the summer of 1996. However, careful
reorganization of the portfolio helped improve performance later in the year,
and we think momentum may be on the Fund's side.
The Fund's net assets grew considerably during the fiscal year, from $6.27
billion to $9.98 billion.
================================================================================
GROWTH OF NET ASSETS
- --------------------------------------------------------------------------------
12/31/95 $6.27 billion
12/31/96 $9.98 billion
================================================================================
Q. WHAT IS THE FUND'S LONG-TERM RECORD?
A. Over the long haul, the Fund has outpaced both the market in general and
growth-oriented equity funds. For the period 5/31/84-12/31/96, average annual
total return is 17.87% for Class A shares of the Fund, compared to 17.23% for
the S&P 500 and 15.29% for the Lipper Growth Funds Index.
During 1995 and 1996 combined, the Lipper Growth Funds Index delivered a
total return of 48.96%: 31.48% for 1995 and 17.48% for 1996. AIM Value Fund
kept pace. Its total return of 34.9% for 1995 added to the 14.5% produced
during fiscal year 1996 amounts to 49.4% for Class A shares. This despite the
fact that, especially during 1996, our bargain-hunting, value-seeking
approach was at a disadvantage.
Q. WHAT MADE THE MARKET SO CHALLENGING FOR AIM VALUE FUND DURING 1996?
A. The stock market has been unusually generous to investors the past two years.
The S&P 500 rose a dramatic 37.45% during 1995, and during 1996 it advanced
another 22.95%. Such substantial investment returns two years in a row is un-
usual. As stock prices have risen, it has become more and more difficult to
find the kind of underpriced stocks the Fund seeks for its portfolio.
Q. HOW DID YOU RESPOND TO THIS SITUATION?
A. We became quite conservative in executing our value-oriented investment
style. The Fund seeks what we often call "growth at a discount."
We try to identify companies with healthy earnings growth and expectations
whose stocks are commanding a lower price than we think justifiable. In an
expensive market, such stocks are hard to find.
But we adhered to our standards by not buying securities we considered too
expensive and by trying to manage risk in a market characterized by
short-term volatility. Our conservative stance is evidenced by the fact that
at times during the reporting period more than 20% of the portfolio's assets
were in cash or short-term cash equivalents. As the fiscal year progressed,
we made a few adjustments to
================================================================================
AIM Value Fund vs. S&P 500
- --------------------------------------------------------------------------------
12/31/86-12/31/96
As shown in the table below, AIM Value Fund Class A shares outperformed the S&P
500 in seven of the 10 years ended December 31, 1996. One year, 1989, was a
virtual dead heat. Note also that back-to-back years with stock market returns
of more than 20% occurred only once during this time frame, in 1995-1996. The
annual total return of Class B shares will differ from that of Class A shares.
Class B shares were first offered 10/18/93.
ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
AIM VALUE FUND
S&P 500 CLASS A SHARES
<S> <S> <C>
1987 5.18% 5.96%
1988 16.50 20.61
1989 31.59 31.54
1990 -3.10 1.88
1991 30.34 43.45
1992 7.61 16.39
1993 10.04 18.71
1994 1.36 3.28
1995 37.45 34.85
1996 22.95 14.52
================================================================================
</TABLE>
----------------
As the reporting period closed,
the Fund was anchored in
domestic, less-cyclical stocks
with more consistent,
predictable earnings.
----------------
2
<PAGE> 5
==============================================================================
PORTFOLIO COMPOSITION
- ------------------------------------------------------------------------------
As of 12/31/96
TOP 10 COMMON STOCK HOLDINGS
1. Federal National Mortgage
Association
2. Columbia/HCA Healthcare Corp.
3. Baxter International, Inc.
4. Philip Morris Companies, Inc.
5. MFS Communications Co., Inc.
6. Bristol-Myers Squibb Co.
7. SmithKline Beecham PLC-ADR
8. Ameritech Corp.
9. Novartis A.G.
10. Canadian Pacific, Ltd.
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.
===============================================================================
the new environment and ended the fiscal year with about 12% of assets in
cash. We also participated in what is known as a "flight to quality"
occurring in the market. With stock values at heady levels, investors began
to favor steady-growing blue chips over more volatile, less-familiar stocks.
As the reporting period closed, the Fund was anchored in domestic,
less-cyclical stocks with more consistent, predictable earnings.
Q. WERE THERE ANY OTHER STEPS YOU TOOK IN RESPONSE TO A DIFFICULT MARKET?
A. In selected cases, we established larger-than-usual positions in stocks we
thought attractive. This somewhat narrowed the Fund's common stock holdings
from 202 at the opening of the fiscal year to 172 at its close.
We have been concentrating on companies expected to meet earnings
predictions, and this has contributed to improved performance. The top 10
holdings in the portfolio are companies like Baxter International Inc.,
Bristol-Myers Squibb Co., and SmithKline Beecham PLC. We think their
long-term records of consistent performance offset any risk we took on by
establishing large positions in these stocks.
Q. ALL THE COMPANIES YOU JUST MENTIONED ARE IN THE MEDICAL/PHARMACEUTICAL AREA.
IS THE FUND HEAVILY INVESTED IN THIS SECTOR?
A. Yes. All together, such companies as pharmaceutical manufacturers,
patient-care providers, and makers of medical instruments and products
accounted for more than 19% of portfolio assets at the close of the fiscal
year.
A number of factors suggest that the health-care industry should continue
to grow and provide profitable investment opportunities for the foreseeable
future.
o An aging population is bound to produce continued demand.
o A new federal initiative in the health-care area seems unlikely, which
means a more certain environment in the industry.
o There has been increased use of prescription drugs by Medicare
recipients enrolled in managed care. Such holdings as Bristol-Myers Squibb
Co. and SmithKline Beecham PLC have reported increased earnings. Drug makers
accounted for 9.20% of the portfolio at the close of the fiscal year, up from
7.19% just six months earlier.
o Finally, health-care companies have made enormous strides in cost
control and increased efficiency through consolidation in recent years. One
of our largest holdings, Columbia/HCA Healthcare Corp., has been a leader of
the consolidation wave sweeping this industry. At the close of the fiscal
year, patient-care providers such as Columbia/HCA constituted 6.24% of the
portfolio, up from 2.33% as the year opened.
Q. ABOUT 19% OF THE FUND'S HOLDINGS ARE FOREIGN, A LARGER PROPORTION THAN USUAL.
HAVE THESE INVESTMENTS BEEN SUCCESSFUL?
A. Yes, they have, and with just about no down side to them. Over the year we
have gradually reduced our holdings in Japan, where markets declined during
1996. By the close of the fiscal year, our overseas holdings tended to be
European stocks, which on average delivered a hefty 20% return during 1996.
Q. WERE THERE OTHER INDUSTRY GROUPS WHERE THE FUND FOUND GOOD INVESTMENT
OPPORTUNITIES?
