<PAGE> 1
AIM SELECT
GROWTH FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1998
<PAGE> 2
------------------------------------
AIM SELECT GROWTH FUND
For shareholders who seek
long-term growth of capital.
The Fund invests primarily
in the common stocks of
established medium- to
large-size companies
with prospects for above-average,
long-term earnings growth.
------------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth Fund.
o AIM Select Growth 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 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 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 The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (S&P 500) is
widely regarded by investors as representative of the stock market in
general.
o The Russell 3000 Index is an unmanaged index that measures the performance
of the 3,000 largest US companies based on total market capitalization.
o The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30
actively traded primarily industrial stocks.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
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:
When we last reported to you, for the fiscal year ended
[PHOTO OF December 31, 1997, equity markets worldwide were still
Charles T. shaken by the financial crisis in Asia. By June 30, 1998,
Bauer, the end of this six-month reporting period, most markets had
Chairman of recovered nicely, with domestic equities producing generous
the Board of returns and European markets outpacing the U.S. Only Asian
THE FUND markets remained in the doldrums. High-quality bonds have
APPEARS HERE] turned in a solid performance with generous real returns.
Good economic news has been arriving almost daily.
Inflation and joblessness in the U.S. have been at their
lowest levels in decades, consumer confidence at its
highest. The economic fundamentals in the U.S. appear
sound, and we at AIM remain cautiously optimistic that the
current economic expansion may continue for the foreseeable
future although market valuations are high compared to
historical standards.
By the close of this reporting period, markets had become less ebullient.
Equities had declined slightly from the heights reached earlier in the period.
Many participants in the U.S. equity markets voiced concern about prices that
continued rising despite slowing earnings growth, especially for larger
companies. The performance of European markets had exceeded everyone's
expectations. Asia's economic woes, especially the continuing recession in
Japan, which markets had shrugged off for a while, seemed more troublesome as
the reporting period closed.
In the face of such uncertainty, the best course for investors is to remain
realistic. We are now in the fourth year of unprecedented market advances, with
equities having the potential to produce returns above 30% again. We have never
experienced this before, and it may have fostered unrealistic expectations among
investors, who would do well to remember that the long-term average return for
equities is closer to 10% per year.
A well-diversified portfolio is still one of the most effective tools for
coping with market shifts because different asset classes and different national
markets tend to move independently of one another. Your financial consultant
remains your best source of information about how to allocate your investments
based on your goals and situation.
AIM FURTHER DIVERSIFIES ITS OFFERINGS
Shortly before the close of the reporting period, AIM broadened its offerings to
shareholders through the addition of the GT Global group of mutual funds. During
the next few months you will be receiving more details about this transaction
and the products it adds to The AIM Family of Funds--Registered Trademark--.
This transaction gives you, our shareholders, access to a greater variety of
investment choices. A complete list of the funds now included in The AIM Family
of Funds--Registered Trademark-- appears on the back cover of this report. We
encourage you to discuss with your financial consultant how these funds may fit
into your portfolio.
The transaction also helps strengthen AIM's position as a major participant
in the money-management industry worldwide. Such strength will enable us to
continue enlarging both the scope of our fund offerings and our menu of services
for our shareholders. AIM continuously reviews its products and services with a
view to enhancing our ability to help shareholders meet their investment goals.
YOUR FUND MANAGERS COMMENT
On the pages that follow, the managers of your AIM Fund discuss how the Fund
performed during the six months covered by this report and give their near-term
market outlook. We hope you will find their discussion informative.
We are pleased to send you this report on your Fund. If you have any
questions or comments, please contact our Client Services department at
800-959-4246 or visit our Web site at www.aimfunds.com. You can access
information about your account on our Web site and also on our automated AIM
Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
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 POSTS SUBSTANTIAL GAINS DURING
TRANSITION PHASE
A roundtable discussion with the Fund management team for AIM Select Growth Fund
for the six months ended June 30, 1998.
- --------------------------------------------------------------------------------
Q. IT WAS A TRANSITION PERIOD FOR AIM SELECT GROWTH FUND. HOW DID THE FUND
PERFORM?
A. It was indeed an eventful six months for your Fund. On May 1, 1998, the
Fund's name was changed from AIM Growth Fund to AIM Select Growth Fund to
reflect an enhancement in the stock-selection strategy. And while this was
being implemented, your Fund continued to post substantial gains. Total
return for the six-month reporting period was 14.68% for Class A shares and
14.22% for Class B and C shares.
Q. WHAT ADDITIONS WERE MADE TO THE STRATEGY?
A. In selecting holdings for the portfolio, we wanted to draw on the expertise
of our entire equity team. Thus, we are using an expanded team of analysts
with expertise not only in large- and mid-cap stocks, but also small-cap
stocks. We also are employing analysts whose specialty is stocks that are
undervalued relative to the rest of the market as well as analysts who
specialize in the stocks of companies that are expected to experience rapid
earnings growth. The goal is to construct a portfolio that includes the most
attractive large-, mid-, and small-cap growth and value stocks.
================================================================================
Average Annual Total Returns
As of 6/30/98, including sales charges
CLASS A SHARES
1 Year 15.32%*
5 Years 15.58
10 Years 13.05
*22.05% excluding sales charge
CLASS B SHARES
1 Year 15.98**
Inception (9/1/93) 14.89
**20.98% excluding CDSC
CLASS C SHARES
Inception (8/4/97) 8.84***
***9.81% excluding sales charges. Total return provided is cumulative total
return that has not been annualized.
================================================================================
Q. ONCE THE PROCESS IS COMPLETED, HOW DO YOU EXPECT THE PORTFOLIO TO BE
STRUCTURED?
A. We expect the Fund to have between 100 and 200 holdings. Large- and mid-cap
stocks should continue to make up the majority of the holdings, with
small-cap stocks comprising about 10% of the portfolio. Previously, the
Fund's holdings have been primarily growth stocks. Going forward, we expect
growth stocks to comprise about two-thirds and value stocks to comprise
approximately one-third of the Fund's holdings. We believe structuring the
portfolio in this manner will put it in a favorable position, regardless of
the market environment.
Q. WHAT WERE SOME OF THE MAJOR THEMES IN THE STOCK MARKET DURING THE REPORTING
PERIOD?
A. When the reporting period opened, the stock market was languishing over
concerns about the economic problems in Asia. However, in the U.S. and most
other developed countries, the economic fundamentals remained sound. While
the economy grew at a brisk pace, inflation and interest rates-two forces
that could potentially undermine corporate profits-continued to be low.
