<PAGE> 1
AIM ADVISOR LARGE CAP VALUE FUND
[Cover Image]
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31, 1998
INVEST WITH DISCIPLINE --Registered Trademark--
<PAGE> 2
WALL STREET TO TRINITY CHURCH (1993,
SERIES) BY BEAU REDMOND, LIVING AMERICAN
WHILE VISITING NEW YORK IN 1980, THE
ARTIST WANTED TO SKETCH A WALL STREET
[Cover Image] SCENE BUT DID NOT HAVE ANY DRAWING
PAPER, SO HE USED WHAT HE DID HAVE, A
PAGE FROM THE WALL STREET JOURNAL. THEN,
INSTEAD OF TRANSFERRING THE SKETCH TO
CANVAS, HE PAINTED ON THE NEWSPAPER
PAGE, CREATING AN EVOCATIVE MEDIUM THAT
WOULD LEAD TO PAINTINGS SUCH AS THIS
ONE. THIS PIECE CALLS TO MIND THE
INDELIBLE LINK BETWEEN WALL STREET AND
THE STOCK MARKET, WHERE LARGE-CAP
COMPANIES ARE A MAJOR DRIVING FORCE.
AIM Advisor Large Cap Value Fund is for shareholders who seek a high total
return on investment through growth of capital and current income, without
regard to federal income tax considerations.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor Large Cap Value Fund performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed at net asset
value without a sales charge.
o During the fiscal year ended 12/31/98 the Fund paid distributions of $2.22
per share for Class A shares, and $2.12 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 Fund's 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 Because Class B shares have been offered for less than one year (since
3/3/98), all total return figures for Class B 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.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of
30 actively traded primarily industrial stocks.
o The unmanaged Lipper Growth & Income Fund Index represents an average of
the performance of the 30 largest growth-and-income funds. It is compiled
by Lipper, Inc., an independent mutual funds performance monitor. Results
shown reflect reinvestment of dividends.
o The Russell 1000 Stock Index is an unmanaged index generally considered
representative of large- capitalization stocks.
o The Russell 1000 Value Index measures performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth
values.
o The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general.
o The Standard & Poor's 400 Mid-Cap Index (S&P 400) is an unmanaged index
comprising common stocks of approximately 400 mid-capitalization companies.
o The Russell 2000 Stock Index is an unmanaged index generally considered
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 ADVISOR LARGE CAP 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 1998'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
industrywide 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 Fund's 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 OF THE
MARKETS DURING 1998.
-------------------------------------
AIM ADVISOR LARGE CAP VALUE FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND REBOUNDS ON STRENGTH OF LARGE-CAP STOCKS
IT WAS AN UNSETTLING YEAR IN THE STOCK MARKET. HOW DID AIM LARGE CAP VALUE FUND
PERFORM?
Despite an extremely volatile market and much uncertainty among investors, the
Fund continued to provide excellent returns.
For the fiscal year ended December 31, 1998, the Fund posted a total return
of 14.07% for Class A shares and 13.15% for Class C shares. Those results
finished close to the Lipper Growth and Income Fund Index, which had a return of
13.58%, and the Russell 1000 Value Index, which had a return of 15.63%. Class B
shares, which had their inception on March 3, 1998, produced a cumulative total
return of 6.51% through the end of the fiscal year.
The Fund staged a remarkable recovery in the fourth quarter of the fiscal
year, with Class A and Class C shares posting returns of 18.04% and 17.83%,
respectively, for the three-month period.
The Fund's total net assets increased from $177 million to more than $205
million during the fiscal year.
WHAT WERE THE MAJOR TRENDS IN THE STOCK MARKET DURING THE FISCAL YEAR?
Volatility was the theme in the markets in 1998. Early in the year, U.S. markets
shrugged off global financial concerns that had previously dampened stock
performance. Markets peaked in April, then paused. In June the market rally
resumed, and by mid-July various equity indexes, including the Dow and the S&P
500, had climbed to new highs.
The "Asian contagion" reappeared when Japan's extensive banking problems
were revealed to be worse than expected and Russia effectively defaulted on its
government debt. These events cast doubt on the sustainability of the long
economic expansion in the United States and the boom in Europe's stock markets.
