<PAGE> 1
AIM VALUE FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31, 1997
<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.
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 and Class
C share performance reflect the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differing fees and expenses.
o Because Class C shares have been offered for less than one year (since
8/4/97), all total return figures for Class C shares reflect cumulative
total return that has not been annualized.
o During the year ended 12/31/97, the Fund paid distributions on Class A,
Class B, and Class C shares of $3.677, $3.639 and $3.639, 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 Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general.
o The Dow Jones Industrial Average (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 The MSCI Europe Index is a group of unmanaged European securities. It is
compiled by Morgan Stanley Capital International.
o The NASDAQ (National Association of Securities Dealers Automated Quotation
system) Composite Index is a group of more than 4,500 unmanaged
over-the-counter securities widely regarded by investors to be
representative of the small- and medium-sized company stock universe.
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 Fellow Shareholder:
1997 proved an eventful year in securities markets. The Dow
[PHOTO OF Jones Industrial Average reached its all-time high--and also
Charles T. had its largest one-day point drop ever, though not its
Bauer, largest percentage drop. Volatility was unabated, and we
Chairman of experienced the first 10% stock market correction in the
the Board of U.S. since 1991.
THE FUND Never dull and occasionally unsettling, 1997 was also a
APPEARS HERE] very good year for many investments. For an unprecedented
third year in a row, domestic equities rose more than 20%.
Late in the year, in the uncertainty brought on by events in
Asia, bond markets, especially the U.S. Treasury market,
fulfilled their usual role as relative safe havens, and a
bull market in bonds took hold. Overseas, though Asian
markets plummeted, Europe thrived.
Market expectations performed an about-face during the year. Worry about
the inflationary potential of vigorous economic growth became concern about the
potential negative impact of Asia's financial crisis. At fiscal year end, there
was no consensus about how serious or widespread this impact would be.
An interview with your Fund's managers appears on the following pages. They
discuss their investment strategies, how your Fund performed in this context,
and their outlook for the future.
In uncertain times like these, your financial consultant remains your best
source for information on market trends and for advice on how to invest
strategically rather than emotionally. We encourage you to visit your financial
consultant regularly to make sure your chosen investments still suit your goals,
risk tolerance, and time horizon.
INVESTOR EDUCATION EVENTS
In addition to professional guidance, every investor needs fundamental
information about the saving and investing choices offered by the marketplace.
AIM has always championed investor education, convinced a more knowledgeable
shareholder is a better customer. A great deal of investment information will be
available during two upcoming events, and we hope our shareholders will
participate in and learn from them to the greatest extent possible.
First, from March 29 through April 4, the Securities and Exchange
Commission (SEC) will sponsor Saving and Investing Education Week. As the SEC
points out, financial markets are more stable when investors are confident in
them, and knowledge is a major confidence builder. The week's theme is "Get the
facts. It's your money. It's your future." The aim is to inform citizens about
the saving and investment possibilities available and to build understanding
about how one's financial needs and goals change throughout one's life. The
week's awareness and education events will culminate with a national investors
town meeting at satellite-linked locations across the nation. You can find out
more from the SEC's Web site at www.sec.gov.
The second event concerns citizens' financial planning for retirement, a
subject of growing urgency as the population ages and the solvency of the Social
Security system is increasingly debatable. In July, the first National Summit on
Retirement Savings will be held at the White House. Under the auspices of the
Department of Labor, working through public-private partnership, the summit's
goal is to advance the public's knowledge of retirement savings through
development of a broad-based education program and to develop recommendations
for public/private action to promote private retirement savings among American
workers.
Look for further information on both of these investor education events in
the national and local press.
We are pleased to send you this report on your Fund. Please contact our
Client Services department at 800-959-4246 if you have questions or comments.
Automated information about your account is available 24 hours a day on the AIM
Investor Line, 800-246-5463. Account information and much more can be found on
our Web site, www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
----------------------------------------
In uncertain times like these,
your financial consultant
remains your best source
for information on market trends
and for advice on
how to invest strategically
rather than emotionally.
----------------------------------------
<PAGE> 4
The Managers' Overview
FUND RESULTS SOLID IN HIGH-PRICED,
HIGH-VOLATILITY MARKET
A roundtable discussion with the Fund management team for AIM Value Fund for the
fiscal year ended December 31, 1997.
- --------------------------------------------------------------------------------
Q. STOCK PRICES REMAINED HIGH IN 1997. HOW DID AIM VALUE FUND PERFORM IN THIS
ENVIRONMENT?
A. It did very well despite market volatility and continuing high valuations.
Average annual total return for the year was 23.95% for Class A shares and
22.96% for Class B shares. Class C shares produced a cumulative total
return of -0.08% from their inception on 8/4/97 through 12/31/97. The
Fund's net assets continued to grow nicely, from $9.98 billion to $13.61
billion in the course of the fiscal year.
================================================================================
Growth of Net Assets
- --------------------------------------------------------------------------------
$13.61
billion
$9.98
billion
12/31/96 12/31/97
================================================================================
Q. HOW WOULD YOU DESCRIBE ECONOMIC CONDITIONS DURING THE FISCAL YEAR?
A. Market expectations shifted 180 degrees. As the year opened, many expected
the Federal Reserve Board (the Fed) to raise interest rates to slow a
robust, possibly inflationary economic expansion. But the U.S. economy
continued to grow vigorously without generating significant inflation. By
fiscal year end, potential deflation had emerged as a topic of public
discussion and the consensus was that the Fed would either do nothing or
lower rates at its next meeting in February 1998. The Asian financial
crisis, triggered by debt default worries in that region, accounted for
much of this change in sentiment because of the pronounced uncertainty it
caused in markets worldwide.
Q. WHAT EFFECT DID THIS CHANGE AND UNCERTAINTY HAVE ON EQUITIES MARKETS?
A. The net result was that for the year as a whole, large-capitalization
stocks again dominated the markets--another year in which a few stocks
contributed much of the rise in the major market indexes. Nearly half the
1997 rise in the S&P 500 index of large-capitalization stocks can be
accounted for by just 25 of the stocks in that index.
For a while, especially during the third calendar quarter of 1997,
investors began to look beyond these stocks because of concern about high
valuations. Many doubted that these firms could sustain the double-digit
earnings growth they'd reported for three years running, especially after
cautions on earnings from such giants as Coca-Cola Company.
However, Asia's economic crisis and the dramatic 554-point drop in the
DJIA on October 27, 1997, changed all that. Once again, investors fled to
quality, seeking the large, liquid blue chips. For example, during the last
quarter of 1997, the S&P 500 stocks rose almost 3% in value, while NASDAQ
small-company stocks declined almost 7%.
Q. HOW DID THESE TRENDS AFFECT THE FUND? FOR INSTANCE, DID THE OCTOBER MARKET
DECLINE MAKE STOCK PRICE VALUATIONS MORE REASONABLE?
A. From our perspective as value managers, not really--or at least not
sufficiently. Just after the October market drop, the price-earnings ratio
for the S&P 500 fell slightly. By year end, though, it had regained its
pre-decline level. So it is still difficult to find bargains.
We had about a 10% cash position in the Fund in late October so we
took advantage of the market break to buy some stocks at very good prices.
We continued to have a fairly high cash position through the end of the
fiscal year, partly because of high valuations and partly because we are
managing the portfolio conservatively in this volatile environment. For
1997, the Fund was roughly 10% less volatile than the market as a whole.
