<PAGE> 1
ANNUAL REPORT / DECEMBER 31 1998
AIM VALUE FUND
[Cover Photo of Antique Dealer]
INVEST WITH DISCIPLINE
-- Registered Trademark --
[AIM LOGO APPEARS HERE]
<PAGE> 2
- -------------------------------------------------------------------------
THE ANTIQUE DEALER BY HEINRICH EDE (1846)
[PHOTO OF ANTIQUE DEALERS SEARCH FOR RARE, HISTORIC PIECES
ANTIQUE
DEALER THAT MAY APPRECIATE IN VALUE OVER TIME. FINE
APPEARS HERE]
ANTIQUES DEVELOP A PATINA THAT CANNOT BE DUPLICATED,
BUT BUILDS ONLY WITH TIME. LIKE ANTIQUE COLLECTING,
INVESTING ALSO TAKES PATIENCE AND AN EYE
FOR INTRINSIC VALUE.
- -------------------------------------------------------------------------
AIM Value Fund is 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 performance figures are historical and reflect reinvestment
of all distributions and changes in net asset value. Unless otherwise
indicated, the Funds performance is computed at net asset value without a
sales charge.
o During the fiscal year ended 12/31/98 the Fund paid distributions of $2.70
per share for Class A shares and $2.61 per share for Class B and Class C
shares.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class
C share performance reflects the applicable contingent deferred sales
charge (CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of the
seventh year. The CDSC on Class C shares is 1% for the first year after
purchase. The performance of the Funds Class B and Class C shares will
differ from that of Class A shares due to differences in sales charge
structure and class expenses.
o The Funds investment return and principal value will fluctuate so that an
investors shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poors 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. Results shown assume the reinvestment of
dividends.
o The Dow Jones Industrial Average (the Dow) 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, Inc., an independent
mutual fund performance monitor.
o The Russell 2000 Stock Index is an unmanaged index generally considered to
be representative of small-capitalization stocks.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. THERE IS A RISK THAT
YOU COULD LOSE A PORTION OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
AIM VALUE FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
As the fiscal year opened, markets were recovering from the
[PHOTO OF concerns produced by financial crises in Asia during 1997,
Charles T. and this optimism early in 1998 led several market indexes
Bauer to all-time highs in spring and early summer. However, the
Chairman of year was to bring two particularly serious financial shocks,
the Board of first the debt default by Russia, and later the gathering
THE FUND crisis in Brazil, which devalued its currency shortly after
APPEARS HERE] the fiscal year closed. The result was another year of
significant market volatility here and abroad.
Optimism yielded to pessimism over the summer amid
global financial crises and a widespread decline in U.S.
corporate earnings growth. Particularly from July through
October, a major market correction for equities, including
previously high-flying blue chips, bolstered U.S. Treasury
issues, whose safety attracts investors in doubtful times.
Beginning in late September, the U.S. Federal Reserve Board
intervened to pump liquidity and confidence into markets. Investors responded
favorably, and the year closed on a positive note with domestic equities
rallying and bonds displaying much less momentum.
Some stock indexes produced excellent total return for the year, with the
S&P 500 index of large-company stocks up a dramatic 28.60%. But focusing on one
market benchmark may give you an incomplete view. There was wide divergence
among market segments this fiscal year. For example, the Russell 2000 index of
small-company stocks declined 2.55%. Even within the S&P 500, the bigger the
company, the better the performance.
HOW SHOULD INVESTORS RESPOND?
We understood how unnerving 1988's level of volatility could have been. Of
course, our repeated message to you is to keep a long-term outlook on
investments rather than responding to short-term fluctuations. And we are
pleased to note that most mutual fund shareholders remained cool headed and did
not pull out of the markets during 1998. In the end, most were rewarded for
their long-term perspective.
In view of recent volatility and the divergent performance of market
sectors, this may be a very good time to meet with your financial consultant to
review your current asset allocation and the diversification of your portfolio.
Broad portfolio diversification remains one of the most fundamental principles
of investing, along with long-term thinking and realistic expectations.
YOUR FUND MANAGERS COMMENTS
On the pages that follow, your Fund's managers, experienced professionals who
have weathered previous periods of market turbulence, offer more detailed
discussion of how markets behaved, how they managed the portfolio in light of
recent volatility, and what they foresee for markets and your Fund. We hope you
find their discussion informative.
YEAR 2000 CONCERN
Many of our shareholders have asked us about AIM's year 2000 readiness status.
We appreciate these concerns, and we take the year 2000 issue seriously. AIM has
devoted considerable effort to creating a comprehensive plan for assessing,
correcting and testing our in-house systems. We will also participate in an
industry wide testing effort scheduled to begin in March. But no matter how well
we prepare and test, no one can know for sure what the year 2000 will bring. Our
industry's systems are connected in complex ways to many third parties, and
there may be unforeseen problems when the year 2000 actually arrives. Though we
cannot predict what all those problems might be, we are working with our
business recovery team to develop contingency plans appropriate for a variety of
year 2000 scenarios.
We are pleased to send you this report on your Funds fiscal year. If you
have any questions or comments, please contact our Client Services department at
800-959-4246, or e-mail your inquiry to us at [email protected]. You can
access information about your account through our AIM Investor Line at
800-246-5463 or at our Web site,www.aimfunds.com. We often post market updates
on our Web site. We thank you for your continued participation in The AIM
Family of Funds --Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
------------------------------------
. . . WE ARE PLEASED
TO NOTE THAT MOST
MUTUAL FUND
SHAREHOLDERS REMAINED
COOL HEADED AND DID NOT
PULL OUT OUT OF THE
MARKETS DURING 1998.
------------------------------------
AIM VALUE FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS OVERVIEW
FUND OUTPACES S&P 500 IN
HIGHLY VOLATILE YEAR
THIS YEAR WAS PARTICULARLY UNSETTLING FOR THE STOCK MARKET. HOW DID THE AIM
VALUE FUND PERFORM?