Consequently, the Dow Jones Industrial Average (DJIA) resumed its upward
climb in late January and set a record in May.
In the final weeks of the reporting period, however, concerns resurfaced
about the Asian crisis and its potential impact on corporate profits. Weak
Asian demand helped push the U.S. trade deficit to record levels. In this
environment, the stock market faltered, and the DJIA ended the reporting
period slightly below its record level.
Q. WHAT STOCKS WERE THE PRIMARY BENEFICIARIES OF THESE TRENDS?
A. Large-cap stocks were the undisputed market leaders throughout the reporting
period. In the uncertain market environment created by the Asian crisis,
investors gravitated to the stocks of large, well-known companies.
Additionally, foreign investors, who began shifting more assets into the
American stock market, were attracted to the equities of larger companies
with global reputations. Finally, growth stocks outperformed value stocks.
Q. HOW DID MARKET TRENDS AFFECT THE PERFORMANCE OF THE FUND?
A. At the end of the reporting period, large-company stocks comprised 56% of
the portfolio while mid- and small-sized company stocks comprised about 36%
------------------------------------
Our goal is to construct a portfolio
that includes the most attractive
large-, mid-, and small-cap growth
and value stocks.
------------------------------------
2
<PAGE> 5
and 8%, respectively. The Fund's large-cap holdings tended to enhance
performance while its mid- and small-cap holdings tended to detract from
it.
The Fund benefited from its growth-stock orientation and its large
holdings in the technology sector, which performed well during the
reporting period. As of June 30, 1998, the Fund's top holdings included:
technology, 29%; financial, 14%; and health-care, 12%. During the six
months since our last report, we slightly increased our holdings in all
three of these sectors.
Q. WHY WAS THE PERFORMANCE OF TECHNOLOGY STOCKS SO STRONG?
A. Several factors contributed to the strong showing of technology stocks,
including the rapid growth of the Internet as a medium of commerce,
communication, and entertainment. That's giving a boost to companies that
are involved in creating technologies to make the Internet more accessible
and easier to use for a wider variety of functions. The solid performance of
Internet-company stocks, particularly toward the end of the reporting
period, gave a boost to the entire technology sector. Technology companies
also are continuing to benefit from the ongoing efforts to solve the
so-called millennium problem-the need to reprogram older computers to
recognize the Year 2000.
A stock that did well for the Fund was America Online, Inc., the world's
top provider of online services. In 1998, America Online, Inc., expanded its
subscriber base and diversified its offerings when it acquired CompuServe.
While America Online, Inc., is entertainment-oriented, CompuServe caters to
the needs of small-business owners.
Other strong-performing technology stocks in the portfolio included
Microsoft Corp. and Dell Computer Corp., which have both experienced strong
earnings growth, BMC Software, Inc., HBO & Co., and Lucent Technologies,
Inc.
Q. WHAT MADE THE STOCKS OF FINANCIAL COMPANIES ATTRACTIVE?
A. The financial sector continued to benefit from declining interest rates, low
inflation, and a vibrant stock market as well as an ongoing series of
mergers and acquisitions. In April, for example, financial-services giants
Travelers Group, Inc., and Citicorp-two stocks represented in the
portfolio-agreed to the largest corporate merger in history-an estimated $76
billion transaction. Both companies reported solid earnings for the second
quarter of 1998.
The Fund also benefited from owning the stocks of such companies as
Household International, Chase Manhattan Corp., and Providian Financial
Corp.
Q. WHICH HEALTH-CARE STOCKS PERFORMED WELL FOR THE FUND ?
A. Health-care stocks we liked included Pfizer Inc., Merck & Co. Inc.,
Bristol-Myers Squibb Co., and ICN Pharmaceuticals, Inc. These companies have
been expanding their product lines and their markets. For example, ICN
Pharmaceuticals, Inc., best known for its antibacterial and antiviral
products, is particularly active in the newly opened markets of Russia and
Eastern Europe.
Q. WHAT IS YOUR OUTLOOK?
A. The economic climate appears to be favorable for stocks. Inflation continues
to be low in the U.S. and other developed countries. If inflation remains
contained, the Federal Reserve Board (the Fed), which has left monetary
policy unchanged for more than a year will be less likely to raise interest
rates. However, Fed Chairman Alan Greenspan, speaking to Congress in July,
warned that a tight labor market could accelerate inflation. Additionally,
the ongoing economic problems in Asia remain a threat to profits and to the
performance of stocks in general.
Investors have displayed a willingness to pay premium prices for the
highly liquid stocks of the very largest companies-the so-called
"mega-caps." At some point, investors could shift their focus to the more
reasonably priced stocks in the large- and mid-cap arenas. Such a
development could prove beneficial for the Fund.
------------------------------------
The Fund benefited from its growth-stock
orientation and its large holdings in the
technology sector, which performed well
during the reporting period.
------------------------------------
PORTFOLIO COMPOSITION
As of 6/30/98, based on total net assets
<TABLE>
<CAPTION>
==========================================================================================================================
TOP 10 EQUITY HOLDINGS % TOP 10 INDUSTRIES %
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Microsoft Corp. 2.19% 1. Computers (Software & Services) 11.36%
2. Dell Computer Corp. 1.85 2. Financial (Diversified) 5.50
3. Warner-Lambert Co.. 1.80 3. Communications Equipment 4.40
4. Freddie Mac 1.64 4. Oil & Gas (Drilling & Equipment) 3.17
5. America Online, Inc. 1.56 5. Electrical Equipment 2.85
6. Tyco International Ltd. 1.53 6. Computers (Hardware) 2.79
7. Travelers Group, Inc. 1.50 7. Broadcasting (Television, Radio & Cable) 2.54
8. WorldCom, Inc. 1.42 8. Health Care (Drugs-Generic & Other) 2.53
9. Pfizer Inc 1.26 9. Retail (General Merchandise) 2.41
10. Clear Channel Communications, Inc. 1.21 10. Health Care (Diversified) 2.33
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>
See important fund and index disclosures inside front cover.