Q. NEVERTHELESS, TOTAL RETURN FOR CLASS A AND B SHARES WAS ABOVE 20%. ARE
THERE CERTAIN HOLDINGS THAT HELP EXPLAIN THIS GOOD PERFORMANCE?
A. For most of the fiscal year, we enjoyed excellent results from our large
position in financial stocks like banks, insurers, and brokerage houses.
Late in the fiscal year, doubts were voiced about the exposure of some
multinational banks to the Asian loan situation, and we began to pare these
holdings somewhat. Nevertheless, the financial sector was the year's best
performer among the Dow Jones U.S. industry groups.
With a growing economy and stable interest rates, financial
institutions have prospered. Earnings growth for big money center banks
such as Chase Manhattan Corp. and Citicorp outdid analysts' expectations.
The sector also is experiencing a wave of mergers and acquisitions, for
example, the purchase of brokerage firm Robertson Stephens by BankAmerica
Corp. Financial firms want to be capable of offering the broadest possible
range of services to clients and of competing in a global environment.
----------------------------------------
We had about a 10% cash position
in the Fund in late October so we took
advantage of the market break to buy
some stocks at very good prices.
----------------------------------------
See important fund and index disclosures inside front cover.
2
<PAGE> 5
================================================================================
Portfolio Composition
- --------------------------------------------------------------------------------
As of 12/31/97, based on total net assets
TOTAL NUMBER OF HOLDINGS: 164
<TABLE>
<CAPTION>
TOP 10 COMMON STOCK HOLDINGS TOP 10 INDUSTRIES
<S> <C> <C> <C>
1. Royal Bank of Canada 3.89% 1. Banks (Major Regional) 7.41%
2. Allstate Corp. 3.54 2. Telecommunications (Long Distance) 6.42
3. Worldcom, Inc. 3.11 3. Insurance (Property-Casualty) 5.46
4. American International Group, Inc. 2.72 4. Banks (Money Center) 5.42
5. MCI Communications Corp. 1.89 5. Insurance (Multi-Line) 5.31
6. BankAmerica Corp. 1.77 6. Financial (Diversified) 4.95
7. Citicorp 1.77 7. Computers (Software & Services) 3.25
8. SmithKline Beecham PLC-ADR 1.76 8. Health Care (Managed Care) 2.28
9. Computer Associates International, Inc. 1.75 9. Lodging-Hotels 2.09
10. Philip Morris Companies, Inc. 1.66 10. Services (Commercial & Consumer) 1.90
=======================================================================================================================
Please keep in mind that the Fund's portfolio is subject to change and there is no assurance
the Fund will continue to hold any particular security.
</TABLE>
Q. AS OF YOUR LAST SHAREHOLDER REPORT IN JUNE, THE FUND HAD SIZABLE FOREIGN
HOLDINGS. IS THAT STILL SO?
A. Approximately 13% of the portfolio was in foreign holdings at fiscal year
end. These holdings are almost exclusively European, and European markets
did well in 1997. Morgan Stanley's MSCI Europe Index was up more than 20%.
European stocks are relatively cheap compared to U.S. stocks. More
importantly, earnings growth in Europe was quite strong.
Two major factors are at work in European markets. The first is
ongoing restructuring and privatization. The second is the spread of stock
investing in European households. One Fund holding that typifies these
trends is recently privatized Railtrack Group PLC, which owns the
infrastructure of Great Britain's rail system--track, stations, bridges,
and the like.
Q. WHAT OTHER HOLDINGS DID WELL?
A. After financials, our next two largest sector weightings are in health care
and technology.
We expect the FDA's streamlined approval process for drugs and medical
devices to reduce costs for the medical instrument and pharmaceutical
industries. We enjoyed good returns from pharmaceutical holdings such as
Watson Pharmaceuticals, Inc., a new holding since our last shareholder
report. Watson reported record earnings recently.
In technology, we raised our holdings in the computer software &
services industry. We expect this industry to profit from the so-called
"millennium" problem of reprogramming older computers and software to
recognize the year 2000. One of our larger portfolio holdings, Computer
Associates International, Inc., is a leading vendor of software used in
solving this problem.
We also found good valuations in telecommunications-long distance
stocks such as AT&T Corp. and Sprint Corp. We added both of these holdings
since our June report to shareholders, and both did very well toward the
end of the year.
Q. WHAT DO YOU FORESEE IN THE ECONOMY AND MARKETS?
A. In the U.S., the economic fundamentals are sound: inflation is low,
corporate profits are strong, and the economy is growing at a healthy pace.
However, we have had three years of unprecedented 20%-plus returns on
equity investments. History shows that over the long term, average annual
total return for stocks is about 10% to 12%. It is reasonable to think that
eventually we will gravitate toward this norm.
Continuing problems in Asia could slow economic growth worldwide,
reducing corporate profits and stock returns. In such a volatile
environment, investors would be well advised to focus on their long-term
financial goals rather than on transitory fluctuations in the markets.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. For the immediate future, we think we may find some good valuations in the
technology sector. Many tech stocks took a beating because of the turmoil
in Asia, but in some cases it may have been for the wrong reason. A lot of
tech companies source parts from Asia and the currency devaluations there
are shrinking their costs, not their markets.
Nevertheless, we expect that finding good values will continue to be a
challenge. There is a lot of talk about high market valuations, especially
for large-capitalization stocks, but so far price/earnings ratios of these
stocks have not significantly declined.
We remain willing to pay a little more for a company if we are
confident it will make its earnings projections, but we intend to maintain
our investment standards in terms of the price we are willing to pay for a
stock.
----------------------------------------
European stocks are relatively cheap
compared to U.S. stocks.
More importantly, earnings growth
in Europe was quite strong.
----------------------------------------
See important fund and index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
AIM Value Fund vs. Benchmark Indexes
The chart compares your Fund's Class A shares to benchmark indexes. It is
important to understand differences between your Fund and these indexes. 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. 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. Use of
these indexes is intended to give you a general idea of how your Fund performed
compared to these benchmarks.
GROWTH OF A $10,000 INVESTMENT
5/1/84 - 12/31/97
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
AIM Value Fund $93,038 S&P'S 500 STOCK INDEX $92,063 LIPPER GROWTH FUND INDEX $72,432
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/1/84 $ 9,452 $10,000 $10,000
12/31/84 10,385 10,714 10,498
12/31/85 12,744 14,105 13,662
12/31/86 13,865 16,730 15,792
12/31/87 14,692 17,597 16,306
12/31/88 17,719 20,500 18,611
12/31/89 23,307 26,976 23,723
12/31/90 23,746 26,136 22,439
12/31/91 34,064 34,064 30,591
12/31/92 39,648 36,656 32,926
12/31/93 47,065 40,334 36,870
12/31/94 48,606 40,881 36,291
12/31/95 65,545 56,189 48,140
12/31/96 75,061 69,056 56,554
12/31/97 93,038 92,063 72,432
=============================================================================================================================
</TABLE>
================================================================================
Average Annual Total Returns
As of 12/31/97, including applicable sales charges
CLASS A SHARES
1 Year 17.12%
5 Years 17.27
10 Years 19.59
Inception (5/1/84) 17.72
CLASS B SHARES
1 Year 17.96%
Inception (10/18/93) 16.19
CLASS C SHARES
Inception (8/4/97) -0.98%*
* Total return provided is cumulative total return that has not been annualized.