The AIM Value Fund reported outstanding results during intense market
volatility. The Funds Class A shares produced a total annual return of 32.76%,
outpacing the S&P 500, which finished 1998 up 28.60%. Class B shares reported a
total annual return for the fiscal year of 31.70%, while Class C shares had a
total annual return of 31.72%. The Funds net assets rose substantially from
$13.6 billion a year ago to $18.7 billion as of December 31, 1998.
WHAT WERE MARKET CONDITIONS LIKE DURING THE FISCAL YEAR?
We would describe 1998 as a market with three definite phases. During the first
stage, from January to mid-July, the market climbed, spurred by strong economies
in the United States and Europe. But by summer these good sentiments began to
disintegrate. In July the market entered its second phase, abruptly declining.
By August, some market indexes such as the Dow had plunged. A convergence of
international problems triggered the downturn: Currency devaluations occurred in
Thailand, Malaysia, Indonesia and Korea. A lingering recession gripped Japan.
Crippled by overwhelming debt, Russia suspended repayment of much of its foreign
debt and suffered deep currency devaluations. Fears of a global credit crunch
then spread to Latin America. Markets there plunged as investors worried that
Brazil could not sustain its exchange rate in light of the country's increasing
debt. The down market spurred a flight to quality, as investors turned away from
riskier securities such as small-cap stocks and sought the relative safety and
liquidity of large-cap stocks and U.S. Treasuries.
The third phase came in October as markets stabilized and then climbed,
spurred by a series of interest rate cuts. Over the course of seven weeks, the
U.S. Federal Reserve Board lowered the key federal funds rate three times from
5.50% to 4.75%. The cuts triggered an astounding market rally. By the end of the
fiscal year, major stock indexes reported impressive total returns.
WHY DID THE FUND HAVE SUCH AN OUTSTANDING PERFORMANCE?
Through our disciplined stock selection process, we chose a number of large-cap
stocks that performed very well. In particular, our top three holdings MCI
WorldCom, Guidant and Nokiamade strong gains in the last quarter of the fiscal
year. MCI WorldCom, formed in September by the merger of MCI and WorldCom, is a
global telecommunications powerhouse. One of the top-performing large stocks in
1998, MCI WorldCom's price more than doubled over the year. U.S.-based Guidant,
the leading maker of cardiovascular therapeutic devices, including pacemakers,
also doubled in price over the year. Finland's Nokia, one of the worlds leading
manufacturers of mobile phones, almost quadrupled in stock price in the course
of the fiscal year. We chose each of these stocks for fundamental reasons: All
three companies are leaders in their respective fields, and each has strong
prospects for continued earnings growth.
===============================================================================
GROWTH OF NET ASSETS
- -------------------------------------------------------------------------------
In billions
[Bar graph]
$13.6 $18.7
12/97 12/98
===============================================================================
------------------------------------
THROUGH OUR DISCIPLINED STOCK
SELECTION PROCESS, WE CHOSE A
NUMBER OF LARGE-CAP STOCKS THAT
PERFORMED VERY WELL.
------------------------------------
AIM VALUE FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS OVERVIEW
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
<TABLE>
<CAPTION>
=======================================================================================================
Top 10 Holdings Top 10 Industries
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. MCI WorldCom, Inc. 5.74% 1. Computers (Software & Services) 6.84%
2. Guidant Corp. 4.06 2. Financial (Diversified) 6.73
3. Nokia Oyj A.B. Class A-ADR 3.54 3. Telecommunications (Long Distance) 5.74
4. American International Group, Inc. 3.36 4. Retail (General Merchandise) 5.15
5. Pharmacia & Upjohn, Inc. 3.14 5. Health Care (Medical Products & Supplies) 4.94
6. Time Warner, Inc. 3.08 6. Communications Equipment 4.90
7. Cox Communications, Inc. Class A 2.25 7. Broadcasting (Television, Radio & Cable) 4.66
8. Microsoft Corp. 2.11 8. Insurance (Multi-Line) 4.32
9. Colgate-Palmolive Co. 2.08 9. Health Care (Drugs-Major Pharmaceuticals) 4.01
10. Wal-Mart Stores, Inc. 2.05 0. Computers (Hardware) 3.11
Please keep in mind that the Funds portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
=======================================================================================================
</TABLE>
We purchased them when they were undervalued. Near the end of the fiscal year,
the market took notice of these exceptional companies.
WHAT CHANGES DID YOU MAKE IN THE FUNDS PORTFOLIO OVER THE YEAR?
Technology and financial sectors have long been the most important areas for the
AIM Value Fund. That remained the case at the end of fiscal 1998, but our
weightings in each sector changed during the year. We reduced our bank holdings
because of weakness in this sector in the third quarter. Stocks of many U.S.
banks and brokerages fell out of favor because of global concerns about credit
and the near collapse of a major hedge fund.
At the same time, we increased our weightings in technology stocks,
particularly in computer software and services. Our top technology stock,
Microsoft, turned in outstanding earnings in 1998 as it introduced its new
operating system, Windows 98. Its stock is one of the best performing members of
the S&P 500; in fact, Microsoft has surpassed General Electric as the worlds
leading company in terms of market capitalization the value of all of its
outstanding stock.
Technology stocks powered the market rally at the end of the fiscal year.
Investor excitement about technology focused primarily on the Internet and its
potential for explosive growth over the next five to 10 years. The Fund doesn't
own any .com stocks because their earnings track record does not meet our
investment criteria. Instead we invest in telecommunications companies like MCI
WorldCom and communications equipment makers like Nokia that are building the
infrastructure for the Internet.