3
<PAGE> 6
For Consideration
AIM PREPARES FOR THE YEAR 2000
THE YEAR 2000. THE WORDS STIR THE IMAGINATION, MAKING US
WONDER WHAT THE NEXT MILLENNIUM WILL BRING. BUT THE WORDS
ARE ALSO STARTING TO MAKE SOME PEOPLE WORRY, SINCE THERE'S
BEEN SO MUCH TALK LATELY ABOUT A COMPUTER GLITCH CALLED "THE
YEAR 2000 PROBLEM." BECAUSE THIS IS A PROBLEM THAT COULD
AFFECT MOST AMERICAN INDUSTRIES, INCLUDING THE MUTUAL FUND
INDUSTRY, WE WANT TO BRING YOU THIS UPDATE TO LET YOU KNOW
HOW AIM IS GETTING READY.
THE YEAR 2000 PROBLEM
It has to do with the way that computers understand dates. Most computers were
programmed to recognize only the last two digits of a four-digit date ("98" for
1998). When the year 2000 hits, the computer will read "00"-- but it may
interpret that as the year 1900. So, if the computer makes a calculation
involving a date of January 1, 2000, or later, it could be processed
incorrectly. Date-sensitive calculations are found in all kinds of places--from
elevators to air traffic control systems--but they are especially prevalent in
the financial services industry.
AIM'S YEAR 2000 COMPLIANCE
AIM's technology team has been addressing Year 2000 issues for some time now.
Our internal team, together with an independent technology consultant, are
implementing a comprehensive Year 2000 Compliance Project for A I M Management
Group Inc. and its subsidiaries.
So far, we've inventoried all software applications that we rely on, and
we've identified the applications that might need adjustments to function
properly when the Year 2000 arrives. We are now in the final phase of the
project, making corrections and testing applications that need adjustment. We
plan to complete this phase during the fourth quarter of 1998.
AN INDUSTRY-WIDE TEST
In the spring of 1999, AIM will be participating in industry-wide testing that
will simulate the arrival of the Year 2000. This will allow mutual fund
companies, banks, exchanges, and other players in the financial community to
test various kinds of transactions and to determine if any further adjustments
need to be made before the end of the year.
We believe our plans are quite comprehensive, and we're committed to
monitoring all software applications through the critical period, extending as
far as needed into the 21st century.
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-89.86%
BANKS (MONEY CENTER)-2.04%
BankAmerica Corp. 30,000 $ 2,593,125
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 110,400 8,335,200
- --------------------------------------------------------------
Citicorp 21,600 3,223,800
- --------------------------------------------------------------
14,152,125
- --------------------------------------------------------------
BANKS (REGIONAL)-0.36%
AmSouth Bancorporation 62,500 2,457,031
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-2.54%
CBS Corp.(a) 100,400 3,187,700
- --------------------------------------------------------------
Chancellor Media Corp.(a) 76,000 3,773,875
- --------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 76,700 8,369,887
- --------------------------------------------------------------
Jacor Communications, Inc.(a) 38,500 2,271,500
- --------------------------------------------------------------
17,602,962
- --------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.98%
Monsanto Co. 121,000 6,760,875
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.07%
Brightpoint, Inc.(a) 21,600 313,200
- --------------------------------------------------------------
Comverse Technology, Inc.(a) 143,300 7,433,688
- --------------------------------------------------------------
Lucent Technologies, Inc. 80,400 6,688,275
- --------------------------------------------------------------
Tellabs, Inc.(a) 83,800 6,002,175
- --------------------------------------------------------------
US LEC Corp.-Class A(a) 37,700 786,987
- --------------------------------------------------------------
21,224,325
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-2.79%
Comdisco, Inc. 55,200 1,048,800
- --------------------------------------------------------------
Compaq Computer Corp. 108,100 3,067,338
- --------------------------------------------------------------
Dell Computer Corp.(a) 138,000 12,808,125
- --------------------------------------------------------------
International Business Machines
Corp. 21,000 2,411,062
- --------------------------------------------------------------
19,335,325
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.29%
EMC Corp.(a) 100,000 4,481,250
- --------------------------------------------------------------
Quantum Corp.(a) 160,000 3,320,000
- --------------------------------------------------------------
Storage Technology Corp.(a) 26,000 1,127,750
- --------------------------------------------------------------
8,929,000
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-11.33%
Activision, Inc.(a) 320,000 3,300,000
- --------------------------------------------------------------
America Online, Inc. 101,500 10,759,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
BMC Software, Inc.(a) 108,000 $ 5,609,250
- --------------------------------------------------------------
Cadence Design Systems, Inc.(a) 100,000 3,125,000
- --------------------------------------------------------------
Citrix Systems, Inc.(a) 61,650 4,215,319
- --------------------------------------------------------------
Compuware Corp.(a) 104,000 5,317,000
- --------------------------------------------------------------
Concord EFS, Inc.(a) 71,550 1,869,244
- --------------------------------------------------------------
Electronic Arts, Inc.(a) 96,700 5,221,800
- --------------------------------------------------------------
HBO & Co 226,400 7,980,600
- --------------------------------------------------------------
Inktomi Corp.(a) 10,700 425,325
- --------------------------------------------------------------
ISS Group, Inc.(a) 4,100 154,262
- --------------------------------------------------------------
Medical Manager Corp.(a) 120,000 3,315,000
- --------------------------------------------------------------
Microsoft Corp.(a) 139,800 15,150,825
- --------------------------------------------------------------
Natural MicroSystems Corp.(a) 125,000 2,000,000
- --------------------------------------------------------------
Sterling Commerce, Inc.(a) 100,000 4,850,000
- --------------------------------------------------------------
Symantec Corp.(a) 23,000 600,875
- --------------------------------------------------------------
Synopsys, Inc.(a) 33,800 1,546,350
- --------------------------------------------------------------
USWeb Corp.(a) 126,000 2,984,625
- --------------------------------------------------------------
78,424,475
- --------------------------------------------------------------
CONSUMER FINANCE-2.24%
Capital One Financial Corp. 18,000 2,235,375
- --------------------------------------------------------------
Household International, Inc. 114,400 5,691,400
- --------------------------------------------------------------
MBNA Corp. 89,250 2,945,250
- --------------------------------------------------------------
Providian Financial Corp. 58,700 4,611,619
- --------------------------------------------------------------
15,483,644
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.28%
AmeriSource Health Corp.-Class A(a) 18,100 1,188,944
- --------------------------------------------------------------
Cardinal Health, Inc. 31,050 2,910,937
- --------------------------------------------------------------
McKesson Corp. 59,000 4,793,750
- --------------------------------------------------------------
8,893,631
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.85%
American Power Conversion Corp.(a) 50,000 1,500,000
- --------------------------------------------------------------
Berg Electronics Corp.(a) 22,400 438,200
- --------------------------------------------------------------
General Electric Co. 57,200 5,205,200
- --------------------------------------------------------------
RELTEC Corp.(a) 66,200 2,979,000
- --------------------------------------------------------------
Sanmina Corp.(a) 87,200 3,782,300