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--. Your Fund's total
return includes applicable sales charges, expenses, and management fees. The
performance of Class B and Class C shares will differ from that of Class A
shares due to differing fees and expenses. For Fund performance calculations and
descriptions of indexes cited on this page, please refer to the inside front
cover.
See important Fund & index disclosures inside front cover.
4
<PAGE> 7
For Consideration
The Roth IRA: The Power to Keep More
Contribute After-Tax Dollars Now . . . So You Can Get Federally Tax-Free Savings
Later
A new and potentially more powerful type of IRA--the Roth IRA--became available
on January 1, 1998. What makes it more powerful? The Roth IRA gives you the
opportunity to keep more of what you earn.
Are you eligible to open a Roth IRA? The answer is yes if you or your
spouse has earned income for the tax year for which you want to make the
contribution, and your adjusted gross income is below $110,000 if you are a
single tax filer, $160,000 if you file jointly.
TWO KEY ROTH IRA BENEFITS:
TAX-FREE AND PENALTY-FREE WITHDRAWALS
o Of earnings after five years. Earnings on your Roth IRA are federally
tax-free if your Roth IRA account has been open for five years and you are
at least 59 1/2 years old, or in the case of death or disability. You may
also use up to $10,000 of your earnings to buy a first home (after five
years).
o Of contributions at any time. For instance, if you make annual
contributions of $2,000 for the next three years, you may take out up to
$6,000 and use that money for any purpose.
HOW YOU MIGHT PUT BOTH BENEFITS TO WORK FOR YOU
Here's an example of how you may take full advantage of a Roth IRA. You are 39
1/2 years old. You contribute $2,000 after-tax annually in your Roth IRA every
year for 20 years, earning an average annual return of 10%. After 20 years, your
account has grown to $126,005. Now at age 59 1/2 you can begin taking
withdrawals and pay no federal income tax or penalty on any of your $126,005. Or
you can keep your money invested and take it out whenever you need it.
THE ROTH IRA: TO CONVERT OR NOT TO CONVERT
Can you convert your Traditional IRA to a Roth IRA? The answer is yes if you
meet these requirements:
You must pay taxes on the amount you convert. If you convert in 1998, you
can spread your tax payments over the next four years. This four-year allowance
will not be available after December 31, 1998.
You cannot convert to a Roth IRA if you are married and file your tax
return separately, or if your annual gross income is over $100,000.
SOME ROTH IRA CONVERSION GUIDELINES
If you can check most of these boxes, converting your Traditional IRA to a Roth
IRA may make sense for you.
[] You have assets outside your retirement savings with which you can easily
afford to pay the taxes due when you convert.
[] You have 10 years or more before you retire. The longer you invest
tax-free, the more you benefit.
[] Your tax rate will probably be higher in retirement than it is now. If so,
you'll pay less taxes now to convert than you would pay at retirement if
you withdrew from a traditional IRA.
[] You plan to convert in 1998. On January 1, 1999, the ability to spread tax
payments over four years disappears.
[] You want to keep making contributions after age 70 1/2 and may wish to pass
your IRA assets on to your heirs after your death.
The Roth IRA Analyzer & Calculator at AIM's
ROTH IRA CALCULATOR Internet Web site--www.aimfunds.com--can
& ANALYZER help you determine your IRA eligibility
status and whether it makes sense for you to
convert an existing IRA into a Roth IRA.
MAKE YOUR IRA CONVERSION DECISION A TRULY INFORMED ONE
Talk to your financial consultant, who knows your specific needs and goals. You
may also wish to talk with a tax adviser.
This discussion does not constitute tax advice. Your tax adviser can provide
guidance concerning your particular situation.
See important Fund & index disclosures inside front cover.
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-66.18%
AEROSPACE/DEFENSE-0.43%
Boeing Co. (The) 47,500 $ 2,324,530
- -------------------------------------------------------------
Lockheed Martin Corp. 34,900 3,437,650
- -------------------------------------------------------------
Orbital Sciences Corp.(a) 271,200 8,068,200
- -------------------------------------------------------------
Precision Castparts Corp. 738,300 44,528,718
- -------------------------------------------------------------
58,359,098
- -------------------------------------------------------------
AIRFREIGHT-0.24%
Airborne Freight Corp. 331,800 20,613,075
- -------------------------------------------------------------
Federal Express Corp.(a) 188,700 11,522,493
- -------------------------------------------------------------
32,135,568
- -------------------------------------------------------------
AIRLINES-0.64%
Continental Airlines,
Inc.(a) 1,800,000 86,625,000
- -------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.85%
Banc One Corp. 2,000,000 108,625,000
- -------------------------------------------------------------
Wachovia Corp. 87,400 7,090,325
- -------------------------------------------------------------
115,715,325
- -------------------------------------------------------------
BANKS (MONEY CENTER)-5.03%
BankAmerica Corp.(b) 3,300,000 240,900,000
- -------------------------------------------------------------
Chase Manhattan Corp. 1,855,400 203,166,300
- -------------------------------------------------------------
Citicorp (b) 1,900,000 240,231,250
- -------------------------------------------------------------
684,297,550
- -------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.28%
US West Media Group(a) 1,292,300 37,315,162
- -------------------------------------------------------------
BUILDING MATERIALS-0.19%
Masco Corp. 500,000 25,437,500
- -------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.41%
Cytec Industries Inc.(a) 1,178,000 55,292,375
- -------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.32%
Comverse Technology,
Inc.(a) 1,100,000 42,900,000
- -------------------------------------------------------------
COMPUTERS (HARDWARE)-1.73%
Compaq Computer Corp. 1,000,000 56,437,500
- -------------------------------------------------------------
Stratus Computer, Inc.(a) 700,000 26,468,750
- -------------------------------------------------------------
Sun Microsystems, Inc.(a) 3,800,000 151,525,000
- -------------------------------------------------------------
234,431,250
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-0.32%
Bay Networks, Inc.(a) 1,700,000 $ 43,456,250
- -------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.94%
Adaptec, Inc.(a) 1,000,000 37,125,000
- -------------------------------------------------------------
Quantum Corp.(a)(b) 4,500,000 90,281,250
- -------------------------------------------------------------
127,406,250
- -------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-3.25%
America Online, Inc.(a) 250,000 22,296,875
- -------------------------------------------------------------
American Management
Systems, Inc.(a) 750,000 14,625,000
- -------------------------------------------------------------
Autodesk, Inc. 200,000 7,400,000
- -------------------------------------------------------------
Avant! Corp.(a) 65,600 1,098,800
- -------------------------------------------------------------
Computer Associates
International, Inc. 4,500,000 237,937,500
- -------------------------------------------------------------
Network Associates, Inc.(a) 891,690 47,148,108
- -------------------------------------------------------------
Sybase, Inc.(a) 3,000,000 39,937,500
- -------------------------------------------------------------
Unisys Corp.(a) 5,200,000 72,150,000
- -------------------------------------------------------------
442,593,783
- -------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.29%
American Greetings
Corp.-Class A 1,000,000 39,125,000