A. As we said earlier, we have tried to manage risk in a very volatile market.
One way to do so is to invest in noncyclical industries like food and other
consumer staples whose performance remains relatively constant whatever the
state of the economy. Our holdings of such food processors as Archer Daniels
Midland Co. and Nabisco Holdings Corp. rose from 1.21% of the portfolio to
slightly more than 3% during the fiscal year. Again, this is another strategy
for managing risk in a market that featured significant short-term volatility
while it delivered excellent returns over the course of a full year.
Q. WHAT IS YOUR NEAR-TERM OUTLOOK FOR THE MARKET AND THE FUND?
A. Predictions concerning stock market performance during 1997 vary widely. Some
knowledgeable people are predicting a Dow Jones Industrial Average well over
7000; others are predicting a drop to below 5000. We are cautionary.
We think it will be difficult for the market to produce anything like the
returns of the past two years. The double-digit earnings growth American
corporations experienced for four years has now slowed. For earnings growth
to accelerate back to the 14% or 15% level will require a very robust
economy, which could lead to a rise in interest rates, which will make the
bond market a stronger competitor for stocks, which could make stocks less
attractive. It is a difficult scenario.
For the Fund, we continue to maintain our investment standards in terms of
the price we will pay for a stock. We are confident about the stocks we own
and that we can continue to offer shareholders very attractive long-term
performance.
See important Fund & index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
AIM VALUE FUND VS. BENCHMARK INDEXES
The chart below compares your Fund to benchmark indexes. It is intended to give
you a general idea of how your Fund performed compared to the indexes from the
Fund's inception 5/1/84 through 12/31/96. 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. A market index such as the S&P 500
is not managed; therefore, there are no sales charges, expenses, or fees. An
index of funds, such as the Lipper Growth Funds Index, includes a number of
mutual funds grouped by investment objective. Each of these funds interprets
that objective differently, and each employs a different management style and
investment strategy. You cannot invest in an index. But if you could buy all the
securities that make up a particular index, you would incur expenses that would
affect the return on your investment.
================================================================================
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
5/1/84 - 12/31/96
(In thousands)
<TABLE>
<CAPTION>
AIM VALUE FUND, S&P 500 STOCK LIPPER GROWTH FUNDS
CLASS A INDEX INDEX
<S> <C> <C> <C>
5/1/84 $9,452 $10,000 $10,000
12/84 10,385 10,714 10,498
12/85 12,744 14,105 13,662
12/86 13,865 16,730 15,792
12/87 14,692 17,597 16,306
12/88 17,719 20,500 18,611
12/89 23,307 26,976 23,723
12/90 23,746 26,136 22,439
12/91 34,064 34,064 30,591
12/92 39,648 36,656 32,926
12/93 47,065 40,334 36,870
12/94 48,606 40,881 36,291
12/95 65,545 56,189 48,140
12/96 75,061 69,056 56,554
</TABLE>
===============================================================================
===============================================================================
AVERAGE ANNUAL TOTAL RETURN
As of 12/31/96, including sales charges
- -------------------------------------------------------------------------------
CLASS A SHARES
1 Year 8.22%*
5 Years 15.80
10 Years 17.73
Inception (5/1/84) 17.25
*14.52% excluding sales charge
CLASS B SHARES
1 Year 8.57%*
Inception (10/18/93) 13.83
*13.57% excluding CDSC
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--. Your Fund's total
return includes sales charges, expenses, and management fees. The performance of
the Fund's Class B shares will differ from that of Class A shares due to
differing fees and expenses. For Fund performance calculations and descriptions
of indexes cited on this page, please refer to the inside front cover.
4
<PAGE> 7
AIM Value Fund vs. S&P 500
12/31/86-12/31/96
As shown in the table below, AIM Value Fund Class A shares outperformed the S&P
500 in seven of the 10 years ended December 31, 1996. One year, 1989, was a
virtual dead heat. Note also that back-to-back years with stock market returns
of more than 20% occurred only once during this time frame, in 1995-1996. The
annual total return of Class B shares will differ from that of Class A shares.
Class B shares were first offered 10/18/93.
ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
AIM VALUE FUND
S&P 500 CLASS A SHARES
<S> <S> <C>
1987 5.18% 5.96%
1988 16.50 20.61
1989 31.59 31.54
1990 -3.10 1.88
1991 30.34 43.45
1992 7.61 16.39
1993 10.04 18.71
1994 1.36 3.28
1995 37.45 34.85
1996 22.95 14.52
</TABLE>
<PAGE> 8
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-67.69%
AEROSPACE/DEFENSE-0.85%
Boeing Co. 550,000 $ 58,506,250
- ---------------------------------------------------------------
United Technologies Corp. 399,800 26,386,800
- ---------------------------------------------------------------
84,893,050
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS &
TIRES-0.17%
Borg-Warner Automotive, Inc. 450,000 17,325,000
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.29%
PepsiCo, Inc. 1,000,000 29,250,000
- ---------------------------------------------------------------
BIOTECHNOLOGY-1.17%
Biogen, Inc.(a) 1,095,100 42,435,125
- ---------------------------------------------------------------
Guidant Corp. 1,300,000 74,100,000
- ---------------------------------------------------------------
116,535,125
- ---------------------------------------------------------------
BUSINESS SERVICES-0.10%
Cognizant Corp. 300,000 9,900,000
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.84%
IMC Global, Inc. 1,200,000 46,950,000
- ---------------------------------------------------------------
Praxair, Inc. 800,000 36,900,000
- ---------------------------------------------------------------
83,850,000
- ---------------------------------------------------------------
COMPUTER MAINFRAMES-0.19%
International Business Machines
Corp. 125,000 18,875,000
- ---------------------------------------------------------------
COMPUTER MINI/PCS-0.45%
Sun Microsystems, Inc.(a) 600,000 15,412,500
- ---------------------------------------------------------------
Wang Laboratories, Inc.(a) 1,448,500 29,332,125
- ---------------------------------------------------------------
44,744,625
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.52%
Cisco Systems, Inc.(a) 400,000 25,450,000
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 687,700 26,003,656
- ---------------------------------------------------------------
51,453,656
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.76%
Seagate Technology, Inc.(a) 800,000 31,600,000
- ---------------------------------------------------------------
U.S. Robotics Corp.(a) 343,100 24,703,200
- ---------------------------------------------------------------
Western Digital Corp.(a) 350,000 19,906,250
- ---------------------------------------------------------------
76,209,450
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-2.09%
American Management Systems,
Inc.(a) 1,400,000 34,300,000
- ---------------------------------------------------------------
Computer Associates International,
Inc. 600,000 29,850,000
- ---------------------------------------------------------------
CompuWare Corp.(a) 277,600 13,914,700
- ---------------------------------------------------------------
Informix Corp.(a) 1,000,000 20,375,000
- ---------------------------------------------------------------
National Data Corp. 300,000 13,050,000
- ---------------------------------------------------------------
Network General Corp.(a) 800,000 24,200,000
- ---------------------------------------------------------------
Wallace Computer Services, Inc. 2,100,000 72,450,000
- ---------------------------------------------------------------