- --------------------------------------------------------------
SCI Systems, Inc.(a) 99,500 3,743,688
- --------------------------------------------------------------
Solectron Corp.(a) 49,000 2,061,062
- --------------------------------------------------------------
19,709,450
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (INSTRUMENTATION)-1.05%
CellStar Corp.(a) 374,400 $ 4,843,800
- --------------------------------------------------------------
Waters Corp.(a) 41,000 2,416,438
- --------------------------------------------------------------
7,260,238
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-2.10%
Altera Corp.(a) 140,400 4,150,575
- --------------------------------------------------------------
Linear Technology Corp. 44,400 2,677,875
- --------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 70,000 2,218,125
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 105,800 4,959,375
- --------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 16,800 518,700
- --------------------------------------------------------------
14,524,650
- --------------------------------------------------------------
ENTERTAINMENT-1.09%
SFX Entertainment, Inc.-Class A(a) 164,200 7,532,675
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS)-0.74%
Applied Materials, Inc.(a) 90,000 2,655,000
- --------------------------------------------------------------
Teradyne, Inc.(a) 93,000 2,487,750
- --------------------------------------------------------------
5,142,750
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.96%
American Express Co. 40,100 4,571,400
- --------------------------------------------------------------
AMRESCO, Inc.(a) 190,000 5,533,750
- --------------------------------------------------------------
Fannie Mae 54,000 3,280,500
- --------------------------------------------------------------
Freddie Mac 241,020 11,343,004
- --------------------------------------------------------------
Hamilton Bancorp Inc.(a) 11,700 421,566
- --------------------------------------------------------------
Heller Financial, Inc.(a) 63,300 1,899,000
- --------------------------------------------------------------
MGIC Investment Corp. 78,400 4,473,700
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 30,500 2,786,937
- --------------------------------------------------------------
34,309,857
- --------------------------------------------------------------
FOOTWEAR-0.07%
Wolverine World Wide, Inc. 21,275 461,401
- --------------------------------------------------------------
HARDWARE & TOOLS-0.58%
Black & Decker Corp. (The) 65,500 3,995,500
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.33%
Bristol-Myers Squibb Co. 31,700 3,643,519
- --------------------------------------------------------------
Warner-Lambert Co. 180,000 12,487,500
- --------------------------------------------------------------
16,131,019
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-2.53%
Forest Laboratories, Inc.(a) 105,200 3,760,900
- --------------------------------------------------------------
ICN Pharmaceuticals, Inc. 115,750 5,288,328
- --------------------------------------------------------------
Jones Medical Industries, Inc. 21,000 695,625
- --------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class
A(a) 78,000 2,847,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-GENERIC & OTHER)-(CONTINUED)
Watson Pharmaceuticals, Inc.(a) 105,000 $ 4,902,188
- --------------------------------------------------------------
17,494,041
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-2.25%
Lilly (Eli) & Co. 32,300 2,133,819
- --------------------------------------------------------------
Merck & Co., Inc. 35,000 4,681,250
- --------------------------------------------------------------
Pfizer Inc. 80,400 8,738,475
- --------------------------------------------------------------
15,553,544
- --------------------------------------------------------------
HEALTH CARE (LONG-TERM CARE)-1.09%
Health Care & Retirement Corp.(a) 72,450 2,857,247
- --------------------------------------------------------------
HEALTHSOUTH Corp.(a) 176,700 4,715,681
- --------------------------------------------------------------
7,572,928
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.79%
Concentra Managed Care, Inc.(a) 34,700 902,200
- --------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 17,300 1,394,813
- --------------------------------------------------------------
First Health Group Corp.(a) 111,800 3,186,300
- --------------------------------------------------------------
5,483,313
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.80%
Arterial Vascular Engineering,
Inc.(a) 27,700 990,275
- --------------------------------------------------------------
Biomet, Inc. 120,600 3,987,338
- --------------------------------------------------------------
Guidant Corp. 52,500 3,743,906
- --------------------------------------------------------------
Sybron International Corp.(a) 149,000 3,762,250
- --------------------------------------------------------------
12,483,769
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-1.18%
Ocular Sciences, Inc.(a) 125,000 4,062,500
- --------------------------------------------------------------
Omnicare, Inc. 71,400 2,722,125
- --------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 17,800 372,688
- --------------------------------------------------------------
Quintiles Transnational Corp.(a) 20,400 1,003,425
- --------------------------------------------------------------
8,160,738
- --------------------------------------------------------------
HOMEBUILDING-0.52%
Clayton Homes, Inc. 188,000 3,572,000
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.24%
Procter & Gamble Co. (The) 18,000 1,639,125
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.96%
Conseco, Inc. 141,400 6,610,450
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.21%
Ace, Ltd. 30,000 1,170,000
- --------------------------------------------------------------
American International Group, Inc. 12,000 1,752,000
- --------------------------------------------------------------
Century Business Services, Inc.(a) 100,000 2,000,000
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-(CONTINUED)
Travelers Group, Inc. 171,050 $ 10,369,906
- --------------------------------------------------------------
15,291,906
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-1.27%
CMAC Investment Corp. 57,000 3,505,500
- --------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 44,500 1,710,469
- --------------------------------------------------------------
Mercury General Corp. 56,000 3,601,500
- --------------------------------------------------------------
8,817,469
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.56%
Freedom Securities Corp.(a) 15,800 286,375
- --------------------------------------------------------------
Merrill Lynch & Co., Inc. 39,000 3,597,750
- --------------------------------------------------------------
3,884,125
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-0.29%
Affiliated Managers Group, Inc.(a) 54,300 2,015,887
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.27%
Mattel, Inc. 43,600 1,844,825
- --------------------------------------------------------------
LODGING-HOTELS-0.53%
Carnival Corp. 91,700 3,633,612
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.66%
Tyco International Ltd. 167,700 10,565,100
- --------------------------------------------------------------
U.S. Industries, Inc. 36,900 913,275
- --------------------------------------------------------------
11,478,375
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.31%
Cognex Corp.(a) 116,600 2,157,100
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.43%
Knoll, Inc.(a) 100,000 2,950,000
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-3.17%
Baker Hughes, Inc. 21,000 725,812
- --------------------------------------------------------------
BJ Services Co.(a) 66,800 1,941,375
- --------------------------------------------------------------
Cooper Cameron Corp.(a) 50,000 2,550,000
- --------------------------------------------------------------
Diamond Offshore Drilling, Inc. 58,400 2,336,000