We increased our weightings in stocks of consumer cyclicals-economically
sensitive companies whose earnings are tied to consumer spending. In fiscal
1998, these companies benefited from strong consumer spending supported by low
inflation and low interest rates. Top holdings in this area included cable
companies Time Warner and Cox Communications, and discount retailer Wal-Mart.
WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND EQUITY MARKETS?
We expect continued volatility in the stock markets, perhaps as much as we
experienced in 1998. At the same time, were optimistic that the United States
will avoid a recession in 1999. The economy is likely to experience annual gross
domestic product growth in the 1.5% to 2% range, so low inflation and low
interest rates should continue. However, with global markets experiencing
weakness and the U.S. economy expanding more slowly, many companies will find it
difficult to produce earnings growth. With our investment approach, which
focuses on companies with strong earnings prospects that are undervalued
relative to the market as a whole, we remain confident that the Fund is
positioned well as we enter the coming year.
See important Fund and index disclosures inside front cover.
AIM VALUE FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT AIM
VALUE FUND VS. BENCHMARK INDEXES
5/1/84-12/31/98
- --------------------------------------------------------------------------------
AIM VALUE
FUND A,
CLASS A
SHARES LIPPER S&P 500
- --------------------------------------------------------------------------------
12/84 10,385 10,498 10,823
12/85 12,744 13,662 14,248
12/86 13,865 15,792 16,901
12/87 14,692 16,306 17,776
12/88 17,719 18,611 20,709
12/89 23,307 23,723 27,251
12/90 23,746 22,439 26,402
12/91 34,064 30,591 34,411
12/92 39,648 32,926 37,029
12/93 47,065 36,870 40,744
12/94 48,606 36,290 41,298
12/95 65,545 48,140 56,761
12/96 75,061 56,580 69,760
12/97 93,038 72,441 93,000
12/98 123,521 91,051 119,525
================================================================================
PAST PERFORMANCE IS NO GUARANTEE OF COMPARABLE FUTURE RESULTS.
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/98, including sales charges
CLASS A SHARES
Inception (5/1/84) 18.69%
10 years 20.75
5 years 19.92
1 year 25.45
**32.76% excluding sales charges
CLASS B SHARES
Inception (10/18/93) 19.18%
5 years 20.11
1 year 26.70**
**31.70% excluding sales charges
CLASS C SHARES
Inception (8/4/97) 21.54%
1 year 30.72***
***31.72% excluding sales charges
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--
Your Funds total return includes sales charges, expenses, and management
fees. The performance of Class B And 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.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
ABOUT THIS CHART
The chart compares your Funds Class A shares to benchmark indexes. It is
intended to give you a general idea of how your Fund performed compared to the
stock market over the period 5/1/8412/31/98. (Please note that the S&P 500 and
the Lipper Growth Funds Index performance figures are for the period
4/30/8412/31/98.) It is important to understand differences between your Fund
and these indexes. An index measures performance of a hypothetical portfolio. A
market index such as the S&P 500 is not managed, incurring no sales charges,
expenses or fees. If you could buy all the securities that make up a market
index, you would incur expenses that would affect the return on your investment.
An index of funds such as the Lipper Growth Funds Index includes a number of
mutual funds grouped by investment objective. Each of those funds interprets
that objective differently, and each employs a different management style and
investment strategy.
================================================================================
AIM VALUE FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-86.11%
AIRLINES-0.39%
Continental Airlines, Inc.(a) 2,172,100 $ 72,765,350
- ---------------------------------------------------------------
AUTOMOBILES-0.21%
Ford Motor Co. 675,000 39,614,062
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.54%
Chase Manhattan Corp. (The) 4,250,000 289,265,625
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-4.66%
Comcast Corp.-Class A 1,600,000 93,900,000
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 6,083,700 420,535,763
- ---------------------------------------------------------------
MediaOne Group Inc.(a) 7,600,000 357,200,000
- ---------------------------------------------------------------
871,635,763
- ---------------------------------------------------------------
BUILDING MATERIALS-0.49%
Masco Corp. 3,200,000 92,000,000
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.09%
Comverse Technology, Inc.(a) 1,939,500 137,704,500
- ---------------------------------------------------------------
Lucent Technologies, Inc. 600,000 66,000,000
- ---------------------------------------------------------------
203,704,500
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-3.11%
Dell Computer Corp.(a) 3,750,000 274,453,125
- ---------------------------------------------------------------
International Business Machines
Corp. 600,000 110,850,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 2,300,000 196,937,500
- ---------------------------------------------------------------
582,240,625
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.64%
Cisco Systems, Inc.(a) 3,300,000 306,281,250
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.95%
EMC Corp.(a) 1,500,000 127,500,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.(a) 500,000 50,250,000
- ---------------------------------------------------------------
177,750,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-6.84%
BMC Software, Inc.(a) 5,500,000 245,093,750
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 2,900,000 186,868,750
- ---------------------------------------------------------------
Microsoft Corp.(a) 2,850,000 395,259,375
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 2,400,000 108,000,000
- ---------------------------------------------------------------
Unisys Corp.(a) 10,000,000 344,375,000
- ---------------------------------------------------------------
1,279,596,875
- ---------------------------------------------------------------
CONSUMER FINANCE-1.02%
MBNA Corp. 1,800,000 44,887,500
- ---------------------------------------------------------------