208,139,700
- ---------------------------------------------------------------
CONGLOMERATES-0.39%
Loews Corp. 362,300 34,146,775
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONGLOMERATES-(CONTINUED)
U.S. Industries, Inc.(a) 135,500 $ 4,657,813
- ---------------------------------------------------------------
38,804,588
- ---------------------------------------------------------------
CONTAINERS-0.28%
First Brands Corp. 1,000,000 28,375,000
- ---------------------------------------------------------------
COSMETICS & TOILETRIES-0.20%
Clorox Co. 200,000 20,075,000
- ---------------------------------------------------------------
ELECTRIC POWER-4.92%
Allegheny Power System, Inc. 2,000,000 60,750,000
- ---------------------------------------------------------------
American Electric Power Co. 2,600,000 106,925,000
- ---------------------------------------------------------------
Baltimore Gas & Electric Co. 800,000 21,400,000
- ---------------------------------------------------------------
Consolidated Edison Co. of New
York, Inc. 1,400,000 40,950,000
- ---------------------------------------------------------------
DQE, Inc. 500,000 14,500,000
- ---------------------------------------------------------------
Duke Power Co. 500,000 23,125,000
- ---------------------------------------------------------------
Edison International 1,737,100 34,524,863
- ---------------------------------------------------------------
Entergy Corp. 1,000,000 27,750,000
- ---------------------------------------------------------------
FPL Group, Inc. 500,000 23,000,000
- ---------------------------------------------------------------
Illinova Corp. 875,300 24,070,750
- ---------------------------------------------------------------
Texas Utilities Co. 600,000 24,450,000
- ---------------------------------------------------------------
Unicom Corp. 3,296,800 89,425,700
- ---------------------------------------------------------------
490,871,313
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.57%
Merrill Lynch & Co., Inc. 700,000 57,050,000
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-5.36%
Federal Home Loan Mortgage Corp. 500,000 55,062,500
- ---------------------------------------------------------------
Federal National Mortgage
Association 10,000,000 372,500,000
- ---------------------------------------------------------------
Student Loan Marketing Association 1,147,300 106,842,313
- ---------------------------------------------------------------
534,404,813
- ---------------------------------------------------------------
FOOD/PROCESSING-2.82%
Archer-Daniels-Midland Co. 5,000,000 110,000,000
- ---------------------------------------------------------------
Flowers Industries, Inc. 1,400,000 30,100,000
- ---------------------------------------------------------------
Interstate Bakeries Corp. 800,000 39,300,000
- ---------------------------------------------------------------
Nabisco Holdings Corp.-Class A 1,279,500 49,740,563
- ---------------------------------------------------------------
Ralcorp Holdings, Inc.(a) 1,062,600 22,447,425
- ---------------------------------------------------------------
Ralston-Ralston Purina Group 400,000 29,350,000
- ---------------------------------------------------------------
280,937,988
- ---------------------------------------------------------------
FUNERAL SERVICES-0.89%
Service Corp. International 2,800,000 78,400,000
- ---------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 300,000 10,200,000
- ---------------------------------------------------------------
88,600,000
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.10%
KN Energy, Inc. 256,800 10,079,400
- ---------------------------------------------------------------
HOME BUILDING-0.21%
Clayton Homes, Inc. 1,548,300 20,902,050
- ---------------------------------------------------------------
HOTELS/MOTELS-0.09%
Choice Hotels International,
Inc.(a) 500,000 8,812,500
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE & HEALTH)-1.01%
Conseco Inc. 383,900 $ 24,473,625
- ---------------------------------------------------------------
Provident Companies, Inc. 1,000,000 48,375,000
- ---------------------------------------------------------------
Safeco Corp. 700,000 27,606,250
- ---------------------------------------------------------------
100,454,875
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-6.90%
Allstate Corp. 1,845,500 106,808,313
- ---------------------------------------------------------------
American International Group, Inc. 1,000,000 108,250,000
- ---------------------------------------------------------------
Chubb Corp. 353,300 18,989,875
- ---------------------------------------------------------------
CIGNA Corp. 700,000 95,637,500
- ---------------------------------------------------------------
CNA Financial Corp.(a) 400,000 42,800,000
- ---------------------------------------------------------------
Exel Limited 1,400,000 53,025,000
- ---------------------------------------------------------------
ITT Hartford Group, Inc. 1,200,000 81,000,000
- ---------------------------------------------------------------
MBIA, Inc. 500,000 50,625,000
- ---------------------------------------------------------------
Progressive Corp. 271,900 18,319,262
- ---------------------------------------------------------------
Transatlantic Holdings, Inc. 203,800 16,405,900
- ---------------------------------------------------------------
Travelers Group, Inc. 2,133,333 96,799,985
- ---------------------------------------------------------------
688,660,835
- ---------------------------------------------------------------
LEISURE & RECREATION-0.98%
Callaway Golf Co. 1,400,000 40,250,000
- ---------------------------------------------------------------
Carnival Corp.-Class A 1,740,200 57,426,600
- ---------------------------------------------------------------
97,676,600
- ---------------------------------------------------------------
MACHINERY (HEAVY)-0.16%
Case Corp. 300,000 16,350,000
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.39%
Pentair, Inc. 1,200,000 38,700,000
- ---------------------------------------------------------------
MEDICAL (DRUGS)-4.04%
American Home Products Corp. 1,000,000 58,625,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 2,200,000 239,250,000
- ---------------------------------------------------------------
ICN Pharmaceuticals, Inc. 1,431,435 28,091,912
- ---------------------------------------------------------------
R.P. Scherer Corp.(a) 500,000 25,125,000
- ---------------------------------------------------------------
Schering-Plough Corp. 800,000 51,800,000
- ---------------------------------------------------------------
402,891,912
- ---------------------------------------------------------------
MEDICAL
(INSTRUMENTS/PRODUCTS)-4.28%
Baxter International, Inc. 7,517,800 308,229,800
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 600,000 36,000,000
- ---------------------------------------------------------------
Hillenbrand Industries, Inc. 800,000 29,000,000
- ---------------------------------------------------------------
St. Jude Medical, Inc.(a) 800,000 34,100,000
- ---------------------------------------------------------------
Sybron International Corp.(a) 600,000 19,800,000
- ---------------------------------------------------------------
427,129,800
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-6.24%
Columbia/HCA Healthcare Corp. 8,500,000 346,375,000
- ---------------------------------------------------------------
Health Care and Retirement
Corp.(a) 1,200,000 34,350,000
- ---------------------------------------------------------------
Manor Care, Inc. 500,000 13,500,000
- ---------------------------------------------------------------
MedPartners, Inc.(a) 7,500,000 157,500,000
- ---------------------------------------------------------------
OrNda HealthCorp(a) 1,800,000 52,650,000
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 600,000 17,850,000