The market downturn that ensued eventually involved even the very large, very
liquid stocks that were chiefly responsible for the U.S. market's earlier rise.
The large-capitalization S&P 500 fell over 19% from its high in mid-July through
the end of August. Mid-cap and smaller stocks fared worse, with the S&P 400 down
almost 25% during the same period. European markets were not immune to the
decline, and many overseas markets were devastated.
In an attempt to calm the nerves of investors who were shifting their money
from equity markets to any security considered liquid--a worldwide flight to
quality--the Federal Reserve Board (the Fed) cut the federal funds rate by 0.25%
in late September. Few people were assuaged by the action. Two weeks later, in
an unusual inter-meeting move, the Fed lowered both the federal funds rate and
the discount rate by 0.25%, igniting a fierce market rally. Both rates were
lowered by 0.25% again in November. By the The market's volatility created a
number of opportunities for the Fund to purchase quality holdings at attractive
prices. close of the fiscal year, markets were enjoying relative equilibrium.
===============================================================================
SECTOR ALLOCATION
- -------------------------------------------------------------------------------
As of 12/31/98, based on total net assets
COMMUNICATIONS SERVICES 3.4%
UTILITIES 3.3%
BASIC MATERIALS 3.6%
ENERGY 6.9%
HEALTH CARE 8.8%
CAPITAL GOODS 9.7%
TECHNOLOGY 12.2%
CONSUMER STAPLES 13.3%
CONSUMER CYCLLCALS 14.4%
TRANSPORTATION 2.4%
FINANCIALS 22.2%
===============================================================================
HOW DID LARGE-CAP STOCKS FARE IN THE UNCERTAIN MARKETS?
Large-cap stocks, such as those in which the Fund invests, again led
performance. Mid-sized and small-company stocks bore the brunt of the market's
summer decline as investors shifted their focus to large, well-established
companies better able to weather the volatile market.
The market advance in 1998 was concentrated in large-cap growth stocks,
which outperformed value stocks by one of the widest margins in history. Even
so, the market's volatility created a number of opportunities for the Fund to
purchase quality holdings at attractive prices.
-------------------------------------
THE MARKET'S VOLATALITY CREATED A
NUMBER OF OPPORTUNITIES FOR THE
FUND TO PURCHASE QUALITY HOLDINGS
AT ATTRACTIVE PRICES.
-------------------------------------
See important Fund and index disclosures inside front cover.
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
<TABLE>
<CAPTION>
==================================================================================================
TOP 10 COMPANIES TOP 10 INDUSTRIES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. UST, Inc. 2.49% 1. Oil (International Integrated) 6.68%
2. Schering-Plough Corp. 2.37 2. Financial (Diversified) 6.25
3. SUPERVALU, Inc. 2.07 3. Computers (Hardware) 4.71
4. National City Corp. 1.97 4. Banks (Money Center) 4.25
5. Lowe's Companies, Inc. 1.97 5. Health Care (Drugs-Major Pharmaceuticals) 4.24
6. Dun & Bradstreet Corp. (The) 1.92 6. Computers (Software & Services) 4.07
7. Merck & Co., Inc. 1.86 7. Insurance (Property-Casualty) 4.01
8. Exxon Corp. 1.85 8. Tobacco 3.75
9. Sun Microsystems, Inc. 1.84 9. Banks (Major Regional) 3.70
10. American General Corp. 1.84 10. Health Care (Diversified) 3.50
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>
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
The Fund's top sector weightings as of December 31, 1998, were as follows:
financials, 22.2%; consumer cyclicals, 14.4%; consumer staples, 13.3%; and
technology, 12.2%. The Fund had 71% of its assets invested in large- and
mega-cap stocks and 29% invested in mid-cap stocks, while having no weighting in
small-cap stocks.
WERE ANY SECTORS PARTICULARLY AFFECTED BY THE MARKET'S VOLATILITY?
The financial sector experienced major ups and downs in 1998. Early in the year
the biggest U.S. banks were riding on a positive earnings tide of proposed major
mergers to create a ripple effect felt in the rest of the financial sector.