- -------------------------------------------------------------
CONSUMER FINANCE-1.24%
Household International,
Inc. 490,500 62,569,406
- -------------------------------------------------------------
MBNA Corp. 1,747,800 47,736,787
- -------------------------------------------------------------
SLM Holding Corp. 421,000 58,571,625
- -------------------------------------------------------------
168,877,818
- -------------------------------------------------------------
ELECTRIC COMPANIES-0.31%
Allegheny Energy, Inc. 653,400 21,235,500
- -------------------------------------------------------------
Carolina Power & Light Co. 262,400 11,135,600
- -------------------------------------------------------------
Wisconsin Energy Corp. 339,400 9,757,750
- -------------------------------------------------------------
42,128,850
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.83%
American Power Conversion
Corp.(a) 2,700,000 63,787,500
- -------------------------------------------------------------
AVX Corp. 189,000 3,484,687
- -------------------------------------------------------------
SCI Systems, Inc.(a) 800,000 34,850,000
- -------------------------------------------------------------
Symbol Technologies, Inc. 302,200 11,408,050
- -------------------------------------------------------------
113,530,237
- -------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.13%
Waters Corp.(a) 466,100 17,537,012
- -------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-0.68%
Maxim Integrated Products,
Inc.(a) 1,249,000 $ 43,090,500
- -------------------------------------------------------------
Microchip Technology,
Inc.(a) 800,000 24,000,000
- -------------------------------------------------------------
National Semiconductor
Corp.(a) 1,000,000 25,937,500
- -------------------------------------------------------------
93,028,000
- -------------------------------------------------------------
ENTERTAINMENT-0.51%
Viacom, Inc.-Class B(a) 1,675,100 69,411,957
- -------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.95%
Ambac Financial Group, Inc. 1,200,000 55,200,000
- -------------------------------------------------------------
Fannie Mae 3,963,000 226,138,688
- -------------------------------------------------------------
Freddie Mac 5,182,000 217,320,125
- -------------------------------------------------------------
MBIA, Inc. 1,032,600 68,990,587
- -------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 1,794,000 106,070,250
- -------------------------------------------------------------
673,719,650
- -------------------------------------------------------------
FOODS-0.19%
Interstate Bakeries Corp. 708,000 26,461,500
- -------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.76%
Bristol-Myers Squibb Co. 1,100,000 104,087,500
- -------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.92%
ICN Pharmaceuticals, Inc. 1,660,035 81,030,458
- -------------------------------------------------------------
Watson Pharmaceuticals,
Inc.(a) 1,371,400 44,484,787
- -------------------------------------------------------------
125,515,245
- -------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.64%
Quorum Health Group,
Inc.(a) 2,700,000 70,537,500
- -------------------------------------------------------------
Tenet Healthcare
Corp.(a)(b) 500,000 16,562,500
- -------------------------------------------------------------
87,100,000
- -------------------------------------------------------------
HEALTH CARE (LONG-TERM CARE)-0.57%
Genesis Health Ventures,
Inc.(a) 1,420,000 37,452,500
- -------------------------------------------------------------
Health Care and Retirement
Corp.(a) 1,000,000 40,250,000
- -------------------------------------------------------------
77,702,500
- -------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-2.13%
MedPartners, Inc.(a) 9,100,000 203,612,500
- -------------------------------------------------------------
PhyCor, Inc.(a) 3,200,000 86,400,000
- -------------------------------------------------------------
290,012,500
- -------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.56%
Allegiance Corp. 549,000 19,455,188
- -------------------------------------------------------------
Baxter International Inc. 1,682,000 84,835,875
- -------------------------------------------------------------
Becton, Dickinson & Co. 800,000 40,000,000
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-(CONTINUED)
Sybron International
Corp.(a) 1,445,000 $ 67,824,687
- -------------------------------------------------------------
212,115,750
- -------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.26%
FPA Medical Management,
Inc.(a) 225,300 4,196,212
- -------------------------------------------------------------
Omnicare, Inc. 1,000,000 31,000,000
- -------------------------------------------------------------
35,196,212
- -------------------------------------------------------------
HOMEBUILDING-0.08%
Clayton Homes, Inc. 600,000 10,800,000
- -------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.45%
Colgate-Palmolive Co. 840,000 61,740,000
- -------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.57%
Conseco, Inc. 2,550,000 115,865,625
- -------------------------------------------------------------
Equitable Companies, Inc. 400,000 19,900,000
- -------------------------------------------------------------
Provident Companies, Inc. 2,000,000 77,250,000
- -------------------------------------------------------------
213,015,625
- -------------------------------------------------------------
INSURANCE (MULTI-LINE)-5.31%
Ace, Ltd. 1,292,800 124,755,200
- -------------------------------------------------------------
American International
Group, Inc.(b) 3,400,000 369,750,000
- -------------------------------------------------------------
CIGNA Corp. 198,600 34,370,212
- -------------------------------------------------------------
Hartford Financial Services
Group Inc. (The) 1,420,700 132,924,244
- -------------------------------------------------------------
Travelers Group, Inc. 1,125,000 60,609,375
- -------------------------------------------------------------
722,409,031
- -------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-5.46%
Allstate Corp. 5,305,000 482,091,875
- -------------------------------------------------------------
Chubb Corp. 300,000 22,687,500
- -------------------------------------------------------------
Exel Ltd. 2,000,000 126,750,000
- -------------------------------------------------------------
Progressive Corp. 600,000 71,925,000
- -------------------------------------------------------------
Transatlantic Holdings,
Inc. 562,000 40,183,000
- -------------------------------------------------------------
743,637,375
- -------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.12%
Merrill Lynch & Co., Inc. 2,081,800 151,841,288
- -------------------------------------------------------------
LODGING-HOTELS-2.09%
Carnival Corp.-Class A 2,986,100 165,355,288
- -------------------------------------------------------------
Host Marriott Corp.(a) 700,000 13,737,500
- -------------------------------------------------------------
Promus Hotel Corp.(a) 1,125,000 47,250,000
- -------------------------------------------------------------
Royal Caribbean Cruises
Ltd. 1,094,000 58,323,875
- -------------------------------------------------------------
284,666,663
- -------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (DIVERSIFIED)-0.62%
Eaton Corp. 355,600 $ 31,737,300
- -------------------------------------------------------------
Hillenbrand Industries,
Inc. 400,000 20,475,000
- -------------------------------------------------------------
Tyco International Ltd.
(Bermuda) 723,800 32,616,237
- -------------------------------------------------------------
84,828,537
- -------------------------------------------------------------
NATURAL GAS-1.05%
El Paso Natural Gas Co. 1,486,400 98,845,600
- -------------------------------------------------------------
Williams Companies, Inc.