- ---------------------------------------------------------------
622,225,000
- ---------------------------------------------------------------
NATURAL GAS PIPELINE-1.31%
Columbia Gas System, Inc. 700,000 $ 44,537,500
- ---------------------------------------------------------------
El Paso Natural Gas Co. 1,714,100 86,562,050
- ---------------------------------------------------------------
131,099,550
- ---------------------------------------------------------------
OFFICE PRODUCTS-0.35%
Reynolds & Reynolds Co.-Class A 1,339,200 34,819,200
- ---------------------------------------------------------------
OIL & GAS-2.67%
Halliburton Co. 469,800 28,305,450
- ---------------------------------------------------------------
Mobil Corp. 300,000 36,675,000
- ---------------------------------------------------------------
NorAm Energy Corp. 1,000,000 15,375,000
- ---------------------------------------------------------------
Oryx Energy Co.(a) 4,000,000 99,000,000
- ---------------------------------------------------------------
Pennzoil Co. 700,000 39,550,000
- ---------------------------------------------------------------
Unocal Corp. 1,185,300 48,152,812
- ---------------------------------------------------------------
267,058,262
- ---------------------------------------------------------------
OIL & GAS
(REFINING/MARKETING)-0.48%
Tosco Corp. 602,907 47,705,016
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.55%
Baker Hughes, Inc. 1,800,000 62,100,000
- ---------------------------------------------------------------
BJ Services Co.(a) 721,500 36,796,500
- ---------------------------------------------------------------
Noble Drilling Corp.(a) 1,000,000 19,875,000
- ---------------------------------------------------------------
Tidewater, Inc. 800,000 36,200,000
- ---------------------------------------------------------------
154,971,500
- ---------------------------------------------------------------
PUBLISHING-0.48%
Gannett Company, Inc. 340,000 25,457,500
- ---------------------------------------------------------------
Knight-Ridder, Inc. 300,000 11,475,000
- ---------------------------------------------------------------
Scripps (E.W.) Co.-Class A 300,000 10,500,000
- ---------------------------------------------------------------
47,432,500
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.93%
American Stores Co. 900,000 36,787,500
- ---------------------------------------------------------------
Safeway, Inc.(a) 1,300,000 55,575,000
- ---------------------------------------------------------------
92,362,500
- ---------------------------------------------------------------
RETAIL (STORES)-0.05%
Meyer (Fred), Inc.(a) 154,300 5,477,650
- ---------------------------------------------------------------
SHOES & RELATED APPAREL-0.26%
Nike, Inc.-Class B 435,200 26,003,200
- ---------------------------------------------------------------
TELECOMMUNICATIONS-4.63%
Lucent Technologies, Inc. 1,022,400 47,286,000
- ---------------------------------------------------------------
MFS Communications Co., Inc.(a) 4,835,092 263,512,514
- ---------------------------------------------------------------
WorldCom, Inc.(a) 5,778,300 150,596,944
- ---------------------------------------------------------------
461,395,458
- ---------------------------------------------------------------
TELEPHONE-3.41%
Ameritech Corp. 3,194,600 193,672,625
- ---------------------------------------------------------------
BellSouth Corp. 2,000,000 80,750,000
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 400,000 24,650,000
- ---------------------------------------------------------------
SBC Communications, Inc. 800,000 41,400,000
- ---------------------------------------------------------------
340,472,625
- ---------------------------------------------------------------
TOBACCO-4.31%
DIMON, Inc. 1,100,000 25,437,500
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TOBACCO-(CONTINUED)
Philip Morris Companies, Inc. 2,600,000 $ 292,825,000
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 3,283,800 111,649,200
- ---------------------------------------------------------------
429,911,700
- ---------------------------------------------------------------
Total Domestic Common Stocks 6,752,886,441
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-19.14%
ARGENTINA-0.38%
YPF Sociedad Anonima-ADR (Oil &
Gas-Exploration & Production) 1,500,000 37,875,000
- ---------------------------------------------------------------
AUSTRALIA-0.49%
Westpac Banking Corp. Ltd.
(Banking) 8,649,037 49,222,721
- ---------------------------------------------------------------
BERMUDA-0.02%
PartnerRe Ltd.
(Insurance-Multi-Line Property) 52,600 1,788,400
- ---------------------------------------------------------------
BRAZIL-0.15%
Telecomunicacoes Brasileiras S.A.
Telebras-ADR
(Telecommunications) 200,000 15,300,000
- ---------------------------------------------------------------
CANADA-2.86%
Canadian National Railway Co.
(Railroads) 1,600,000 60,800,000
- ---------------------------------------------------------------
Canadian Pacific, Ltd.
(Transportation) 6,200,000 164,300,000
- ---------------------------------------------------------------
CanWest Global Communications
Corp. (Advertising/Broadcasting) 1,800,000 18,450,000
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 400,000 24,750,000
- ---------------------------------------------------------------
Potash Corp. of Saskatchewan Inc.
(Chemicals) 200,000 17,000,000
- ---------------------------------------------------------------
285,300,000
- ---------------------------------------------------------------
DENMARK-0.58%
Danisco A.S. (Food/Processing) 460,000 27,955,456
- ---------------------------------------------------------------
Novo Nordisk A.S.-Class B
(Medical-Drugs) 160,500 30,242,921
- ---------------------------------------------------------------
58,198,377
- ---------------------------------------------------------------
FRANCE-0.98%
Rhone-Poulenc Rorer, Inc.-Class A
(Medical-Drugs) 517,900 17,657,610
- ---------------------------------------------------------------
Rhone-Poulenc Rorer, Inc.
(Medical-Drugs) 954,900 74,601,563
- ---------------------------------------------------------------
Roussel Uclaf (Medical-Drugs) 16,900 4,973,750
- ---------------------------------------------------------------
97,232,923
- ---------------------------------------------------------------
GERMANY-0.44%
VEBA A.G. (Electric Power) 760,000 43,956,330
- ---------------------------------------------------------------
HONG KONG-1.15%
Cheung Kong Holdings Ltd. (Real
Estate) 3,421,000 30,408,397
- ---------------------------------------------------------------
Citic Pacific Ltd. (Banking) 5,000,000 29,025,794
- ---------------------------------------------------------------
First Pacific Co. Ltd.
(Conglomerates) 7,850,000 10,200,076
- ---------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 1,200,000 14,584,007
- ---------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real
Estate) 2,459,000 30,123,505
- ---------------------------------------------------------------
114,341,779
- ---------------------------------------------------------------
ITALY-1.60%
Edison S.p.A. (Electric Power) 3,000,000 18,911,667
- ---------------------------------------------------------------
Fila Holding S.p.A.-ADR
(Retail-Stores) 384,200 22,331,625
- ---------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A.
(Banking) 3,263,500 27,837,633
- ---------------------------------------------------------------
ITALY-(CONTINUED)
Telecom Italia Mobile S.p.A.
(Telecommunications) 14,500,000 36,751,813
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 20,800,000 $ 54,022,413
- ---------------------------------------------------------------
159,855,151
- ---------------------------------------------------------------
JAPAN-0.38%
Fuji Photo Film (Leisure &
Recreation) 750,000 24,738,796
- ---------------------------------------------------------------
Honda Motor Co.