Providian Financial Corp. 1,950,000 146,250,000
- ---------------------------------------------------------------
191,137,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)-0.07%
Cardinal Health, Inc. 167,100 $ 12,678,712
- ---------------------------------------------------------------
ELECTRIC COMPANIES-0.13%
Wisconsin Energy Corp. 791,100 24,870,206
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.75%
General Electric Co. 3,200,000 326,600,000
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.12%
Waters Corp.(a) 250,000 21,812,500
- ---------------------------------------------------------------
ENTERTAINMENT-3.08%
Time Warner Inc. 9,300,000 577,181,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.73%
Ambac Financial Group, Inc. 1,100,000 66,206,250
- ---------------------------------------------------------------
American Express Co. 1,500,000 153,375,000
- ---------------------------------------------------------------
American General Corp. 1,300,000 101,400,000
- ---------------------------------------------------------------
Associates First Capital
Corp.-Class A 5,600,000 237,300,000
- ---------------------------------------------------------------
Citigroup Inc. 1,400,000 69,300,000
- ---------------------------------------------------------------
Fannie Mae 3,700,000 273,800,000
- ---------------------------------------------------------------
Freddie Mac 4,954,200 319,236,263
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 550,000 39,050,000
- ---------------------------------------------------------------
1,259,667,513
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.78%
Bristol-Myers Squibb Co. 2,150,000 287,696,875
- ---------------------------------------------------------------
Warner-Lambert Co. 600,000 45,112,500
- ---------------------------------------------------------------
332,809,375
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.34%
Watson Pharmaceuticals, Inc.(a) 1,000,000 62,875,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-4.01%
Merck & Co., Inc. 1,100,000 162,456,250
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 10,373,400 587,393,775
- ---------------------------------------------------------------
749,850,025
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-4.94%
Allegiance Corp. 1,200,000 55,950,000
- ---------------------------------------------------------------
Guidant Corp. 6,900,000 760,725,000
- ---------------------------------------------------------------
Medtronic, Inc. 1,450,000 107,662,500
- ---------------------------------------------------------------
924,337,500
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.53%
Alza Corp.(a) 1,900,000 99,275,000
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-2.08%
Colgate-Palmolive Co. 4,200,000 390,075,000
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE/HEALTH)-0.33%
Provident Companies, Inc. 1,500,000 $ 62,250,000
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-4.32%
Ace, Ltd. 2,578,600 88,800,538
- ---------------------------------------------------------------
American International Group,
Inc. 6,500,000 628,062,500
- ---------------------------------------------------------------
Hartford Financial Services
Group Inc. (The) 1,663,800 91,301,025
- ---------------------------------------------------------------
808,164,063
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.09%
Allstate Corp. (The) 2,750,000 106,218,750
- ---------------------------------------------------------------
EXEL Ltd.-Class A 2,225,000 166,875,000
- ---------------------------------------------------------------
Progressive Corp. 700,000 118,562,500
- ---------------------------------------------------------------
391,656,250
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.21%
Merrill Lynch & Co., Inc.(b) 599,500 40,016,625
- ---------------------------------------------------------------
LODGING-HOTELS-2.28%
Carnival Corp. 6,650,000 319,200,000
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 2,900,000 107,300,000
- ---------------------------------------------------------------
426,500,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.61%
Tyco International Ltd. 4,000,000 301,750,000
- ---------------------------------------------------------------
NATURAL GAS-1.01%
El Paso Energy Corp. 1,300,000 45,256,250
- ---------------------------------------------------------------
Enron Corp. 1,700,000 97,006,250
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 1,500,000 46,781,250
- ---------------------------------------------------------------
189,043,750
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.24%
Amoco Corp. 750,000 45,281,250
- ---------------------------------------------------------------
PERSONAL CARE-1.08%
Avon Products, Inc. 4,550,000 201,337,500
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.70%
Xerox Corp. 2,700,000 318,600,000
- ---------------------------------------------------------------
PUBLISHING-0.31%
Dow Jones & Co., Inc. 1,200,000 57,750,000
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.26%
New York Times Co.-Class A
(The) 1,400,000 48,562,500
- ---------------------------------------------------------------
RAILROADS-0.26%
Kansas City Southern
Industries, Inc. 1,000,000 49,187,500
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.82%
Lowe's Companies, Inc. 3,000,000 153,562,500
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.21%
Federated Department Stores,
Inc.(a) 900,000 39,206,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS)-2.11%
Albertson's, Inc. 500,000 $ 31,843,750
- ---------------------------------------------------------------
Kroger Co.(a) 3,079,600 186,315,800
- ---------------------------------------------------------------
Safeway, Inc.(a) 2,905,700 177,066,094
- ---------------------------------------------------------------
395,225,644
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-5.15%
Costco Companies, Inc.(a) 3,100,000 223,781,250
- ---------------------------------------------------------------
Dayton Hudson Corp. 6,600,000 358,050,000
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 4,700,000 382,756,250
- ---------------------------------------------------------------
964,587,500
- ---------------------------------------------------------------
SERVICES (ADVERTISING & MARKETING)-1.60%
Omnicom Group, Inc. 5,156,000 299,048,000
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.36%