(The) 1,540,000 43,697,500
- -------------------------------------------------------------
142,543,100
- -------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.16%
Wallace Computer Services,
Inc. 575,300 22,364,789
- -------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.79%
Baker Hughes, Inc. 500,000 21,812,500
- -------------------------------------------------------------
BJ Services Co.(a) 600,000 43,162,500
- -------------------------------------------------------------
Cooper Cameron Corp.(a) 400,000 24,400,000
- -------------------------------------------------------------
Noble Drilling Corp.(a) 600,000 18,375,000
- -------------------------------------------------------------
107,750,000
- -------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.58%
Tosco Corp. 2,100,221 79,414,607
- -------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.19%
Xerox Corp. 2,200,000 162,387,500
- -------------------------------------------------------------
PUBLISHING-0.04%
Meredith Corp. 135,800 4,846,363
- -------------------------------------------------------------
RAILROADS-0.26%
Kansas City Southern
Industries, Inc. 1,111,100 35,277,425
- -------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.30%
Cali Realty Corp. 1,000,000 41,000,000
- -------------------------------------------------------------
RESTAURANTS-0.33%
Cracker Barrel Old Country
Store, Inc. 1,143,900 38,177,662
- -------------------------------------------------------------
Papa John's International,
Inc.(a) 192,400 6,709,950
- -------------------------------------------------------------
44,887,612
- -------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.61%
CompUSA, Inc.(a) 800,000 24,800,000
- -------------------------------------------------------------
Ingram Micro, Inc.-Class
A(a) 1,200,000 34,950,000
- -------------------------------------------------------------
Tech Data Corp.(a)(b) 607,400 23,612,676
- -------------------------------------------------------------
83,362,676
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS)-0.87%
Kroger Co.(a) 1,500,000 $ 55,406,250
- -------------------------------------------------------------
Safeway, Inc.(a) 1,000,100 63,256,326
- -------------------------------------------------------------
118,662,576
- -------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.40%
Dayton-Hudson Corp. 800,000 54,000,000
- -------------------------------------------------------------
RETAIL (SPECIALTY)-0.47%
Corporate Express, Inc.(a) 5,000,000 64,375,000
- -------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.95%
Charter One Financial, Inc. 420,000 26,512,500
- -------------------------------------------------------------
Washington Mutual, Inc. 1,600,080 102,105,105
- -------------------------------------------------------------
128,617,605
- -------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.90%
Cendant Corp.(a) 961,240 33,042,626
- -------------------------------------------------------------
Service Corp. International 3,600,000 132,975,000
- -------------------------------------------------------------
Stewart Enterprises,
Inc.-Class A 2,000,000 93,250,000
- -------------------------------------------------------------
259,267,626
- -------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.16%
National Data Corp. 600,000 21,675,000
- -------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.37%
AccuStaff, Inc.(a) 2,200,000 50,600,000
- -------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.12%
Nextel Communications,
Inc.(a) 650,900 16,923,400
- -------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-6.21%
AT&T Corp.(b) 1,416,100 86,736,125
- -------------------------------------------------------------
LCI International, Inc.(a) 1,273,400 39,157,050
- -------------------------------------------------------------
MCI Communications Corp. 6,000,000 256,875,000
- -------------------------------------------------------------
Sprint Corp. 654,200 38,352,475
- -------------------------------------------------------------
WorldCom, Inc.(a) 14,000,093 423,502,814
- -------------------------------------------------------------
844,623,464
- -------------------------------------------------------------
TOBACCO-1.66%
Philip Morris Companies,
Inc.(b) 5,000,000 226,562,500
- -------------------------------------------------------------
WASTE MANAGEMENT-0.46%
USA Waste Services, Inc.(a) 1,600,000 62,800,000
- -------------------------------------------------------------
Total Domestic Common Stocks 9,006,394,604
- -------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-13.16%
BRAZIL-0.33%
Uniao de Bancos Brasileiros
S.A.-GDR
(Banks-Regional)(a) 1,400,000 $ 45,062,500
- -------------------------------------------------------------
CANADA-4.76%
Bank of Montreal
(Banks-Money Center) 1,200,000 53,196,179
- -------------------------------------------------------------
Canadian National Railway
Co.-ADR (Railroads) 700,000 33,075,000
- -------------------------------------------------------------
Philip Services Corp.-ADR
(Waste Management)(a) 2,300,000 33,062,500
- -------------------------------------------------------------
Royal Bank of Canada
(Banks-Major Regional) 10,001,800 529,118,001
- -------------------------------------------------------------
648,451,680
- -------------------------------------------------------------
DENMARK-0.34%
Novo Nordisk A/S (Health
Care-Drugs-Generic &
Other) 321,000 45,911,353
- -------------------------------------------------------------
FINLAND-0.77%
Nokia Oyj A.B.-Class A-ADR
(Communications
Equipment) 1,500,000 105,000,000
- -------------------------------------------------------------
ITALY-1.45%
Credito Italiano S.p.A.
(Banks-Major Regional) 30,000,000 92,798,191
- -------------------------------------------------------------
Istituto Mobiliare Italiano
S.p.A. (Banks-Major
Regional) 5,000,000 59,279,254
- -------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 7,079,638 45,287,272
- -------------------------------------------------------------
197,364,717
- -------------------------------------------------------------
NETHERLANDS-0.33%
Akzo Nobel N.V. (Chemicals-
Diversified) 259,000 44,655,833
- -------------------------------------------------------------
PHILIPPINES-0.01%
Metro Pacific Corp.
(Manufacturing-
Diversified) 28,646,870 792,210
- -------------------------------------------------------------
PORTUGAL-0.08%
Portugal Telecom S.A.
(Telephone) 223,750 10,382,097
- -------------------------------------------------------------
SPAIN-0.15%
Endesa S.A. (Electric
Companies) 445,300 7,906,377
- -------------------------------------------------------------
Telefonica de Espana
(Telephone) 415,300 11,857,926
- -------------------------------------------------------------
19,764,303
- -------------------------------------------------------------
SWEDEN-1.62%
Nordbanken Holding A.B.
(Banks-Major Regional) 16,438,800 92,961,136
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWEDEN-(CONTINUED)
Sparbanken Sverige
A.B.-Class A (Banks-Major
Regional) 4,980,850 $ 113,231,077
- -------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR
(Communications
Equipment) 400,000 14,925,000
- -------------------------------------------------------------
221,117,213
- -------------------------------------------------------------
SWITZERLAND-0.71%
Novartis A.G. (Health Care-
Diversified) 60,000 97,297,297
- -------------------------------------------------------------
UNITED KINGDOM-2.61%
Danka Business Systems
PLC-ADR (Office Equipment
& Supplies) 1,207,500 19,244,531
- -------------------------------------------------------------
Ladbroke Group PLC (Leisure
Time-Products) 6,750,000 29,266,677
- -------------------------------------------------------------
Railtrack Group PLC
(Shipping) 3,857,100 61,256,628
- -------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care-Drugs-Major
Pharmaceuticals)(b) 4,667,200 240,069,100
- -------------------------------------------------------------
Standard Chartered PLC
(Banks-Major Regional) 460,100 4,911,694
- -------------------------------------------------------------
354,748,630
- -------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 1,790,547,833
- -------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS-0.48%
HEALTH CARE (MANAGED CARE)-0.15%
Medpartners Inc.-$1.44
Conv. Pfd. 903,000 19,866,000
- -------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.12%
Conseco Inc.-$4.278 Conv.
PRIDES 105,000 16,380,000
- -------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.21%
WorldCom, Inc.-$2.68 Conv.
Pfd. 283,100 29,725,500
- -------------------------------------------------------------
Total Convertible Preferred Stocks 65,971,500
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
TIME DEPOSIT-0.62%
Deutsche Bank Securities
Corp.