(Automobile-Manufacturers) 450,000 12,861,584
- ---------------------------------------------------------------
37,600,380
- ---------------------------------------------------------------
MALAYSIA-0.03%
Malayan Banking Berhad (Banking) 272,000 3,015,640
- ---------------------------------------------------------------
NETHERLANDS-1.02%
Royal Dutch Petroleum Co. (Oil &
Gas-Services) 200,000 34,150,000
- ---------------------------------------------------------------
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (Publishing) 3,000,000 62,728,062
- ---------------------------------------------------------------
Wolters Kluwer N.V. (Publishing) 40,000 5,317,116
- ---------------------------------------------------------------
102,195,178
- ---------------------------------------------------------------
NORWAY-0.16%
Storebrand A.S.A.
(Insurance-Multi-Line
Property)(a) 2,854,250 16,390,752
- ---------------------------------------------------------------
PHILIPPINES-0.26%
C & P Homes, Inc. (Home Building) 10,050,000 5,158,745
- ---------------------------------------------------------------
Filinvest Land Inc. (Real
Estate)(a) 19,833,000 6,183,673
- ---------------------------------------------------------------
Metro Pacific Corp.
(Conglomerates) 58,708,000 14,509,582
- ---------------------------------------------------------------
25,852,000
- ---------------------------------------------------------------
SPAIN-1.75%
Banco Popular Espanol S.A.
(Banking) 200,000 39,283,651
- ---------------------------------------------------------------
Empresa Nacional de Electricidad,
S.A. (Electric Power) 1,200,000 85,407,280
- ---------------------------------------------------------------
Iberdrola S.A. (Electric Power) 3,500,000 49,605,237
- ---------------------------------------------------------------
174,296,168
- ---------------------------------------------------------------
SWEDEN-1.21%
Hennes & Mauritz A.B.-Class B
(Retail-Stores) 300,000 41,525,535
- ---------------------------------------------------------------
Nordbanken A.B. (Banking) 262,250 7,940,678
- ---------------------------------------------------------------
Skandinaviska Enskilda
Banken-Class A (Banking) 4,000,000 41,056,320
- ---------------------------------------------------------------
Telefonaktiebolaget L.M.
Ericsson-ADR
(Telecommunications) 1,000,000 30,187,500
- ---------------------------------------------------------------
120,710,033
- ---------------------------------------------------------------
SWITZERLAND-1.84%
Novartis A.G. (Medical-Drugs)(a) 159,990 183,238,453
- ---------------------------------------------------------------
THAILAND-0.18%
Krung Thai Bank PLC (Banking) 5,918,100 11,422,677
- ---------------------------------------------------------------
Thai Farmers Bank PLC (Banking) 1,046,600 6,529,517
- ---------------------------------------------------------------
Thai Farmers Bank PLC-Wts.,
expiring 09/15/02 (Banking)(a) 137,500 130,015
- ---------------------------------------------------------------
18,082,209
- ---------------------------------------------------------------
UNITED KINGDOM-3.66%
Burton Group PLC (Retail-Stores) 1,800,000 4,810,690
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Granada Group PLC (Leisure &
Recreation) 4,000,000 $ 59,139,970
- ---------------------------------------------------------------
Railtrack Group PLC (Railroads) 3,500,000 23,235,395
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Medical-Drugs) 3,000,000 204,000,000
- ---------------------------------------------------------------
Standard Chartered PLC
(Finance-Asset Management) 3,982,300 49,190,308
- ---------------------------------------------------------------
Unilever PLC (Consumer
Non-Durables) 1,000,000 24,267,603
- ---------------------------------------------------------------
364,643,966
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 1,909,095,460
- ---------------------------------------------------------------
PREFERRED STOCKS-0.38%
INSURANCE (LIFE & HEALTH)-0.12%
Conseco Inc.-$4.278 Conv. PRIDES 105,000 11,943,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.26%
MFS Communications Co., Inc.-$2.68
Conv. Pfd. 283,100 25,832,875
- ---------------------------------------------------------------
Total Preferred Stocks 37,776,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-0.26%
COMPUTER SOFTWARE/SERVICES-0.26%
First Financial Management Corp.,
Conv. Deb., 5.00%, 12/15/99 $15,250,000 26,391,193
- ---------------------------------------------------------------
COMMERCIAL PAPER TRUST-1.50%
Citibank, N.A., 4.945%,
12/26/97(b) 150,000,000 150,000,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MASTER NOTE AGREEMENTS-1.58%
Citicorp Securities, Inc.,
5.875%(c), 01/27/97 $24,000,000 $ 24,000,000
- ---------------------------------------------------------------
Goldman, Sachs & Co., 5.755%(d),
04/23/97 54,000,000 54,000,000
- ---------------------------------------------------------------
Morgan Stanley Group Inc.,
5.725%(c), 05/28/97 80,000,000 80,000,000
- ---------------------------------------------------------------
Total Master Note Agreements 158,000,000
- ---------------------------------------------------------------
U.S. TREASURY SECURITIES-4.48%
U.S. TREASURY BILLS-4.48%(e)
5.22%, 01/02/97 347,825,000 347,775,998
- ---------------------------------------------------------------
5.14%, 03/06/97 100,000,000 99,151,000
- ---------------------------------------------------------------
Total U.S. Treasury Securities 446,926,998
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-4.78%(f)
HSBC Securities, Inc.,
7.05%(g), 01/02/97 19,021,553 19,021,553
- ---------------------------------------------------------------
Merrill Lynch & Co. Inc.,
6.50%(h), 01/02/97 400,000,000 400,000,000
- ---------------------------------------------------------------
Merrill Lynch & Co. Inc.,
7.05%(i), 01/02/97 27,359,031 27,359,031
- ---------------------------------------------------------------
Morgan Stanley Group, Inc.,
7.05%(j), 01/02/97 30,000,000 30,000,000
- ---------------------------------------------------------------
Total Repurchase Agreements 476,380,584
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.81% 9,957,457,301
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.19% 18,537,009
- ---------------------------------------------------------------
NET ASSETS-100.00% $9,975,994,310
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Variable rate trust certificates representing an interest in a trust
(comprised of eligible debt obligations) entitling the Fund to receive
variable rate interest. The Fund has the right, upon seven calendar days'
notice to the trustee, to put its certificates to the trust at par value
plus accrued interest. Because variable rate trust certificates involve a
trust and a third party put feature, they involve complexities and potential
risks that may not be present where the debt obligation is owned directly.
Rate shown is the rate in effect on December 31, 1996.
(c) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 3 business days' notice to the issuer. Interest
rates on master notes are redetermined periodically. Rate shown is the rate
in effect on December 31, 1996.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 7 business days' prior written notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on December 31, 1996.
(e) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(f) Collateral on repurchase agreements, including 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.
(g) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$300,117,500. Collateralized by U.S. Government obligations, 0% to 8.00% due
07/16/97 to 11/01/35 with an aggregate market value at December 31, 1996 of
$306,000,188.
(h) Repurchase agreement entered into 12/31/96 with a maturing value of
$400,144,444. Collateralized by U.S. Government obligations, 6.00% to 12.00%
due 03/01/01 to 11/01/26 with an aggregate market value at December 31, 1996
of $408,003,538.