Stewart Enterprises, Inc.-Class
A 3,000,000 66,750,000
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.64%
SunGard Data Systems Inc.(a) 3,023,600 119,999,125
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.37%
Ceridian Corp.(a) 400,000 27,925,000
- ---------------------------------------------------------------
Equifax, Inc. 1,200,000 41,025,000
- ---------------------------------------------------------------
68,950,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-1.60%
AirTouch Communications,
Inc.(a) 4,150,000 299,318,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-5.74%
MCI WorldCom, Inc.(a) 14,972,543 1,074,279,961
- ---------------------------------------------------------------
TELEPHONE-1.35%
BellSouth Corp. 2,900,000 144,637,500
- ---------------------------------------------------------------
SBC Communications, Inc. 2,000,000 107,250,000
- ---------------------------------------------------------------
251,887,500
- ---------------------------------------------------------------
TOBACCO-1.07%
Philip Morris Companies, Inc. 3,750,000 200,625,000
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.89%
Waste Management, Inc. 7,599,998 354,349,907
- ---------------------------------------------------------------
Total Domestic Common
Stocks (Cost
$10,797,450,533) 16,115,913,206
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-4.68%
CANADA-0.40%
Royal Bank of Canada
(Banks-Major Regional) 1,500,000 75,049,020
- ---------------------------------------------------------------
FINLAND-3.55%
Nokia Oyj A.B.-Class A
(Communications Equipment) 23,000 2,797,998
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINLAND-(CONTINUED)
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 5,500,000 $ 662,406,250
- ---------------------------------------------------------------
665,204,248
- ---------------------------------------------------------------
SWEDEN-0.26%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 2,000,000 47,875,000
- ---------------------------------------------------------------
UNITED KINGDOM-0.47%
British Petroleum Co. PLC-ADR
(Oil-International
Integrated) 500,000 44,812,500
- ---------------------------------------------------------------
WPP Group PLC
(Services-Advertising/
Marketing) 7,000,000 42,548,787
- ---------------------------------------------------------------
87,361,287
- ---------------------------------------------------------------
Total Foreign Stocks &
Other Equity Interests
(Cost $545,076,752) 875,489,555
- ---------------------------------------------------------------
MASTER NOTE AGREEMENT-0.21%
Merrill Lynch Mortgage Capital,
Inc., 5.78%, 08/16/99(c)
(Cost $40,000,000) $ 40,000,000 $ 40,000,000
- ---------------------------------------------------------------
TIME DEPOSIT-2.05%
SunTrust Bank of Atlanta,
4.00%, 01/04/99 (Cost
$382,984,564) 382,984,564 382,984,564
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS(d)-7.18%
Bear Stearns & Co., Inc.,
4.85%(e) $292,000,000 $ 292,000,000
- ---------------------------------------------------------------
Credit Suisse First Boston
Corp., 5.00%, 01/04/99(f) 105,000,000 105,000,000
- ---------------------------------------------------------------
Dean Witter Reynolds, Inc.,
5.00%, 01/04/99(g) 255,000,000 255,000,000
- ---------------------------------------------------------------
Deutsche Morgan Grenfel Inc.,
5.00%(h) 200,000,000 200,000,000
- ---------------------------------------------------------------
First Chicago Capital Markets,
Inc., 5.04%, 01/04/99(i) 5,949,388 5,949,388
- ---------------------------------------------------------------
Goldman, Sachs & Co., 5.00%,
01/04/99(j) 400,000,000 400,000,000
- ---------------------------------------------------------------
Greenwich Capital Markets,
Inc., 4.10%, 01/04/99(k) 40,000,000 40,000,000
- ---------------------------------------------------------------
SBC Warburg Dillon Read Inc.,
4.75%, 01/04/99(l) 45,964,800 45,964,800
- ---------------------------------------------------------------
Total Repurchase Agreements
(Cost $1,343,914,188) 1,343,914,188
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.23% 18,758,301,513
- ---------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(0.23)% (43,045,043)
- ---------------------------------------------------------------
NET ASSETS-100.00% $18,715,256,470
================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 8.
(c) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon two days' notice to the issuer. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in effect
on 12/31/98.
(d) 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 is at least 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.
(e) Open repurchase agreement entered into 10/05/98. Either party may terminate
the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $354,763,000 U.S. Government
obligations, 0% to 8.65% due 01/15/99 to 06/11/18 with an aggregate market
value at 12/31/98 of $360,262,932.
(f) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$150,083,333. Collateralized by $140,222,000 U.S. Government obligations,
5.50% to 8.125% due 02/02/01 to 08/15/28 with an aggregate market value at
12/31/98 of $155,433,051.
(g) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$300,166,667. Collateralized by a $304,116,000 U.S. Government obligation,
0% due 11/04/03 with a market value at 12/31/98 of $306,000,953.
(h) Open repurchase agreement entered into 10/02/97. Either party may terminate
the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $373,807,171 U.S. Government
obligations, 6.132% to 7.077% due 09/01/33 to 07/01/34 with an aggregate
market value at 12/31/98 of $204,000,000.
(i) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$485,271,600. Collateralized by $500,177,000 U.S. Government obligations, 0%
to 5.86% due 02/09/99 to 04/28/03 with an aggregate market value at 12/31/98
of $494,702,672.
(j) Repurchase agreement entered into 12/31/98 with a maturing value of
$400,222,222. Collateralized by $902,636,386 U.S. Government obligations,
5.886% to 7.889% due 07/01/19 to 02/01/38 with an aggregate market value at
12/31/98 of $408,000,000.
(k) Repurchase agreement entered into 12/31/98 with a maturing value of
$40,018,222. Collateralized by $41,294,406 U.S. Government obligations,
5.50% to 9.50% due 12/01/08 to 12/01/28 with an aggregate market value at
12/31/98 of $40,803,888.