6.75%, 01/02/98 $ 85,000,000 85,000,000
- ------------------------------------------------------------
Total Investments (excluding
Repurchase Agreements) 10,947,913,937
- ------------------------------------------------------------
REPURCHASE AGREEMENTS(c)-20.79%
Barclays De Zoete Wedd,
6.60%(d), 01/02/98 70,469,028 70,469,028
- ------------------------------------------------------------
CBIC Wood Gundy Securities
Corp.,
6.75%(e), 01/02/98 400,000,000 400,000,000
- ------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-(CONTINUED)
Dresdner Bank AG,
5.25%(f), 01/02/98 $ 100,000,000 $ 100,000,000
- -------------------------------------------------------------
Goldman Sachs & Co.,
5.25%(g), 01/02/98 300,000,000 300,000,000
- -------------------------------------------------------------
6.53%(h), 01/02/98 396,659,217 396,659,217
- -------------------------------------------------------------
6.80%(i), 01/02/98 312,824,281 312,824,281
- -------------------------------------------------------------
Merrill Lynch & Co. Inc.,
5.50%(j) 200,000,000 200,000,000
- -------------------------------------------------------------
SBC Capital Markets, Inc.,
4.25%(k), 01/02/98 150,000,000 150,000,000
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-(CONTINUED)
5.15%(l), 01/02/98 $ 400,000,000 $ 400,000,000
- -------------------------------------------------------------
6.75%(m), 01/02/98 500,000,000 500,000,000
- -------------------------------------------------------------
Total Repurchase Agreements 2,829,952,526
- -------------------------------------------------------------
TOTAL INVESTMENTS-101.23% 13,777,866,463
- -------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(1.23%) (167,917,952)
- -------------------------------------------------------------
NET ASSETS-100.00% $13,609,948,511
=============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
GDR - Global Depositary Receipt
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of these securities are subject to call options written. See Note
8.
(c) 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.
(d) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$300,110,000. Collateralized by $299,790,000 U.S. Government obligations, 0%
to 7.025% due 01/15/98 to 11/13/07 with an aggregate market value at
12/31/97 of $306,000,850.
(e) Repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $399,965,000 U.S. Government obligations, 0%
to 11.25% due 06/01/98 to 02/15/15 with an aggregate market value at
12/31/97 of $408,000,501.
(f) Repurchase agreement entered into 12/31/97 with a maturing value of
$100,029,167. Collateralized by $101,670,000 U.S. Government obligations, 0%
to 6.25% due 05/07/98 to 08/31/02 with an aggregate market value at 12/31/97
of $102,000,802.
(g) Repurchase agreement entered into 12/31/97 with a maturing value of
$300,087,500. Collateralized by $293,402,000 U.S. Government obligations,
5.625% to 6.50% due 08/15/99 to 10/15/06 with an aggregate market value at
12/31/97 of $306,301,187.
(h) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations, 0%
to 14% due 01/08/98 to 08/15/23 with an aggregate market value at 12/31/97
of $918,902,583.
(i) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$800,302,222. Collateralized by $1,489,204,572 U.S. Government obligations,
5.107% to 9.136% due 08/01/02 to 05/01/35 with an aggregate market value at
12/31/97 of $816,000,078.
(j) Open repurchase agreement entered into 12/31/97. Collateralized by
$469,973,264 U.S. Government obligations, 0% to 16.50% due 05/01/98 to
08/01/31 with an aggregate market value at 12/31/97 of $204,001,008.
(k) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$500,118,056. Collateralized by $503,848,000 U.S. Government obligations,
3.375% to 6.50% due 05/31/98 to 01/15/07 with an aggregate market value at
12/31/97 of $510,059,173.
(l) Repurchase agreement entered into 12/31/97 with a maturing value of
$400,114,444. Collateralized by $337,547,000 U.S. Government obligations, 0%
to 12% due 08/31/98 to 08/15/25 with an aggregate market value at 12/31/97
of $408,282,570.
(m) Repurchase agreement entered into 12/31/97 with a maturing value of
$500,187,500. Collateralized by $511,195,000 U.S. Government obligations,
6.50% to 7% due 12/01/12 to 10/01/27 with an aggregate market value at
12/31/97 of $512,386,030.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (excluding repurchase
agreements), at market value (cost
$8,628,039,403) $10,947,913,937
- ----------------------------------------------------------
Repurchase agreements (cost
2,829,952,526) 2,829,952,526
- ----------------------------------------------------------
Foreign currencies, at value (cost
$7,797,037) 7,683,993
- ----------------------------------------------------------
Receivables for:
Investments sold 59,096,899
- ----------------------------------------------------------
Fund shares sold 41,392,487
- ----------------------------------------------------------
Dividends and interest 12,832,137
- ----------------------------------------------------------
Investment for deferred compensation plan 93,487
- ----------------------------------------------------------
Other assets 144,622
- ----------------------------------------------------------
Total assets 13,899,110,088
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 233,364,138
- ----------------------------------------------------------
Fund shares reacquired 18,366,529
- ----------------------------------------------------------
Options written 14,124,863
- ----------------------------------------------------------
Deferred compensation plan 93,487
- ----------------------------------------------------------
Accrued advisory fees 6,940,004
- ----------------------------------------------------------
Accrued administrative service fees 17,368
- ----------------------------------------------------------
Accrued distribution fees 12,229,970
- ----------------------------------------------------------
Accrued transfer agent fees 2,386,762
- ----------------------------------------------------------
Accrued trustees' fees 14,896
- ----------------------------------------------------------
Accrued operating expenses 1,623,560
- ----------------------------------------------------------
Total liabilities 289,161,577
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $13,609,948,511
==========================================================
NET ASSETS:
Class A $ 6,745,252,900
==========================================================
Class B $ 6,831,795,749
==========================================================
Class C $ 32,899,862
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 208,074,043
==========================================================
Class B 214,229,189
==========================================================
Class C 1,031,375
==========================================================
Class A:
Net asset value and redemption price
per share $ 32.42
==========================================================
Offering price per share:
(Net asset value of $32.42 divided
by 94.50%) $ 34.31
==========================================================
Class B:
Net asset value and offering price per
share $ 31.89
==========================================================
Class C:
Net asset value and offering price per
share $ 31.90
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $5,373,214 foreign
withholding tax) $ 147,003,956
- ----------------------------------------------------------
Interest 46,029,269
- ----------------------------------------------------------
Total investment income 193,033,225
- ----------------------------------------------------------
EXPENSES:
Advisory fees 75,312,449
- ----------------------------------------------------------
Custodian fees 1,562,667
- ----------------------------------------------------------
Distribution fees -- Class A 15,098,832
- ----------------------------------------------------------
Distribution fees -- Class B 59,621,333
- ----------------------------------------------------------
Distribution fees -- Class C 63,254
- ----------------------------------------------------------
Administrative service fees 225,784
- ----------------------------------------------------------
Trustees' fees 77,336
- ----------------------------------------------------------
Transfer agent fees -- Class A 8,289,133
- ----------------------------------------------------------
Transfer agent fees -- Class B 11,799,719
- ----------------------------------------------------------
Transfer agent fees -- Class C 15,522
- ----------------------------------------------------------
Other 3,414,777
- ----------------------------------------------------------
Total expenses 175,480,806
- ----------------------------------------------------------
Less: Fees waived by advisor (2,501,999)
- ----------------------------------------------------------
Expenses paid indirectly (260,298)
- ----------------------------------------------------------
Net expenses 172,718,509
- ----------------------------------------------------------
Net investment income 20,314,716
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,420,125,127
- ----------------------------------------------------------
Foreign currencies (2,453,966)
- ----------------------------------------------------------
Option contracts 32,600,560
- ----------------------------------------------------------
1,450,271,721
- ----------------------------------------------------------
Net unrealized appreciation of:
Investment securities 951,396,114
- ----------------------------------------------------------
Foreign currencies 718,971
- ----------------------------------------------------------
Option contracts 9,872,222
- ----------------------------------------------------------
961,987,307
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies and option contracts 2,412,259,028
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $2,432,573,744
==========================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,314,716 $ 103,535,521
- -------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 1,450,271,721 379,159,846
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 961,987,307 687,919,898
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,432,573,744 1,170,615,265
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (7,048,371) (68,036,562)
- -------------------------------------------------------------------------------------------------
Class B -- (33,169,539)
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (677,329,447) (182,879,810)
- -------------------------------------------------------------------------------------------------
Class B (697,438,107) (175,428,877)
- -------------------------------------------------------------------------------------------------
Class C (2,766,027) --
- -------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,076,707,236 1,320,636,081
- -------------------------------------------------------------------------------------------------
Class B 1,473,648,468 1,674,774,506
- -------------------------------------------------------------------------------------------------
Class C 35,606,705 --
- -------------------------------------------------------------------------------------------------
Net increase in net assets 3,633,954,201 3,706,511,064
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 9,975,994,310 6,269,483,246
- -------------------------------------------------------------------------------------------------
End of period $13,609,948,511 $9,975,994,310
=================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $11,116,186,261 $8,530,223,852
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 17,752,405 6,940,026
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign
currencies, futures and option contracts 151,380,707 76,188,601
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 2,324,629,138 1,362,641,831
- -------------------------------------------------------------------------------------------------
$13,609,948,511 $9,975,994,310
=================================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares, the
Class B shares and the Class C shares. The new Class C shares commenced sales on
August 4, 1997. Class A shares are sold with a front-end sales charge. Class B
and Class C shares are sold with a contingent deferred sales charge. Matters
affecting each portfolio or class 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 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 foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
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, 1997,
$2,453,966 was reclassified from undistributed net investment income to
undistributed net realized gains as a result of differing book/tax treatment
of foreign currency transactions in order to comply with the requirements of
the American Institute of Certified Public Accountants Statement of Position
93-2. Net
13
<PAGE> 16
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 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 -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 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, 1997, AIM
voluntarily waived advisory fees in the amount of $2,501,999.