(i) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$200,078,333. Collateralized by U.S. Government obligations, 0% to 15.50%
due 03/01/97 to 12/01/26 with an aggregate market value at December 31,
1996 of $204,003,804.
(j) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$300,117,500. Collateralized by U.S. Government obligations, 6.50% to
12.00% due 10/15/10 to 12/20/26 with an aggregate market value at December
31, 1996 of $307,371,109.
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Wts. - Warrants
See Notes to Financial Statements.
8
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$8,588,978,881) $ 9,957,457,301
- ----------------------------------------------------------
Foreign currencies, at value (cost
$83,365,445) 82,577,413
- ----------------------------------------------------------
Receivables for:
Investments sold 34,148,878
- ----------------------------------------------------------
Fund shares sold 21,265,654
- ----------------------------------------------------------
Dividends and interest 19,239,351
- ----------------------------------------------------------
Investment for deferred compensation plan 57,673
- ----------------------------------------------------------
Other assets 166,862
- ----------------------------------------------------------
Total assets 10,114,913,132
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 44,248,364
- ----------------------------------------------------------
Fund shares reacquired 40,121,185
- ----------------------------------------------------------
Options written 36,831,463
- ----------------------------------------------------------
Deferred compensation plan 57,673
- ----------------------------------------------------------
Accrued advisory fees 5,076,114
- ----------------------------------------------------------
Accrued administrative service fees 18,619
- ----------------------------------------------------------
Accrued distribution fees 8,170,140
- ----------------------------------------------------------
Accrued transfer agent fees 2,510,426
- ----------------------------------------------------------
Accrued trustees' fees 17,930
- ----------------------------------------------------------
Accrued operating expenses 1,866,908
- ----------------------------------------------------------
Total liabilities 138,918,822
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $ 9,975,994,310
==========================================================
NET ASSETS:
Class A $ 5,100,060,952
==========================================================
Class B $ 4,875,933,358
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 174,979,851
==========================================================
Class B 168,596,396
==========================================================
Class A:
Net asset value and redemption price
per share $ 29.15
==========================================================
Offering price per share:
(Net asset value of $29.15
divided by 94.50%) $ 30.85
==========================================================
Class B:
Net asset value and offering price per
share $ 28.92
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $3,459,015 foreign
withholding tax) $ 140,639,640
- ----------------------------------------------------------
Interest 87,267,409
- ----------------------------------------------------------
Total investment income 227,907,049
- ----------------------------------------------------------
EXPENSES:
Advisory fees 51,821,484
- ----------------------------------------------------------
Custodian fees 1,348,989
- ----------------------------------------------------------
Distribution fees -- Class A 10,740,282
- ----------------------------------------------------------
Distribution fees -- Class B 39,533,247
- ----------------------------------------------------------
Administrative service fees 196,586
- ----------------------------------------------------------
Trustees' fees 58,939
- ----------------------------------------------------------
Transfer agent fees -- Class A 7,667,173
- ----------------------------------------------------------
Transfer agent fees -- Class B 10,273,753
- ----------------------------------------------------------
Other 4,429,849
- ----------------------------------------------------------
Total expenses 126,070,302
- ----------------------------------------------------------
Less: Fees waived by advisor (1,562,359)
- ----------------------------------------------------------
Expenses paid indirectly (136,415)
- ----------------------------------------------------------
Net expenses 124,371,528
- ----------------------------------------------------------
Net investment income 103,535,521
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTIONS
TRANSACTIONS:
Net realized gain (loss) from:
Investment securities 335,204,694
- ----------------------------------------------------------
Foreign currencies (1,465,209)
- ----------------------------------------------------------
Futures contracts 35,626,021
- ----------------------------------------------------------
Options contracts 9,794,340
- ----------------------------------------------------------
379,159,846
- ----------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 705,017,998
- ----------------------------------------------------------
Foreign currencies (1,035,558)
- ----------------------------------------------------------
Futures contracts (11,292,015)
- ----------------------------------------------------------
Options contracts (4,770,527)
- ----------------------------------------------------------
687,919,898
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and options
transactions 1,067,079,744
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $1,170,615,265
==========================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 103,535,521 $ 16,293,031
- ------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and options transactions 379,159,846 412,157,661
- ------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies,
futures and options contracts 687,919,898 561,870,244
- ------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,170,615,265 990,320,936
- ------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (68,036,562) (10,460,381)
- ------------------------------------------------------------------------------------------------
Class B (33,169,539) --
- ------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (182,879,810) (183,638,497)
- ------------------------------------------------------------------------------------------------
Class B (175,428,877) (154,081,759)
- ------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,320,636,081 1,629,870,392
- ------------------------------------------------------------------------------------------------
Class B 1,674,774,506 1,958,628,734
- ------------------------------------------------------------------------------------------------
Net increase in net assets 3,706,511,064 4,230,639,425
- ------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,269,483,246 2,038,843,821
- ------------------------------------------------------------------------------------------------
End of period $9,975,994,310 $6,269,483,246
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $8,530,223,852 $5,534,813,265
- ------------------------------------------------------------------------------------------------
Undistributed net investment income 6,940,026 6,075,815
- ------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign
currencies, futures and options transactions 76,188,601 53,872,233
- ------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and options contracts 1,362,641,831 674,721,933
- ------------------------------------------------------------------------------------------------
$9,975,994,310 $6,269,483,246
================================================================================================
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Value Fund (the "Fund") is a series portfolio of AIM Funds Group (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 nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund. The Fund's investment objective is to seek to achieve
long-term growth of capital by investing primarily in equity securities judged
by the Fund's investment advisor to be undervalued relative to the investment
advisor's appraisal of the current or projected earnings of the companies
issuing the securities, or relative to current market values of assets owned by
the companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
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 mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
10
<PAGE> 14
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. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. 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 mean of the closing bid and asked prices. 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 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.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by
or under the supervision of the Board of Trustees.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at the date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts -- A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. 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 and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1996,
$1,465,209 was reclassified from undistributed net realized gains to
undistributed net investment income as a result of differing book/tax
treatment of foreign currency transactions. Net assets of the Fund were
unaffected as a result of this reclassification.
E. 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, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contract 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 contract is
closed, the Fund records 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 contract may not correlate with changes in
the value of the Fund's portfolio being hedged.
F. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the
11
<PAGE> 15
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.
G. 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.
H. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
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 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. AIM is currently
voluntarily waiving a portion of its advisory fees payable by the Fund to AIM to
the extent necessary to reduce the fees paid by the Fund at net asset levels
higher than those currently incorporated in the present advisory fee schedule.
AIM will receive a fee calculated at 0.80% of the first $150 million of the
Fund's average daily net assets, plus 0.625% of the Fund's average daily net
assets in excess of $150 million to and including $2 billion, plus 0.60% of the
Fund's average daily net assets in excess of $2 billion. The waiver of fees is
entirely voluntary and the Board of Trustees would be advised of any decision by
AIM to discontinue the waiver. During the year ended December 31, 1996, AIM
voluntarily waived advisory fees in the amount of $1,562,359.