(l) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviation:
ADR - American Depositary Receipt
CAD - Canadian Dollar
FIM - Finnish Marka
GBP - British Pound Sterling
SEK - Swedish Krona
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$13,109,426,037) $18,758,301,513
- ----------------------------------------------------------
Foreign currencies, at value (cost
$6,184) 6,108
- ----------------------------------------------------------
Receivables for:
Investments sold 17,364,690
- ----------------------------------------------------------
Fund shares sold 34,930,383
- ----------------------------------------------------------
Dividends and interest 7,931,517
- ----------------------------------------------------------
Forward contracts 5,466,427
- ----------------------------------------------------------
Investment for deferred compensation plan 134,758
- ----------------------------------------------------------
Other assets 343,720
- ----------------------------------------------------------
Total assets 18,824,479,116
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 34,538,469
- ----------------------------------------------------------
Fund shares reacquired 45,628,894
- ----------------------------------------------------------
Deferred compensation plan 134,758
- ----------------------------------------------------------
Forward contracts 923,264
- ----------------------------------------------------------
Options written (Premiums received
$1,254,474) 1,141,844
- ----------------------------------------------------------
Accrued advisory fees 9,079,319
- ----------------------------------------------------------
Accrued distribution fees 15,591,465
- ----------------------------------------------------------
Accrued transfer agent fees 929,692
- ----------------------------------------------------------
Accrued trustees' fees 22,091
- ----------------------------------------------------------
Accrued operating expenses 1,232,850
- ----------------------------------------------------------
Total liabilities 109,222,646
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $18,715,256,470
- ----------------------------------------------------------
NET ASSETS:
Class A $ 8,823,093,519
==========================================================
Class B $ 9,680,068,386
==========================================================
Class C $ 212,094,565
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 219,528,926
==========================================================
Class B 246,662,868
==========================================================
Class C 5,402,874
==========================================================
Class A:
Net asset value and redemption price
per share $ 40.19
- ----------------------------------------------------------
Offering price per share:
(Net asset value of $40.19 divided
by 94.50%) $ 42.53
==========================================================
Class B:
Net asset value and offering price per
share $ 39.24
==========================================================
Class C:
Net asset value and offering price per
share $ 39.26
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $3,464,586 foreign
withholding tax) $ 126,900,270
- ----------------------------------------------------------
Interest 71,253,935
- ----------------------------------------------------------
Total investment income 198,154,205
- ----------------------------------------------------------
EXPENSES:
Advisory fees 98,360,939
- ----------------------------------------------------------
Administrative services fees 323,939
- ----------------------------------------------------------
Custodian fees 918,751
- ----------------------------------------------------------
Distribution fees -- Class A 19,005,948
- ----------------------------------------------------------
Distribution fees -- Class B 79,819,281
- ----------------------------------------------------------
Distribution fees -- Class C 1,114,428
- ----------------------------------------------------------
Trustees' fees 130,394
- ----------------------------------------------------------
Transfer agent fees -- Class A 9,249,742
- ----------------------------------------------------------
Transfer agent fees -- Class B 13,852,532
- ----------------------------------------------------------
Transfer agent fees -- Class C 248,230
- ----------------------------------------------------------
Other 2,845,132
- ----------------------------------------------------------
Total expenses 225,869,316
- ----------------------------------------------------------
Less: Expenses paid indirectly (246,587)
- ----------------------------------------------------------
Fees waived by advisor (3,423,939)
- ----------------------------------------------------------
Net expenses 222,198,790
- ----------------------------------------------------------
Net investment income (loss) (24,044,585)
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES, FORWARD AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,239,384,004
- ----------------------------------------------------------
Foreign currencies 447,068
- ----------------------------------------------------------
Forward contracts (36,087,505)
- ----------------------------------------------------------
Futures contracts 1,526,410
- ----------------------------------------------------------
Option contracts written (7,886,317)
- ----------------------------------------------------------
1,197,383,660
- ----------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 3,329,000,942
- ----------------------------------------------------------
Foreign currencies 206,713
- ----------------------------------------------------------
Forward contracts 4,543,163
- ----------------------------------------------------------
Option contracts written (4,845,758)
- ----------------------------------------------------------
3,328,905,060
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures, forward
and option contracts 4,526,288,720
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $4,502,244,135
==========================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (24,044,585) $ 20,314,716
- --------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures, forward and option contracts 1,197,383,660 1,450,271,721
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, forward contracts and option
contracts 3,328,905,060 961,987,307
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,502,244,135 2,432,573,744
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (18,008,475) (7,048,371)
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (539,610,813) (677,329,447)
- --------------------------------------------------------------------------------------------------
Class B (602,045,865) (697,438,107)
- --------------------------------------------------------------------------------------------------
Class C (12,727,398) (2,766,027)
- --------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 439,374,153 1,076,707,236
- --------------------------------------------------------------------------------------------------
Class B 1,179,878,726 1,473,648,468
- --------------------------------------------------------------------------------------------------
Class C 156,203,496 35,606,705
- --------------------------------------------------------------------------------------------------
Net increase in net assets 5,105,307,959 3,633,954,201
- --------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 13,609,948,511 9,975,994,310
- --------------------------------------------------------------------------------------------------
End of period $18,715,256,470 $13,609,948,511
==================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $12,965,142,636 $11,116,186,261
- --------------------------------------------------------------------------------------------------
Undistributed net investment income (391,429) 17,752,405
- --------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign
currencies, futures, forward and option contracts 96,971,065 151,380,707
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, forward contracts and option contracts 5,653,534,198 2,324,629,138
- --------------------------------------------------------------------------------------------------
$18,715,256,470 $13,609,948,511
- --------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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: Class A shares, Class B
shares and Class C shares. 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
9
<PAGE> 12
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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. Outstanding forward currency contracts at
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
2/10/99 CAD 88,000,000 57,212,826 57,517,060 (304,234)
2/26/99 CAD 1,000,000 645,307 653,677 (8,370)
1/19/99 FIM 519,000,000 104,150,617 101,937,707 2,212,910
1/20/99 FIM 369,000,000 72,053,961 72,479,805 (425,844)
1/20/99 FIM 451,000,000 88,915,869 88,586,428 329,441
1/21/99 FIM 540,000,000 107,593,581 106,073,660 1,519,921
1/22/99 FIM 574,000,000 113,663,523 112,758,382 905,141
1/19/99 GBP 5,000,000 8,476,100 8,295,020 181,080
1/20/99 GBP 17,000,000 28,407,000 28,200,478 206,522
2/16/99 GBP 12,500,000 20,670,000 20,689,032 (19,032)
2/18/99 GBP 5,500,000 9,193,085 9,101,747 91,338
1/19/99 SEK 10,000,000 1,252,678 1,232,604 20,074
2/16/99 SEK 276,000,000 33,895,829 34,061,613 (165,784)
----------- ----------- ---------
646,130,376 641,587,213 4,543,163
</TABLE>
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. Such dividends are paid
annually. On December 31, 1998 additional paid-in capital was increased by
$73,500,000, undistributed net investment income was increased by
$23,909,226 and undistributed net realized gains was decreased by
$97,409,226 as a result of differing book/tax treatment of foreign currency
transactions and equalization credits in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
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 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
10
<PAGE> 13
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 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. 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.