- --------------------------------------------------------------
EVI Weatherford Inc.(a) 93,300 3,463,763
- --------------------------------------------------------------
Global Industries Ltd.(a) 191,000 3,223,125
- --------------------------------------------------------------
National-Oilwell, Inc.(a) 90,000 2,413,125
- --------------------------------------------------------------
Noble Drilling Corp.(a) 100,000 2,406,250
- --------------------------------------------------------------
Pride International, Inc.(a) 32,900 557,244
- --------------------------------------------------------------
Rowan Companies, Inc.(a) 20,000 388,750
- --------------------------------------------------------------
Varco International, Inc.(a) 66,600 1,319,512
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Veritas DGC, Inc.(a) 12,600 $ 629,212
- --------------------------------------------------------------
21,954,168
- --------------------------------------------------------------
PERSONAL CARE-1.19%
Avon Products, Inc. 29,100 2,255,250
- --------------------------------------------------------------
Gillette Co. 41,000 2,324,188
- --------------------------------------------------------------
Steiner Leisure Ltd.(a) 120,000 3,630,000
- --------------------------------------------------------------
8,209,438
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.12%
Gannett Co., Inc. 12,000 852,750
- --------------------------------------------------------------
RAILROADS-0.74%
Kansas City Southern Industries,
Inc. 103,000 5,111,375
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.61%
Home Depot, Inc. (The) 22,600 1,877,212
- --------------------------------------------------------------
Lowe's Companies, Inc. 58,600 2,376,963
- --------------------------------------------------------------
4,254,175
- --------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.96%
CDW Computer Centers, Inc.(a) 23,050 1,152,500
- --------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 71,900 3,181,575
- --------------------------------------------------------------
Tech Data Corp.(a) 54,000 2,315,250
- --------------------------------------------------------------
6,649,325
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.80%
Federated Department Stores,
Inc.(a) 22,000 1,183,875
- --------------------------------------------------------------
Kohl's Corp.(a) 21,800 1,130,875
- --------------------------------------------------------------
Proffitt's, Inc.(a) 80,000 3,230,000
- --------------------------------------------------------------
5,544,750
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.57%
Dollar General Corp. 22,606 894,350
- --------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 34,425 1,398,516
- --------------------------------------------------------------
Ross Stores, Inc. 37,700 1,621,100
- --------------------------------------------------------------
3,913,966
- --------------------------------------------------------------
RETAIL (DRUG STORES)-1.08%
CVS Corp. 192,498 7,495,390
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.57%
Kroger Co.(a) 114,900 4,926,338
- --------------------------------------------------------------
Safeway, Inc.(a) 146,000 5,940,375
- --------------------------------------------------------------
10,866,713
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-2.41%
Costco Companies, Inc.(a) 76,000 4,792,750
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-(CONTINUED)
Dayton Hudson Corp. 170,000 $ 8,245,000
- --------------------------------------------------------------
Fred Meyer, Inc.(a) 84,840 3,605,700
- --------------------------------------------------------------
16,643,450
- --------------------------------------------------------------
RETAIL (SPECIALTY)-1.96%
Bed Bath & Beyond, Inc.(a) 45,900 2,378,194
- --------------------------------------------------------------
Williams-Sonoma, Inc.(a) 170,000 5,408,125
- --------------------------------------------------------------
Zale Corp.(a) 181,000 5,758,062
- --------------------------------------------------------------
13,544,381
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.67%
Gap, Inc. (The) 24,000 1,479,000
- --------------------------------------------------------------
TJX Companies, Inc. 130,800 3,155,550
- --------------------------------------------------------------
4,634,550
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.59%
Ahmanson (H.F.) & Co. 39,600 2,811,600
- --------------------------------------------------------------
Washington Mutual, Inc. 29,250 1,270,547
- --------------------------------------------------------------
4,082,147
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.34%
Omnicom Group, Inc. 20,000 997,500
- --------------------------------------------------------------
Young & Rubicam Inc.(a) 42,600 1,363,200
- --------------------------------------------------------------
2,360,700
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-1.32%
Service Corp. International 162,400 6,962,900
- --------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 57,300 1,525,613
- --------------------------------------------------------------
Trammell Crow Co.(a) 20,000 668,750
- --------------------------------------------------------------
9,157,263
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.86%
Cambridge Technology Partners,
Inc.(a) 10,100 551,712
- --------------------------------------------------------------
Gartner Group, Inc.-Class A(a) 23,000 805,000
- --------------------------------------------------------------
Shared Medical Systems Corp. 10,900 800,469
- --------------------------------------------------------------
SunGard Data Systems Inc.(a) 98,600 3,783,775
- --------------------------------------------------------------
5,940,956
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.75%
Affiliated Computer Services,
Inc.(a) 22,600 870,100
- --------------------------------------------------------------
Billing Concepts Corp.(a) 37,200 576,600
- --------------------------------------------------------------
CSG Systems International, Inc.(a) 90,000 4,218,750
- --------------------------------------------------------------
DST Systems, Inc.(a) 22,100 1,237,600
- --------------------------------------------------------------
Fiserv, Inc.(a) 56,850 2,414,348
- --------------------------------------------------------------
Paychex, Inc. 51,900 2,111,682
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING)-(CONTINUED)
PMT Services, Inc.(a) 25,500 $ 648,656
- --------------------------------------------------------------
12,077,736
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.24%
AccuStaff, Inc.(a) 53,700 1,678,125
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-2.27%
MCI Communications Corp. 100,300 5,829,938
- --------------------------------------------------------------
WorldCom, Inc.(a) 203,200 9,842,500
- --------------------------------------------------------------
15,672,438
- --------------------------------------------------------------
TEXTILES (APPAREL)-1.00%
Jones Apparel Group, Inc.(a) 45,200 1,652,625
- --------------------------------------------------------------
Liz Claiborne, Inc. 29,300 1,530,925
- --------------------------------------------------------------
Tommy Hilfiger Corp.(a) 60,200 3,762,500
- --------------------------------------------------------------
6,946,050
- --------------------------------------------------------------
TOBACCO-0.85%
Philip Morris Companies Inc. 149,000 5,866,875
- --------------------------------------------------------------
WASTE MANAGEMENT-2.21%
American Disposal Services, Inc.(a) 137,000 6,421,875
- --------------------------------------------------------------
KTI, Inc.(a) 210,000 4,541,250
- --------------------------------------------------------------
Waste Management, Inc. 123,200 4,312,000
- --------------------------------------------------------------
15,275,125
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $433,347,339) 621,705,986
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-1.90%
CANADA-0.54%
Newcourt Credit Group, Inc.