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 year ended December 31, 1996, AIM
was reimbursed $196,586 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended December 31, 1996, AFS was paid
$9,776,850 for such services.
The Fund received reductions in transfer agency fees payable to AFS of
$126,199 from dividends received on balances in cash management accounts. In
addition, pricing service expenses in the amount of $10,216 were paid through
directed brokerage commissions paid by the Fund. The above arrangements resulted
in a reduction of the Fund's total expenses of $136,415 during the year ended
December 31, 1996.
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 shares and Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. 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 this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors' duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges payable to AIM
Distributors related to the Class B shares. During the year ended December 31,
1996, the Class A shares and the Class B shares paid AIM Distributors
$10,740,282 and $39,533,247, respectively, as compensation pursuant to the
Plans.
AIM Distributors received commissions of $7,792,991 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. 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, 1996,
AIM Distributors received $1,988,299 in contingent deferred sales charges
imposed on redemptions of Fund shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $18,622
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-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.
12
<PAGE> 16
NOTE 4-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) $325,000,000 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.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $56,800,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% of 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 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$11,872,784,862 and $8,787,111,126, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,466,690,588
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (105,343,330)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,361,347,258
==========================================================
Cost of investments for tax purposes is $8,596,110,043.
</TABLE>
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 83,369,308 $2,309,759,146 79,351,992 $2,054,533,413
- --------------------- ---------------------------- ----------------------------
Class B 73,576,913 2,011,544,498 75,466,438 1,966,370,940
- --------------------- ---------------------------- ----------------------------
Issued as
reinvestment of
dividends:
Class A 8,503,122 239,780,446 6,956,211 184,199,771
- --------------------- ---------------------------- ----------------------------
Class B 7,058,251 197,560,616 5,526,910 145,522,539
- --------------------- ---------------------------- ----------------------------
Reacquired:
Class A (44,030,263) (1,228,903,511) (23,428,920) (608,862,792)
- --------------------- ---------------------------- ----------------------------
Class B (19,368,345) (534,330,608) (5,847,788) (153,264,745)
- --------------------- ---------------------------- ----------------------------
109,108,986 $2,995,410,587 138,024,843 $3,588,499,126
============================ ============================
</TABLE>
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
--------------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period 4,000 $ 1,731,692
- ----------------------------------------------------------------------------------------
Written 244,171 78,737,578
- ----------------------------------------------------------------------------------------
Closed (42,715) (16,676,651)
- ----------------------------------------------------------------------------------------
Exercised (64,525) (7,877,711)
- ----------------------------------------------------------------------------------------
Expired (40,808) (23,997,281)
- ----------------------------------------------------------------------------------------
End of period 100,123 $ 31,917,627
========================================================================================
</TABLE>
13
<PAGE> 17
Open call option contracts written at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
NUMBER DECEMBER 31, UNREALIZED
CONTRACT STRIKE OF PREMIUM 1996 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Boston Scientific Corp. Jan. 50 3,000 $ 1,040,965 $ 3,093,750 $(2,052,785)
Case Corp. Jul. 55 3,000 1,513,689 1,293,750 219,939
Clorox Co. Jan. 95 2,000 1,122,962 1,150,000 (27,038)
Comverse Technology, Inc. Jan. 40 2,000 901,970 225,000 676,970
Fila Holding S.p.a. - ADR Jan. 75 3,130 2,180,021 39,125 2,140,896
Informix Corp. Jan. 20 10,000 1,594,946 1,343,750 251,196
Lucent Technologies, Inc. Jan 40 6,000 2,015,932 3,900,000 (1,884,068)
Lucent Technologies, Inc. Jan. 45 3,995 1,498,075 848,938 649,137
MedPartners, Inc. Mar. 22.5 15,000 4,025,427 1,312,500 2,712,927
Merrill Lynch & Co., Inc. Jan. 75 3,000 1,303,816 2,100,000 (796,184)
Mobil Corp. Jan. 115 3,000 2,049,231 2,306,250 (257,019)
Nike, Inc. - Class B Jan. 60 4,000 1,091,963 750,000 341,963
Northern Telecom Ltd. Jan. 60 2,000 716,976 637,500 79,476
PepsiCo, Inc. Jan. 30 10,000 3,308,743 468,750 2,839,993
Travelers Group, Inc. Mar. 33.75 8,000 3,079,097 10,000,000 (6,920,903)
United Technologies Corp. Jan. 65 998 321,216 174,650 146,566
United Technologies Corp. Jan. 67.5 1,000 220,732 62,500 158,232
WorldCom, Inc. Jan. 22.5 20,000 3,931,866 7,125,000 (3,193,134)
- ---------------------------------------------------------------------------------------------------------------------------------
100,123 $31,917,627 $36,831,463 $(4,913,836)
=================================================================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended December 31, 1996 and for a Class
B share outstanding during each of the years in the three-year period ended
December 31, 1996 and the period October 18, 1993 (date sales commenced) through
December 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991
------------ ------------ ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of
period $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Income from investment operations:
Net investment income 0.43(b) 0.14 0.16 0.04 0.12 0.13
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Net gains on securities (both
realized and unrealized) 3.42 7.21 0.52 3.34 2.68 5.73
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Total from investment
operations 3.85 7.35 0.68 3.38 2.80 5.86
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Less distributions:
Dividends from net investment
income (0.41) (0.09) (0.16) (0.03) (0.12) (0.14)
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Distributions from net realized
capital gains (1.10) (1.59) (0.20) (0.77) (1.99) (1.92)
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Total distributions (1.51) (1.68) (0.36) (0.80) (2.11) (2.06)
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Net asset value, end of period $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55
================================== ============ ============ ============ ========= ========= =========
Total return(c) 14.52% 34.85% 3.28% 18.71% 16.39% 43.45%
================================== ============ ============ ============ ========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $5,100,061 $ 3,408,952 $ 1,358,725 $765,305 $239,663 $152,149
================================== ============ ============ ============ ========= ========= =========
Ratio of expenses to average net
assets(d) 1.11%(e)(f) 1.12% 0.98% 1.09% 1.16% 1.22%
================================== ============ ============ ============ ========= ========= =========
Ratio of net investment income to
average net assets(g) 1.65%(e) 0.74% 0.92% 0.30% 0.75% 0.89%
================================== ============ ============ ============ ========= ========= =========
Portfolio turnover rate 126% 151% 127% 177% 170% 135%
================================== ============ ============ ============ ========= ========= =========
Average broker commission rate(h) $ 0.0436 N/A N/A N/A N/A N/A
================================== ============ ============ ============ ========= ========= =========
<CAPTION>
1990 1989 1988 1987
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of
period $ 14.53 $ 12.79 $ 11.47 $ 12.26
- ---------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.26 0.40 0.26 0.25
- ---------------------------------- -------- -------- -------- --------
Net gains on securities (both
realized and unrealized) 0.01 3.58 2.07 0.53
- ---------------------------------- -------- -------- -------- --------
Total from investment
operations 0.27 3.98 2.33 0.78
- ---------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.26) (0.43) (0.26) (0.39)
- ---------------------------------- -------- -------- -------- --------
Distributions from net realized
capital gains (0.79) (1.81) (0.75) (1.18)
- ---------------------------------- -------- -------- -------- --------
Total distributions (1.05) (2.24) (1.01) (1.57)
- ---------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 13.75 $ 14.53 $ 12.79 $ 11.47
================================== ======== ======== ======== ========
Total return(c) 1.88% 31.54% 20.61% 5.96%
================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $86,565 $76,444 $60,076 $55,527
================================== ======== ======== ======== ========
Ratio of expenses to average net
assets(d) 1.21% 1.00% 1.00% 1.00%
================================== ======== ======== ======== ========
Ratio of net investment income to
average net assets(g) 1.87% 2.65% 1.98% 1.91%
================================== ======== ======== ======== ========
Portfolio turnover rate 131% 152% 124% 219%
================================== ======== ======== ======== ========
Average broker commission rate(h) N/A N/A N/A N/A
================================== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Calculated using average shares outstanding.