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. 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, 1998, AIM
voluntarily waived advisory fees in the amount of $3,423,939.
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,
1998, AIM was reimbursed $323,939 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, 1998, AFS was paid
$14,002,958 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
11
<PAGE> 14
respective classes. During the year ended December 31, 1998, the Class A, Class
B and Class C shares paid AIM Distributors $19,005,948, $79,819,281 and
$1,114,428, respectively, as compensation under the Plans.
AIM Distributors received commissions of $4,259,204 from sales of the Class
A shares of the Fund during the year ended December 31, 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 year ended December 31,
1998, AIM Distributors received $1,498,642 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, 1998, the Fund paid legal fees of
$32,680 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 year ended December 31, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $174,089 and $72,498, respectively under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $246,587 during the year ended December 31, 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 year ended December 31, 1998, 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.
12
<PAGE> 15
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, 1998 was
$17,711,356,448 and $16,096,656,971, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $5,657,577,843
- ----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (71,716,453)
- ----------------------------------------------------------------------------
Net unrealized appreciation of investment securities $5,585,861,390
============================================================================
</TABLE>
Cost of investments for tax purposes is $13,172,440,123.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 61,939,114 $ 2,232,305,973 56,549,515 $ 1,862,338,902
- ---------------------------------------------------------------------------------------------------------------------------
Class B 44,964,399 1,587,327,551 44,494,521 1,452,059,926
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 4,634,085 164,861,278 982,300 34,164,971
- ---------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 13,921,013 529,914,065 20,397,239 655,150,256
- ---------------------------------------------------------------------------------------------------------------------------
Class B 15,274,620 567,695,520 20,756,501 656,098,487
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 327,964 12,197,171 82,603 2,611,962
- ---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (64,405,244) (2,322,845,885) (43,852,562) (1,440,781,922)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (27,805,340) (975,144,345) (19,618,229) (634,509,945)
- ---------------------------------------------------------------------------------------------------------------------------
Class C* (590,550) (20,854,953) (33,528) (1,170,228)
- ---------------------------------------------------------------------------------------------------------------------------
48,260,061 $ 1,775,456,375 79,758,360 $ 2,585,962,409
===========================================================================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-CALL OPTION CONTRACTS WRITTEN
Transactions in call option contracts written during the year ended December 31,
1998 are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 43,901 $ 19,083,250
- ---------------------------------------------------------------------------------------
Written 152,389 86,212,411
- ---------------------------------------------------------------------------------------
Closed (57,500) (30,689,449)
- ---------------------------------------------------------------------------------------
Exercised (78,819) (54,836,551)
- ---------------------------------------------------------------------------------------
Expired (56,976) (18,515,187)
- ---------------------------------------------------------------------------------------
End of period 2,995 $ 1,254,474
=======================================================================================
</TABLE>
Open call option contracts written at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
NUMBER DECEMBER 31,
CONTRACT STRIKE OF PREMIUM 1998 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
----- -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Merrill Lynch & Co., Inc. Jan. 99 65 2,995 $1,254,474 $ 1,141,844 $ 112,630
=================================================================================================================================
</TABLE>
13
<PAGE> 16
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998; and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 32.42 $ 29.15 $ 26.81 $ 21.14 $ 20.82
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.09 0.17 0.43(a) 0.14 0.16
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and unrealized) 10.38 6.78 3.42 7.21 0.52
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 10.47 6.95 3.85 7.35 0.68
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.09) (0.04) (0.41) (0.09) (0.16)
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains (2.61) (3.64) (1.10) (1.59) (0.20)
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total distributions (2.70) (3.68) (1.51) (1.68) (0.36)
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 40.19 $ 32.42 $ 29.15 $ 26.81 $ 21.14
======================================================== ========== ========== ========== ========== ==========
Total return(b) 32.76% 23.95% 14.52% 34.85% 3.28%
======================================================== ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $8,823,094 $6,745,253 $5,100,061 $3,408,952 $1,358,725
======================================================== ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(c) 1.00%(d) 1.04% 1.11% 1.12% 0.98%
======================================================== ========== ========== ========== ========== ==========
Ratio of net investment income to average net assets(e) 0.26%(d) 0.57% 1.65% 0.74% 0.92%
======================================================== ========== ========== ========== ========== ==========
Portfolio turnover rate 113% 137% 126% 151% 127%
======================================================== ========== ========== ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.02%, 1.06%, 1.13% and 1.13% for 1998-1995, respectively.
(d) Ratios are based on average net assets of $7,602,379,116.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 0.24%, 0.55%, 1.63% and 0.73% for 1998-1995,
respectively.