(Financial-Diversified) 75,500 3,713,656
- --------------------------------------------------------------
FINLAND-0.38%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 36,700 2,663,044
- --------------------------------------------------------------
FRANCE-0.57%
Alcatel Alsthom-ADR (Communications
Equipment) 97,000 3,946,687
- --------------------------------------------------------------
IRELAND-0.03%
CBT Group PLC-ADR
(Computers-Software &
Services)(a) 3,600 192,600
- --------------------------------------------------------------
SWEDEN-0.38%
Telefonaktiebolaget LM Ericsson-ADR
(Communications Equipment) 92,200 2,639,225
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$9,172,901) 13,155,212
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE NOTES-0.15%
COMPUTERS (PERIPHERALS)-0.15%
EMC Corp., Conv. Sub. Notes, 3.25%,
03/15/02 (Cost $677,145) 500,000 $ 1,028,020
- --------------------------------------------------------------
REPURCHASE AGREEMENT-8.62%(b)
UBS Securities LLC, 5.60%,
07/01/98(c)(Cost $59,671,855) 59,671,855 59,671,855
- --------------------------------------------------------------
TOTAL INVESTMENTS-100.53% 695,561,073
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.53%) (3,692,568)
- --------------------------------------------------------------
NET ASSETS-100.00% $691,868,505
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security
(b) 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.
(c) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,031,111. Collateralized by $290,091,354 U.S. Government obligations,
0% to 12.75% due 03/31/99 to 03/01/33 with an aggregate market value at
06/30/98 of $204,000,924.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Sub. - Subordinated
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$502,869,240) $695,561,073
- ---------------------------------------------------------
Receivables for:
Investments sold 356,576
- ---------------------------------------------------------
Fund shares sold 1,421,420
- ---------------------------------------------------------
Dividends and interest 248,701
- ---------------------------------------------------------
Investment for deferred compensation plan 59,830
- ---------------------------------------------------------
Other assets 37,349
- ---------------------------------------------------------
Total assets 697,684,949
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 228,276
- ---------------------------------------------------------
Fund shares reacquired 4,259,876
- ---------------------------------------------------------
Amount due custodian 16,593
- ---------------------------------------------------------
Deferred compensation plan 59,830
- ---------------------------------------------------------
Accrued advisory fees 364,522
- ---------------------------------------------------------
Accrued administrative services fees 6,164
- ---------------------------------------------------------
Accrued distribution fees 640,996
- ---------------------------------------------------------
Accrued trustees' fees 2,600
- ---------------------------------------------------------
Accrued transfer agent fees 152,181
- ---------------------------------------------------------
Accrued operating expenses 85,406
- ---------------------------------------------------------
Total liabilities 5,816,444
- ---------------------------------------------------------
Net assets applicable to shares outstanding $691,868,505
=========================================================
NET ASSETS:
Class A $296,505,730
=========================================================
Class B $390,809,504
=========================================================
Class C $ 4,553,271
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 16,500,439
=========================================================
Class B 22,837,593
=========================================================
Class C 266,068
=========================================================
Class A:
Net asset value and redemption price per
share $ 17.97
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $17.97 divided
by 94.50%) $ 19.02
=========================================================
Class B:
Net asset value and offering price per
share $ 17.11
=========================================================
Class C:
Net asset value and offering price per
share $ 17.11
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $14,635 foreign
withholding tax) $ 1,397,727
- ---------------------------------------------------------
Interest 1,715,620
- ---------------------------------------------------------
Total investment income 3,113,347
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,193,877
- ---------------------------------------------------------
Administrative services fees 36,984
- ---------------------------------------------------------
Custodian fees 31,302
- ---------------------------------------------------------
Transfer agent fees-Class A 198,841
- ---------------------------------------------------------
Transfer agent fees-Class B 400,082
- ---------------------------------------------------------
Transfer agent fees-Class C 3,350
- ---------------------------------------------------------
Trustees' fees 5,506
- ---------------------------------------------------------
Distribution fees-Class A 353,534
- ---------------------------------------------------------
Distribution fees-Class B 1,876,017
- ---------------------------------------------------------
Distribution fees-Class C 11,778
- ---------------------------------------------------------
Other 107,620
- ---------------------------------------------------------
Total expenses 5,218,891
- ---------------------------------------------------------
Less: Expenses paid indirectly (8,385)
- ---------------------------------------------------------
Net expenses 5,210,506
- ---------------------------------------------------------
Net investment income (loss) (2,097,159)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 15,039,026
- ---------------------------------------------------------
Futures contracts 2,479,145
- ---------------------------------------------------------
Option contracts (9,051)
- ---------------------------------------------------------
17,509,120
- ---------------------------------------------------------
Net unrealized appreciation of:
Investment securities 74,055,416
- ---------------------------------------------------------
Foreign currencies 39
- ---------------------------------------------------------
Futures contracts 289,500
- ---------------------------------------------------------
74,344,955
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 91,854,075
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $89,756,916
=========================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (2,097,159) $ (2,562,900)
- -------------------------------------------------------------------------------------------
Net realized gain from investment securities, futures and
option contracts 17,509,120 68,573,981
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and futures contracts 74,344,955 29,604,019
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 89,756,916 95,615,100
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (115,803)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (28,869,623)
- -------------------------------------------------------------------------------------------
Class B -- (40,478,955)
- -------------------------------------------------------------------------------------------
Class C -- (105,058)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (8,927,612) 23,238,247
- -------------------------------------------------------------------------------------------
Class B (15,536,007) 64,250,779
- -------------------------------------------------------------------------------------------
Class C 3,032,291 1,318,691
- -------------------------------------------------------------------------------------------
Net increase in net assets 68,325,588 114,853,378
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 623,542,917 508,689,539
- -------------------------------------------------------------------------------------------
End of period $691,868,505 $623,542,917
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $477,679,485 $499,110,813
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (2,131,359) (34,200)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, futures and option contracts 23,628,380 6,119,260
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 192,691,999 118,347,044
- -------------------------------------------------------------------------------------------
$691,868,505 $623,542,917
===========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Select Growth Fund (formerly, AIM Growth 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: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class are voted on exclusively by the shareholders of such portfolio or class.
The assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to achieve long-term growth of
capital by investing primarily in the common stocks of established medium-
to-large size companies with prospects for above-average, long-term earnings
growth. Realization of current income is an incidental consideration.
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
11
<PAGE> 14
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 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 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.
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.
E. 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.
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. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 25% of the net assets of the
Fund.
G. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security
12
<PAGE> 15
or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged. The Fund will not purchase put options where
the aggregate value of the securities underlying all such options exceeds 25%
of the value of its net assets.
H. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contracts at the end of
each day's trading. Variation margin payments are made or received depending
upon whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and the change in the value of the contracts may not correlate with changes
in the value of the Fund's portfolio being hedged.
I. 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.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended June 30, 1998, AIM
was reimbursed $36,984 for such services.
The Fund, pursuant to a transfer agency and shareholder service agreement, has
agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency and shareholder services to the Fund. During the six months ended June
30, 1998, AFS was paid $325,301 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 the average daily net assets of the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the six months ended June 30, 1998, the Class A, Class B and
Class C shares paid AIM Distributors $353,534, $1,876,017 and $11,778,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $81,589 from sales of the Class A
shares of the Fund during the six months ended June 30, 1998. 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 six months ended June 30,
1998, AIM Distributors received $68,024 in contingent deferred sales charges
imposed on redemptions of Fund shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
During the six months ended June 30, 1998, the Fund paid legal fees of $1,916
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the six months ended June 30, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $3,996 and $4,389, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $8,385 during the six months ended June 30, 1998.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the six months ended June 30, 1998, the Fund
did not borrow under the line of credit agreement. The funds
13
<PAGE> 16
which are parties to the line of credit are charged a commitment fee of 0.05% on
the unused balance of the committed line. The commitment fee is allocated among
such funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 1998 was
$245,371,271 and $238,755,342, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $207,824,240
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (15,383,438)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $192,440,802
=========================================================
</TABLE>
Cost of investments for tax purposes is $503,120,271.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1998 and the
year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 15,003,241 $ 256,645,024 14,466,946 $ 234,213,923
- ------------------ ------------ ------------- ----------- -------------
Class B 2,453,140 39,450,243 7,100,475 113,053,525
- ------------------ ------------ ------------- ----------- -------------
Class C* 275,771 4,507,578 104,003 1,760,456
- ------------------ ------------ ------------- ----------- -------------
Issued as
reinvestment of
dividends:
Class A -- -- 1,802,991 27,333,257
- ------------------ ------------ ------------- ----------- -------------
Class B -- -- 2,600,309 37,704,454
- ------------------ ------------ ------------- ----------- -------------
Class C* -- -- 6,820 98,891
- ------------------ ------------ ------------- ----------- -------------
Reacquired:
Class A (15,493,533) (265,572,636) (14,695,429) (238,308,933)
- ------------------ ------------ ------------- ----------- -------------
Class B (3,395,430) (54,986,250) (5,524,470) (86,507,200)
- ------------------ ------------ ------------- ----------- -------------
Class C* (89,100) (1,475,287) (31,426) (540,656)
- ------------------ ------------ ------------- ----------- -------------
(1,245,911) $ (21,431,328) 5,830,219 $ 88,807,717
================== ============ ============= =========== =============
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-CALL OPTION CONTRACTS WRITTEN
Transactions in call option contracts written during the six months ended June
30, 1998 are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Beginning of period -- $ --
- -------------------------- ------- ---------
Written 1,056 417,229
- -------------------------- ------- ---------
Closed (478) (188,956)
- -------------------------- ------- ---------
Exercised (329) (163,373)
- -------------------------- ------- ---------
Expired (249) (64,900)
- -------------------------- ------- ---------
End of period -- $ --
========================== ======= =========
</TABLE>
NOTE 9-PUT OPTIONS CONTRACTS PURCHASED
Transactions in put option contracts purchased during the six months ended June
30, 1998 are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- --------
<S> <C> <C>
Beginning of period -- $ --
- -------------------------- ------- ---------
Purchased 337 110,033
- -------------------------- ------- ---------
Closed (231) (52,899)
- -------------------------- ------- ---------
Expired (106) (57,134)
- -------------------------- ------- ---------
End of period -- --
=========================== ======= =========
</TABLE>
14
<PAGE> 17
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the six months ended June 30, 1998 and each of the years in the five-year
period ended December 31, 1997; for a share of Class B outstanding during the
six months ended June 30, 1998, each of the years in the four-year period ended
December 31, 1997 and the period September 1, 1993 (date sales commenced)
through December 31, 1993; and for a share of Class C outstanding during the six
months ended June 30, 1998 and the period August 4, 1997 (date sales commenced)
through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------
DECEMBER 31,
JUNE 30, --------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 14.78 $ 13.05 $ 10.32 $ 11.32 $ 12.28
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (0.01) 0.01(a) 0.07 0.02(a) -- --
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.31 2.82 2.34 3.50 (0.57) 0.41
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 2.30 2.83 2.41 3.52 (0.57) 0.41
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- (0.01) -- -- -- --
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains -- (1.93) (0.68) (0.79) (0.43) (1.37)
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions -- (1.94) (0.68) (0.79) (0.43) (1.37)
- -------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 17.97 $ 15.67 $ 14.78 $ 13.05 $ 10.32 $ 11.32
======================================================== ======== ======== ======== ======== ======== ========
Total return(b) 14.68% 19.54% 18.61% 34.31% (4.99)% 3.64%
======================================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $296,506 $266,168 $227,882 $168,217 $123,271 $146,723
======================================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.11%(c) 1.13%() 1.18% 1.28% 1.22% 1.17%
======================================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net assets (0.16)%(c) 0.04%() 0.46% 0.20% 0.02% 0.02%
======================================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 40% 110% 97% 87% 201% 192%
======================================================== ======== ======== ======== ======== ======== ========
Average broker commission rate paid(d) $ 0.0557 $ 0.0568 $ 0.0621 N/A N/A N/A
======================================================== ======== ======== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are annualized and based on average net assets of $285,170,733.