However, many U.S. banks and brokerages experienced substantial losses during
the third quarter due to global financial concerns and the near collapse of a
major hedge fund. As a result, we reduced our position in some companies that
were hurt by their foreign exposure.
We are still enthusiastic about financial stocks because we feel that some
good names took unfounded hits in the latter part of the year, so we have
maintained a substantial weighting in this sector. We continue to believe in the
long-term potential of financial stocks and are prepared for any short-term
problems. Financial stocks that we liked include National City, American
General, First Union and Fannie Mae.
Declining oil prices, which fell to their lowest level in 12 years, hurt
energy stock prices as the supply exceeded demand. Foreign market weakness
hobbled commodity pricing as foreign countries still trying to recover from the
market's dive curtailed their import levels and flooded markets with exports to
raise capital. We have scaled back our weightings in both energy and basic
materials until these situations improve.
We have still found value in the oil industry using our discipline that
evaluates each company's historical profitability relative to its current price.
We believe the oil giants, such as Exxon and Amoco, are better positioned to
weather continuing weak market conditions due to their diverse business
operations and huge size.
HOW DID OTHER SECTORS IN THE FUND PERFORM?
The Fund benefited from owning consumer-oriented stocks such as building
material giant Lowe's and clothing retailer The Limited. In health care, two
major pharmaceutical companies we liked were Merck and Schering-Plough. And
while we were slightly underweight in technology, our holdings in that
sector--including IBM, Sun Microsystems and Oracle--performed well for the Fund.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
At the close of 1998, the consumer price index was on track to record its
smallest annual increase since 1986, when the index rose just 1.1%. Meanwhile,
the Fed appeared to have adopted a "wait and see" attitude because inflation sat
at its lowest point in more than a decade. Some analysts expect more interest
rate cuts in the coming year as the U.S. economy continues to slow, with annual
gross domestic product growth likely to be in the 1.5% to 2.5% range, and as
world markets continue to recover and stabilize.
After offering some disappointments as the year came to a close, U.S.
corporate profits are expected to be mixed, and unemployment may rise in 1999.
The markets' roller-coaster ride in 1998 led many analysts to believe that high
volatility may be here to stay, as companies prepare to compete in the new,
uncertain environment. Regardless of near-term volatility, we believe the Fund
is well positioned to continue its strong performance.
See important Fund and index disclosures inside front cover.
AIM ADVISOR LARGE CAP VALUE FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ADVISOR LARGE CAP VALUE FUND VS. BENCHMARK INDEXES
2/15/84-12/31/98
In thousands
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
AIM ADVISOR LARGE
CAP VALUE LIPPER GROWTH AND RUSSELL 1000
FUND - C SHARES INCOME FUND INDEX S&P 500 INDEX VALUE INDEX
- ---------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
12/84 10,738 10,562 10,687 11,119
12/85 13,909 13,578 14,078 14,707
12/86 14,993 15,971 16,705 17,336
12/87 16,071 16,393 17,582 17,845
12/88 18,326 19,401 20,492 20,920
12/89 22,322 24,005 26,975 27,284
12/90 21,484 22,567 26,140 26,149
12/91 28,701 28,830 34,090 34,786
12/92 30,087 31,607 36,683 37,930
12/93 32,843 36,228 40,375 41,780
12/94 33,727 36,078 40,907 41,939
12/95 43,939 47,312 56,265 57,779
12/96 51,485 57,094 69,179 70,751
12/97 67,272 72,438 92,252 93,992
12/98 76,116 82,275 118,612 119,389
====================================================================================================
Past performance is no guarantee of comparable future results.
====================================================================================================
</TABLE>
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/98, including sales charges
Class C Shares
Inception (2/15/84) 14.62%
10 years 15.30
5 years 18.31
1 year 12.15*
Class A Shares
Inception (12/31/96) 19.14%
1 year 7.81**
Class B Shares
Inception (3/3/98) 1.61%***
* 13.15%, excluding sales charge
** 14.07%, excluding sales charge
*** 6.51%, excluding sales charge. Total return provided is cumulative total
return that has not been annualized.