(c) Total returns do not deduct sales charges.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.13%, 1.13%, 1.23%, 1.09% and 1.08% for 1996, 1995 and 1990-88,
respectively.
(e) Ratios are based on average net assets of $4,296,112,779.
(f) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(g) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 1.63%, 0.73%, 1.85%, 2.56% and 1.90% for 1996, 1995 and
1990-88, respectively.
(h) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
14
<PAGE> 18
NOTE 8-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993
------------ ------------ --------- --------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 26.65 $ 21.13 $ 20.82 $ 21.80
- ------------------------------------------------------------ ------------ ------------ --------- --------
Income from investment operations:
Net investment income (loss) 0.20(a) (0.01) -- 0.02
- ------------------------------------------------------------ ------------ ------------ --------- --------
Net gains (losses) on securities (both realized and
unrealized) 3.38 7.12 0.51 (0.21)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Total from investment operations 3.58 7.11 0.51 (0.19)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Less distributions:
Dividends from net investment income (0.21) -- -- (0.02)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Distributions from net realized capital gains (1.10) (1.59) (0.20) (0.77)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Total distributions (1.31) (1.59) (0.20) (0.79)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Net asset value, end of period $ 28.92 $ 26.65 $ 21.13 $ 20.82
============================================================ ============ ============ ========= ========
Total return(b) 13.57% 33.73% 2.46% (0.74)%
============================================================ ============ ============ ========= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,875,933 $ 2,860,531 $ 680,119 $ 63,215
============================================================ ============ ============ ========= ========
Ratio of expenses to average net assets(c) 1.94%(d)(e) 1.94% 1.90% 1.85%(f)
============================================================ ============ ============ ========= ========
Ratio of net investment income (loss) to average net
assets(c) 0.82%(d) (0.08)% 0.00% (0.46)%(f)
============================================================ ============ ============ ========= ========
Portfolio turnover rate 126% 151% 127% 177%
============================================================ ============ ============ ========= ========
Average broker commission rate(g) $ 0.0436 N/A N/A N/A
============================================================ ============ ============ ========= ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct contingent deferred sales charges and for
periods less than one year are not annualized.
(c) The ratios of expenses to average net assets prior to waiver of advisory
fees were 1.96% and 1.96% for 1996 and 1995, respectively. The ratio of net
investment income (loss) to average net assets prior to waiver of advisory
fees were 0.81% and (0.09)% for 1996 and 1995, respectively.
(d) Ratios are based on average net assets of $3,953,324,717.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
15
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Value Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with 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 December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Value Fund
as of December 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each
of the years in the two-year period then ended and the
financial highlights for each of the years in the four-year
period then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
16
<PAGE> 20
Trustees & Officers
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Formerly Director, President, and
Chief Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 1919
Owen Daly II Carol F. Relihan Houston, TX 77046
Director Senior Vice President and Secretary
Cortland Trust Inc. TRANSFER AGENT
Gary T. Crum
Carl Frischling Senior Vice President A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis & Frankel Scott G. Lucas Houston, TX 77210-4739
Senior Vice President
Robert H. Graham CUSTODIAN
President and Chief Operating Officer Dana R. Sutton
A I M Management Group Inc. Vice President and Assistant Treasurer State Street Bank & Trust Company
225 Franklin Street
John F. Kroeger Robert G. Alley Boston, MA 02110
Formerly Consultant Vice President
Wendell & Stockel Associates, Inc. COUNSEL TO THE FUND
Stuart W. Coco
Lewis F. Pennock Vice President Ballard Spahr
Attorney Andrews & Ingersoll
Melville B. Cox 1735 Market Street
Ian W. Robinson Vice President Philadelphia, PA 19103
Consultant; Formerly Executive
Vice President and Karen Dunn Kelley COUNSEL TO THE TRUSTEES
Chief Financial Officer Vice President
Bell Atlantic Management Kramer, Levin, Naftalis & Frankel
Services, Inc. Jonathan C. Schoolar 919 Third Avenue
Vice President New York, NY 10022
Louis S. Sklar
Executive Vice President P. Michelle Grace DISTRIBUTOR
Hines Interests Assistant Secretary
Limited Partnership A I M Distributors, Inc.
David L. Kite 11 Greenway Plaza
Assistant Secretary Suite 1919
Houston, TX 77046
Nancy L. Martin
Assistant Secretary AUDITORS
Ofelia M. Mayo KPMG Peat Marwick LLP
Assistant Secretary 700 Louisiana
NationsBank Bldg.
Kathleen J. Pflueger Houston, TX 77002
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Value Fund Class A and Class B shares paid ordinary
dividends in the amount of $0.592 and $0.392 per share, respectively, to
shareholders during it's tax year ended December 31, 1996. Of these
amounts, 60.34% is eligible for the dividends received deduction for
corporations. The Fund also distributed long-term capital gains of $0.91 per
share during its tax year ended December 31, 1996.
STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 11.47% for both Class A and 8.81% for
Class B shares was derived from U.S. Treasury obligations.
<PAGE> 21
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
[PHOTO OF GROWTH
11 Greenway Plaza AIM Blue Chip Fund
APPEARS HERE] AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity Treasury Shares
A I M Management Group Inc. has provided STABILITY, LIQUIDITY, AND CURRENT INCOME
leadership in the mutual fund industry AIM Money Market Fund
since 1976 and manages approximately $70
billion in assets for more than 3.5 STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
million shareholders, including AIM Tax-Exempt Cash Fund
individual investors, corporate clients,
and financial institutions as of *AIM Aggressive Growth Fund was closed to new
February 11, 1997. The AIM Family of investors on July 18, 1995. For more complete
Funds--Registered Trademark--is distributed information about any AIM Fund(s), including
nationwide, and AIM today ranks among the sales charges and expenses, ask your financial
nation's top 15 mutual fund companies in consultant or securities dealer for a free
assets under management, according to Lipper prospectus(es). Please read the prospectus(es)
Analytical Services, Inc. carefully before you invest or send money.
[AIM LOGO APPEARS HERE] ---------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 1919 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
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