(d) 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.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------- ------------------------
DECEMBER 31,
JUNE 30, --------------------------------------------------- JUNE 30, DECEMBER 31,
1998 1997 1996 1995 1994 1993 1998 1997
-------- ------- ------- ------- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 11.31 $ 12.83 $ 14.98 $ 17.65
- ---------------------------------- -------- ------- ------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.08) (0.13)(a) (0.05) (0.08)(a) (0.06) (0.01) (0.08)(a) (0.04)(a)
- ---------------------------------- -------- ------- ------- -------- ------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 2.21 2.72 2.28 3.43 (0.61) (0.14) 2.21 (0.70)
- ---------------------------------- -------- ------- ------- -------- ------- ------- ------- -------
Total from investment
operations 2.13 2.59 2.23 3.35 (0.67) (0.15) 2.13 (0.74)
- ---------------------------------- -------- ------- ------- -------- ------- ------- ------- -------
Less distributions:
Distributions from net realized
gains -- (1.93) (0.68) (0.79) (0.43) (1.37) -- (1.93)
- ---------------------------------- -------- ------- ------- -------- ------- ------- ------- -------
Total distributions -- (1.93) (0.68) (0.79) (0.43) (1.37) -- (1.93)
- ---------------------------------- -------- ------- ------- -------- ------- ------- ------- -------
Net asset value, end of period $ 17.11 $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 11.31 $ 17.11 $ 14.98
================================== ======== ======= ======= ======== ======= ======= ======= =======
Total return(b) 14.22% 18.50% 17.60% 33.00% (5.88)% (0.92)% 14.22% (3.86)%
================================== ======== ======= ======= ======== ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $390,810 $356,186 $280,807 $138,034 $38,448 $11,053 $ 4,553 $ 1,189
================================== ======== ======== ======== ======== ======= ======= ======= =======
Ratio of expenses to average net
assets 1.93%(c) 1.99% 2.03% 2.13% 2.18% 1.91%(d) 1.93%(c) 1.95%(d)
================================== ======== ======== ======== ======== ======= ======= ======= =======
Ratio of net investment income
(loss) to average net assets (0.99)%(c) (0.82)% (0.39)% (0.65)% (0.94)% (0.72)%(d) (0.99)%(c) (0.77)%(d)
================================== ======== ======== ======== ======== ======= ======= ======= =======
Portfolio turnover rate 40% 110% 97% 87% 201% 192% 40% 110%
================================== ======== ======== ======== ======== ======= ======= ======= =======
Average broker commission rate
paid(e) $ 0.0557 $0.0568 $0.0621 N/A N/A N/A $0.0557 $0.0568
================================== ======== ======== ======== ======== ======= ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $378,312,846 and
$2,375,123 for Class B and Class C, respectively.
(d) Annualized.
(e) 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.
15
<PAGE> 18
Trustees & Officers
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman 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
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Stuart W. Coco Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling Karen Dunn Kelley 1735 Market Street
Partner Vice President Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel
Jonathan C. Schoolar COUNSEL TO THE TRUSTEES
Robert H. Graham Vice President
President and Chief Executive Officer Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Renee A. Friedli 919 Third Avenue
Assistant Secretary New York, NY 10022
Lewis F. Pennock
Attorney P. Michelle Grace DISTRIBUTOR
Assistant Secretary
Ian W. Robinson A I M Distributors, Inc.
Consultant; Formerly Executive Jeffrey H. Kupor 11 Greenway Plaza
Vice President and Assistant Secretary Suite 100
Chief Financial Officer Houston, TX 77046
Bell Atlantic Management Nancy L. Martin
Services, Inc. Assistant Secretary
Louis S. Sklar Ofelia M. Mayo
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
16
<PAGE> 19
How AIM Makes Investing
Easy for You
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $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 many 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--Registered Trademark--. 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> 20
<TABLE>
<CAPTION>
The AIM Family of Funds--Registered Trademark--
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
<S> <C> <C>
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(2)
AIM Constellation Fund AIM Emerging Markets Fund(2)
AIM Mid Cap Growth Fund(2) AIM Europe Growth Fund(2)
[PHOTO OF AIM Select Growth Fund(3) AIM European Development Fund
11 GREENWAY PLAZA AIM Small Cap Equity Fund(2) AIM International Equity Fund
APPEARS HERE] AIM Small Cap Opportunities Fund AIM International Growth Fund(2)
AIM Value Fund AIM Weingarten Fund AIM Japan Growth Fund(2)
AIM Latin American Growth Fund(2)
GROWTH & INCOME FUNDS AIM New Pacific Growth Fund(2)
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM America Value Fund(2) AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Charter Fund GLOBAL GROWTH & INCOME FUNDS
INCOME FUNDS AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
AIM Floating Rate Fund(2)
AIM High Yield Fund GLOBAL INCOME FUNDS
AIM Income Fund
AIM Intermediate Government Fund AIM Global Government Income Fund(2)
AIM Limited Maturity Treasury Fund AIM Global High Income Fund(2)
AIM Global Income Fund
TAX-FREE INCOME FUNDS AIM Strategic Income Fund(2)
AIM High Income Municipal Fund THEME FUNDS
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Consumer Products and Services Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Financial Services Fund(2)
AIM Global Health Care Fund(2)
MONEY MARKET FUNDS AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Dollar Fund(2) AIM Global Telecommunications Fund(2)
AIM Money Market Fund AIM New Dimension Fund(2)
AIM Tax-Exempt Cash Fund
</TABLE>
(1)AIM Aggressive Growth Fund was closed to new investors on June 5, 1997.
(2)Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3)On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. For more complete information about any AIM Fund(s), including sales
charges and expenses, ask your financial consultant or securities dealer for a
free prospectus(es). Please read the prospectus(es) carefully before you invest
or send money.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and managed approximately $101 billion in assets for more than 5.2
million shareholders, including individual investors, corporate clients, and
financial institutions, as of June 30, 1998. The AIM Family of
Funds--Registered Trademark-- is distributed nationwide, and AIM today is the
ninth-largest mutual fund complex in the U.S. in assets under management,
according to Strategic Insight, an independent mutual fund monitor.
INVEST WITH DISCIPLINE(SM)