===============================================================================
Sources: Towers Data Systems HYPO --Registered Trademark--, Bloomberg.
===============================================================================
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of the Fund's Class C shares will differ from Class A and
Class B shares due to differing fees and expenses. For fund data performance
calculations and descriptions of indexes cited in this page, please refer to
the inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
The chart compares your Fund to benchmark indexes. An index measures
performance of a hypothetical portfolio. It is important to understand
differences between your Fund and these indexes. Your Fund's total return is
shown with a sales charge and includes Fund expenses and management fees. A
market index such as the Russell 1000 Value Index or the S&P 500 Index is not
managed, incurring no sales charges, expenses or fees. (Please note that the
results for these indexes are from 1/31/84-12/31/98.) If you could buy all the
securities that make up a market index, you would incur expenses that would
affect your investment's return. Use of these indexes is intended to give you a
general idea of how your Fund performed compared to the stock market.
An index of funds such as the Lipper Growth & Income Fund 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 ADVISOR LARGE CAP VALUE FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-97.45%
AEROSPACE/DEFENSE-1.00%
Lockheed Martin Corp. 24,360 $ 2,064,510
- --------------------------------------------------------------
AIRLINES-1.45%
Southwest Airlines Co. 132,450 2,971,846
- --------------------------------------------------------------
AUTOMOBILES-1.40%
DaimlerChrysler AG 30,000 2,881,875
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-3.70%
Bank One Corp. 69,660 3,557,013
- --------------------------------------------------------------
National City Corp. 56,000 4,060,000
- --------------------------------------------------------------
7,617,013
- --------------------------------------------------------------
BANKS (MONEY CENTER)-4.25%
BankAmerica Corp. 45,674 2,746,150
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 34,500 2,348,156
- --------------------------------------------------------------
First Union Corp. 60,000 3,648,750
- --------------------------------------------------------------
8,743,056
- --------------------------------------------------------------
BANKS (REGIONAL)-0.95%
Commerce Bancshares, Inc. 45,990 1,954,575
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.73%
Anheuser-Busch Companies, Inc. 23,000 1,509,375
- --------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-1.03%
PepsiCo, Inc. 51,600 2,112,375
- --------------------------------------------------------------
CHEMICALS-0.63%
Dow Chemical Co. (The) 14,300 1,300,407
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-4.71%
Compaq Computer Corp. 67,900 2,847,557
- --------------------------------------------------------------
International Business Machines
Corp. 16,500 3,048,375
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 44,300 3,793,188
- --------------------------------------------------------------
9,689,120
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-4.07%
Computer Associates International,
Inc. 56,000 2,387,000
- --------------------------------------------------------------
Electronic Data Systems Corp. 52,200 2,623,050
- --------------------------------------------------------------
Oracle Corp.(a) 78,100 3,368,063
- --------------------------------------------------------------
8,378,113
- --------------------------------------------------------------
CONSTRUCTION (CEMENT &
AGGREGATES)-1.66%
Vulcan Materials Co. 25,900 3,407,468
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES &
GIFTS)-0.62%
American Greetings Corp.-Class A 31,000 1,272,937
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-2.07%
SUPERVALU, INC. 152,000 4,256,000
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.16%
DTE Energy Co. 35,000 1,500,625
- --------------------------------------------------------------
GPU, Inc. 35,000 1,546,563
- --------------------------------------------------------------
Southern Co. 70,000 2,034,375
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRIC COMPANIES-(CONTINUED)
Teco Energy, Inc. 50,000 $ 1,409,375
- --------------------------------------------------------------
6,490,938
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.51%
Emerson Electric Co. 30,000 1,876,875
- --------------------------------------------------------------
General Electric Co. 32,200 3,286,412
- --------------------------------------------------------------
5,163,287
- --------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.55%
W.W. Grainger, Inc. 27,000 1,123,875
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-1.02%
Raytheon Co. 39,400 2,098,050
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.25%
American General Corp. 48,600 3,790,800
- --------------------------------------------------------------
Fannie Mae 50,000 3,700,000
- --------------------------------------------------------------