14
<PAGE> 17
NOTE 9-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------- ------------------------
1998 1997 1996 1995 1994 1998 1997
---------- ---------- ---------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 31.90 $ 35.60
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Income from investment
operations:
Net investment income (loss) (0.18) (0.07) 0.20(a) (0.01) -- (0.19)(a) (0.01)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Net gains (losses) on securities
(both realized and unrealized) 10.14 6.68 3.38 7.12 0.51 10.16 (0.05)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Total from investment
operations 9.96 6.61 3.58 7.11 0.51 9.97 (0.06)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Less distributions:
Dividends from net investment
income -- -- (0.21) -- -- -- --
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Distributions from net realized
gains (2.61) (3.64) (1.10) (1.59) (0.20) (2.61) (3.64)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Total distributions (2.61) (3.64) (1.31) (1.59) (0.20) (2.61) (3.64)
================================= ========== ========== ========== ========== ======== ======== =======
Net asset value, end of period $ 39.24 $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 39.26 $ 31.90
================================= ========== ========== ========== ========== ======== ======== =======
Total return(b) 31.70% 22.96% 13.57% 33.73% 2.46% 31.72% (0.08)%
================================= ========== ========== ========== ========== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) 19,680,068 $6,831,796 $4,875,933 $2,860,531 $680,119 $212,095 $32,900
================================= ========== ========== ========== ========== ======== ======== =======
Ratio of expenses to average net
assets(c) 1.80%(d) 1.85% 1.94% 1.94% 1.90% 1.80%(d) 1.84%(f)
================================= ========== ========== ========== ========== ======== ======== =======
Ratio of net investment income
(loss) to average net assets(e) (0.54)%(d) (0.24)% 0.82% (0.08)% 0.00% (0.54)%(d) (0.23)%(f)
================================= ========== ========== ========== ========== ======== ======== =======
Portfolio turnover rate 113% 137% 126% 151% 127% 113% 137%
================================= ========== ========== ========== ========== ======== ======== =======
</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) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.82%, 1.87%, 1.96% and 1.96% for 1998-1995 for Class B, respectively, and
1.82% and 1.86% (annualized) for 1998-1997, respectively, for Class C.
(d) Ratios are based on average net assets of $7,981,928,079 and $111,442,755
for Class B and Class C, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were (0.56)%, (0.26)%, 0.81% and (0.09)% for 1998-1995,
respectively, for Class B, and (0.56)% and (0.25)% (annualized) for
1998-1997, respectively, for Class C.
(f) Annualized.
15
<PAGE> 18
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, 1998, and the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years in the 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 5, 1999
16
<PAGE> 19
<TABLE>
<CAPTION>
BOARD OF DIRECTORS 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
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.: P. Michelle Grace DISTRIBUTOR
Commissioner, New York City Dept. for Assistant Secretary
the Aging; and member of the Board of Director A I M Distributors, Inc.
Metropolitan Transportation Authority of Jeffrey H. Kupor 11 Greenway Plaza
New York State Assistant Secretary Suite 100
Houston, TX 77046
Lewis F. Pennock Nancy L. Martin
Attorney Assistant Secretary AUDITORS
Ian W. Robinson Ofelia M. Mayo KPMG LLP
Consultant; Formerly Executive Assistant Secretary 700 Louisiana
Vice President and Houston, TX 77002
Chief Financial Officer Lisa A. Moss
Bell Atlantic Management Assistant Secretary
Services, Inc.
Kathleen J. Pflueger
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests Samuel D. Sirko
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Value Fund Class A, Class B, and Class C shares paid ordinary dividends in
the amount of $0.26, $0.1725, and $0.1725 per share, respectively, to
shareholders during its tax year ended December 31, 1998. Of these amounts
13.76% is eligible for the dividends received deduction for corporations. The
Fund also distributed long-term capital gains of $2.441 per share during the
Fund's tax year ended December 31, 1998.
The Fund also distributed long-term capital gains of $1,151,708,430 for the
Fund's tax year ended December 31, 1998. Of long-term capital gains distributed,
100% is 20% rate gain.
REQUIRED STATE INCOME TAX INFORMATION
Of total ordinary dividends paid, 0.005% were derived from U.S. Treasury
obligations.
<PAGE> 20
<TABLE>
<S> <C>
THE A I M FAMILY OF FUNDS--Registered Trademark--
GROWTH FUNDS MONEY MARKET FUNDS
AIM Aggressive Growth Fund(1) AIM Money Market Fund
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund
AIM Capital Development Fund
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS
AIM Mid Cap Equity Fund(2)(A) AIM Advisor International Value Fund
AIM Select Growth Fund(3) AIM Asian Growth Fund
AIM Small Cap Growth Fund(2)(B) AIM Developing Markets Fund(3)
AIM Small Cap Opportunities Fund AIM Europe Growth Fund(3)
AIM Value Fund AIM European Development Fund
AIM Weingarten Fund AIM International Equity Fund
AIM Japan Growth Fund(2)
GROWTH & INCOME FUNDS AIM Latin American Growth Fund(2)
AIM Advisor Flex Fund AIM New Pacific Growth Fund(2)
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund GLOBAL GROWTH FUNDS
AIM Advisor Real Estate Fund AIM Global Aggressive Growth Fund
AIM Balanced Fund AIM Global Growth Fund
AIM Basic Value Fund(2)(C)
AIM Charter Fund GLOBAL GROWTH & INCOME FUNDS
AIM Global Growth & Income Fund(2)
INCOME FUNDS AIM Global Utilities Fund
AIM Floating Rate Fund(2)
AIM High Yield Fund GLOBAL INCOME FUNDS
AIM High Yield Fund II AIM Emerging Markets Debt Fund(2)(D)
AIM Income Fund AIM Global Government Income Fund(2)
AIM Intermediate Government Fund AIM Global Income Fund
AIM Limited Maturity Treasury Fund AIM Strategic Income Fund(2)
TAX-FREE INCOME FUNDS THEME FUNDS
AIM High Income Municipal Fund AIM Global Consumer Products and Services Fund(2)
AIM Municipal Bond Fund AIM Global Financial Services Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Health Care Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2)(E)
</TABLE>
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and managed approximately $109 billion in assets for more than 6.2
million shareholders, including individual investors, corporate clients, and
financial institutions, as of December 31, 1998.
The AIM Family of Funds--Registered Trademark-- is distributed nationwide,
and AIM today is the 10th-largest mutual fund complex in the U.S. in assets
under management, according to Strategic Insight, an independent mutual fund
monitor.
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. On September 8, 1998, AIM New
Dimension Fund was renamed AIM Global Trends Fund. For more complete information
about any AIM Fund(s), including sales charges and expenses, ask your financial
consultant or securities dealer for a free prospectus(es). Please read the
prospectus(es) carefully before you invest or send money.