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, 1997, AIM
was reimbursed $225,784 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, 1997, AFS was paid
$11,353,884 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of
14
<PAGE> 17
the average daily net assets attributable to the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee by the Class B or Class C shares under the
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by the respective classes. AIM Distributors may, from time to time, assign,
transfer, or pledge to one or more designees, its rights to all or a designated
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 received by
AIM Distributors related to the Class B shares. During the year ended December
31, 1997, for the Class A shares and Class B shares and the period August 4,
1997 (date sales commenced) through December 31, 1997, for the Class C shares,
the Class A, Class B and Class C shares, paid AIM Distributors $15,098,832,
$59,621,333 and $63,254, respectively, as compensation under the Plans.
AIM Distributors received commissions of $4,660,735 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $1,752,662 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, 1997, the Fund paid legal fees of $22,577
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $45,555 during the year ended December 31, 1997. Also during the
year ended December 31, 1997 the Fund received reductions in transfer agency
fees from AFS (an affiliate of AIM) and reductions in custodian fees of $133,849
and $80,894, respectively, under expense offset arrangements. The effect of the
above arrangements resulted in reductions of the Fund's total expenses of
$260,298 during the year ended December 31, 1997.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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 6-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, 1997 was
$14,975,071,788 and $15,170,340,041, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,583,202,659
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (299,435,866)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $2,283,766,793
==========================================================
</TABLE>
Cost of investments for tax purposes is $8,664,147,144
15
<PAGE> 18
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 56,549,515 $ 1,862,338,902 83,369,308 $2,309,759,146
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class B 44,494,521 1,452,059,926 73,576,913 2,011,544,498
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class C* 982,300 34,164,971 -- --
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Issued as reinvestment of dividends:
Class A 20,397,239 655,150,256 8,503,122 239,780,446
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class B 20,756,501 656,098,487 7,058,251 197,560,616
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class C* 82,603 2,611,962 -- --
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Reacquired:
Class A (43,852,562) (1,440,781,922) (44,030,263) (1,228,903,511)
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class B (19,618,229) (634,509,945) (19,368,345) (534,330,608)
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class C* (33,528) (1,170,228) -- --
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
* Class C shares commenced sales on August 4, 1997. 79,758,360 $ 2,585,962,409 109,108,986 $2,995,410,587
============================================================ =========== =============== =========== ==============
</TABLE>
NOTE 8-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 100,123 $ 31,917,627
- ------------------------------------------------------ --------- ------------
Written 174,516 72,203,112
- ------------------------------------------------------ --------- ------------
Closed (41,450) (18,916,369)
- ------------------------------------------------------ --------- ------------
Exercised (126,094) (39,884,228)
- ------------------------------------------------------ --------- ------------
Expired (63,194) (26,236,892)
- ------------------------------------------------------ --------- ------------
End of period 43,901 $ 19,083,250
====================================================== ========= ============
</TABLE>
Open call option contracts written at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
NUMBER DECEMBER 31, UNREALIZED
CONTRACT STRIKE OF PREMIUM 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
AT&T Corp. Apr. 60 4,000 $ 2,397,960 $ 2,075,000 $ 322,960
AT&T Corp. Apr. 65 1,075 413,324 335,938 77,386
American International Group, Inc. Feb. 100 5,000 3,229,892 5,250,000 (2,020,108)
BankAmerica Corp. Apr. 80 2,850 1,603,546 855,000 748,546
Citicorp Apr. 135 5,000 5,116,728 3,375,000 1,741,728
Philip Morris Companies, Inc. Jan. 45 5,000 797,473 546,875 250,598
Quantum Corp. Feb. 27.5 9,000 2,897,903 337,500 2,560,403
SmithKline Beecham PLC Jan. 50 4,000 1,212,959 887,500 325,459
Tech Data Corp. Jan. 45 2,976 617,251 55,800 561,451
Tenet Healthcare Corp. Feb. 35 5,000 796,214 406,250 389,964
- -------------------------------------------------------------------------------------------------------------------------------
43,901 $19,083,250 $14,124,863 $ 4,958,387
===============================================================================================================================
</TABLE>
16
<PAGE> 19
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period October 18, 1993 (date sales commenced)
through December 31, 1993, and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Income from investment operations:
Net investment income 0.17 0.43(a) 0.14 0.16 0.04
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Net gains on securities (both realized and
unrealized) 6.78 3.42 7.21 0.52 3.34
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Total from investment operations 6.95 3.85 7.35 0.68 3.38
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Less distributions:
Dividends from net investment income (0.04) (0.41) (0.09) (0.16) (0.03)
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Distributions from net realized gains (3.64) (1.10) (1.59) (0.20) (0.77)
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Total distributions (3.68) (1.51) (1.68) (0.36) (0.80)
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Net asset value, end of period $ 32.42 $ 29.15 $ 26.81 $ 21.14 $ 20.82
================================================== ============ ============ ============ ============ =========
Total return(b) 23.95% 14.52% 34.85% 3.28% 18.71%
================================================== ============ ============ ============ ============ =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 6,745,253 $5,100,061 $ 3,408,952 $ 1,358,725 $765,305
================================================== ============ ============ ============ ============ =========
Ratio of expenses to average net assets(c) 1.04%(d)(e) 1.11% 1.12% 0.98% 1.09%
================================================== ============ ============ ============ ============ =========
Ratio of net investment income to average net
assets(f) 0.57%(d) 1.65% 0.74% 0.92% 0.30%
================================================== ============ ============ ============ ============ =========
Portfolio turnover rate 137% 126% 151% 127% 177%
================================================== ============ ============ ============ ============ =========
Average brokerage commission rate paid(g) $ 0.0481 $ 0.0436 N/A N/A N/A
================================================== ============ ============ ============ ============ =========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers. Ratios of expenses to average net assets prior to fee
waivers were 1.06%, 1.13% and 1.13%, for 1997-1995, respectively.
(d) Ratios are based on average net assets of $6,039,532,925.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(f) After fee waivers. Ratios of net investment income to average net assets
prior to fee waivers were 0.55%, 1.63% and 0.73%, for 1997-1995,
respectively.
(g) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
17
<PAGE> 20
NOTE 9-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------------------------- ----------
1997 1996 1995 1994 1993 1997
---------- ------------ ------------ --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 21.80 $ 35.60
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Income from investment operations:
Net investment income (loss) (0.07) 0.20(a) (0.01) -- 0.02 (0.01)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Net gains (losses) on securities
(both realized and unrealized) 6.68 3.38 7.12 0.51 (0.21) (0.05)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Total from investment operations 6.61 3.58 7.11 0.51 (0.19) (0.06)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Less distributions:
Dividends from net investment income -- (0.21) -- -- (0.02) --
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Distributions from net realized gains (3.64) (1.10) (1.59) (0.20) (0.77) (3.64)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Total distributions (3.64) (1.31) (1.59) (0.20) (0.79) (3.64)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Net asset value, end of period $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 31.90
====================================== ========== ============ ============ ========= ======== ==========
Total return(b) 22.96% 13.57% 33.73% 2.46% (0.74)% (0.08)%
====================================== ========== ============ ============ ========= ======== ==========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $6,831,796 $ 4,875,933 $ 2,860,531 $ 680,119 $ 63,215 $ 32,900
====================================== ========== ============ ============ ========= ======== ==========
Ratio of expenses to average net
assets(c) 1.85%(d)(e) 1.94% 1.94% 1.90% 1.85%(f) 1.84%(d)(e)(f)
====================================== ========== ============ ============ ========= ======== ==========
Ratio of net investment income (loss)
to average net assets(c) (0.24)%(d) 0.82% (0.08)% 0.00% (0.46)%(f) (0.23)%(d)(f)
====================================== ========== ============ ============ ========= ======== ==========
Portfolio turnover rate 137% 126% 151% 127% 177% 137%
====================================== ========== ============ ============ ========= ======== ==========
Average brokerage commission rate
paid(g) $ 0.0481 $ 0.0436 N/A N/A N/A $ 0.0481
====================================== ========== ============ ============ ========= ======== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and are not annualized for
periods less than one year .
(c) After fee waivers. Ratios of expenses to average net assets prior to fee
waivers were 1.87%, 1.96% and 1.96% for 1997-1995, respectively for Class B
and 1.86% for 1997 for Class C. Ratios of net investment income (loss) to
average net assets prior to fee waivers were (0.26)%, 0.81% and (0.09)% for
1997-1995, respectively for Class B and (0.25)% for 1997 for Class C.
(d) Ratios are based on average net assets of $5,962,133,311 for Class B and
$15,391,746 for Class C, respectively.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same for Class B
and would have been 1.83% for Class C.
(f) Annualized.
(g) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
18
<PAGE> 21
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, 1997, 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 or periods in the five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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 or periods in the five-year period then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
19
<PAGE> 22
Trustees & Officers
<TABLE>
<S> <C> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President Investment Advisor
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II Transfer Agent
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Dana R. Sutton Houston, TX 77210-4739
Chief Executive Officer Vice President and Assistant Treasurer
Texana Global, Inc.; Custodian
Formerly Member of the Robert G. Alley
U.S. House of Representatives Vice President State Street Bank and Trust Company
225 Franklin Street
Carl Frischling Stuart W. Coco Boston, MA 02110
Partner Vice President
Kramer, Levin, Naftalis & Frankel Counsel to the Fund
Melville B. Cox
Robert H. Graham Vice President Ballard Spahr
President and Chief Executive Officer Andrews & Ingersoll
A I M Management Group Inc. Karen Dunn Kelley 1735 Market Street
Vice President Philadelphia, PA 19103
John F. Kroeger
Formerly Consultant Jonathan C. Schoolar Counsel to the Trustees
Wendell & Stockel Associates, Inc. Vice President
Kramer, Levin, Naftalis & Frankel
Lewis F. Pennock P. Michelle Grace 919 Third Avenue
Attorney Assistant Secretary New York, NY 10022
Ian W. Robinson Nancy L. Martin Distributor
Consultant; Formerly Executive Assistant Secretary
Vice President and A I M Distributors, Inc.
Chief Financial Officer Ofelia M. Mayo 11 Greenway Plaza
Bell Atlantic Management Assistant Secretary Suite 100
Services, Inc. Houston, TX 77046
Kathleen J. Pflueger
Louis S. Sklar Assistant Secretary Auditors
Executive Vice President
Hines Interests Samuel D. Sirko KPMG Peat Marwick LLP
Limited Partnership Assistant Secretary 700 Louisiana
Houston, TX 77002
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
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REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Value Fund Class A, Class B, and Class C shares paid ordinary dividends in
the amount of $1.917, $1.879, and $1.879 per share, respectively, to
shareholders during its tax year ended December 31, 1997. Of these amounts
14.90% is eligible for the dividends received deduction for corporations. The
Fund also distributed long-term capital gains of $1.76 per share during the
Fund's tax year ended December 31, 1997. Of this amount, 46.34% is 20% rate
gain.
REQUIRED STATE INCOME TAX INFORMATION
Of total ordinary dividends paid, 0.80% were derived from U.S. Treasury
obligations.
20
<PAGE> 23
How AIM Makes Investing
Easy for You
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o Automatic Reinvestment of Dividends and/or Capital Gains. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time,
the power of compounding can significantly increase the value of your
assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may
be more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds(R). The exchange privilege may be modified or discontinued
for any of the AIM funds.
o RETIREMENT PLANS. You may purchase shares of the fund for your Individual
Retirement Account (IRA) or any other type of retirement plan, and earn
tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o WWW.AIMFUNDS.COM. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
----------------------------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
----------------------------------------
<PAGE> 24
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<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Asian Growth Fund
AIM Capital Development Fund
AIM Constellation Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
[PHOTO OF GROWTH OF CAPITAL
11 GREENWAY PLAZA AIM Advisor International Value Fund
APPEARS HERE] AIM Blue Chip Fund
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in the *AIM Aggressive Growth Fund was closed to new investors on
mutual fund industry since 1976 and managed approximately June 5, 1997. For more complete information about any AIM
$83 billion in assets for more than 3.7 million Fund(s), including sales charges and expenses, ask your
shareholders, including individual investors, corporate financial consultant or securities dealer for a free
clients, and financial institutions as of December 31, 1997. prospectus(es). Please read the prospectus(es) carefully
The AIM Family of Funds--Registered Trademark-- is before you invest or send money.
distributed nationwide, and AIM today ranks among the
companies in assets under management, according to Lipper
nation's top 15 mutual fund Analytical Services, Inc.
Invest with DISCIPLINE-SM-
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