MGIC Investment Corp. 44,000 1,751,750
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 50,750 3,603,250
- --------------------------------------------------------------
12,845,800
- --------------------------------------------------------------
FOODS-1.61%
H.J. Heinz Co. 58,350 3,304,068
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.50%
Abbott Laboratories 71,200 3,488,800
- --------------------------------------------------------------
American Home Products Corp. 65,800 3,705,363
- --------------------------------------------------------------
7,194,163
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.77%
Mylan Laboratories, Inc. 50,000 1,575,000
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.24%
Merck & Co., Inc. 25,900 3,825,106
- --------------------------------------------------------------
Schering-Plough Corp. 88,400 4,884,100
- --------------------------------------------------------------
8,709,206
- --------------------------------------------------------------
HOUSEHOLD FURNITURE AND
APPLIANCES-1.17%
Maytag Corp. 38,600 2,402,850
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-1.00%
Kimberly-Clark Corp. 37,900 2,065,550
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.99%
Jefferson-Pilot Corp. 36,000 2,700,000
- --------------------------------------------------------------
Torchmark Corp. 39,700 1,401,906
- --------------------------------------------------------------
4,101,906
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.62%
Loews Corp. 13,000 1,277,250
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-4.01%
Allstate Corp. (The) 45,000 1,738,125
- --------------------------------------------------------------
General Re Corp.(a)>) 13,500 3,363,727
- --------------------------------------------------------------
Old Republic International Corp. 60,000 1,350,000
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE
(PROPERTY-CASUALTY)-(CONTINUED)
SAFECO Corp. 42,000 $ 1,803,375
- --------------------------------------------------------------
8,255,227
- --------------------------------------------------------------
IRON & STEEL-0.93%
Nucor Corp. 44,000 1,903,000
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.85%
Dover Corp. 48,000 1,758,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.52%
Hanson PLC-ADR (United Kingdom) 61,000 2,379,000
- --------------------------------------------------------------
Illinois Tool Works Inc. 17,000 986,000
- --------------------------------------------------------------
Textron, Inc. 24,000 1,822,500
- --------------------------------------------------------------
5,187,500
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.09%
Federal Signal Corp. 82,000 2,244,750
- --------------------------------------------------------------
METALS MINING-0.25%
Phelps Dodge Corp. 10,100 513,839
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-1.05%
Pitney Bowes, Inc. 32,600 2,153,637
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-6.68%
Amoco Corp. 45,400 2,741,025
- --------------------------------------------------------------
Exxon Corp. 52,000 3,802,500
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 60,000 3,277,500
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares-ADR (Netherlands) 40,400 1,934,150
- --------------------------------------------------------------
YPF Sociedad Anonima-ADR (Argentina) 70,900 1,980,770
- --------------------------------------------------------------
13,735,945
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.49%
Xerox Corp. 26,000 3,068,000
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-1.54%
Gannett Co., Inc. 48,000 3,177,000
- --------------------------------------------------------------
RAILROADS-0.83%
GATX Corp. 25,000 946,875
- --------------------------------------------------------------
Norfolk Southern Corp. 24,000 760,500
- --------------------------------------------------------------
1,707,375
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-3.19%
Lowe's Companies, Inc. 79,000 4,043,813
- --------------------------------------------------------------
Sherwin-Williams Co. 85,400 2,508,625
- --------------------------------------------------------------
6,552,438
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-1.14%
J.C. Penney Co., Inc. 50,000 $ 2,343,750
- --------------------------------------------------------------
RETAIL (DRUG STORES)-1.35%
Rite Aid Corp. 55,900 2,770,543
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.60%
Limited, Inc. (The) 113,000 3,291,125
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-2.05%
Dun & Bradstreet Corp. (The) 125,000 3,945,313
- --------------------------------------------------------------
Waddell & Reed Financial, Inc. 2,258 53,486
- --------------------------------------------------------------
Waddell & Reed Financial, Inc.-Class
B 9,722 226,036
- --------------------------------------------------------------
4,224,835
- --------------------------------------------------------------
SPECIALTY PRINTING-1.33%
Deluxe Corp. 75,000 2,742,187
- --------------------------------------------------------------
TELEPHONE-3.37%
Ameritech Corp. 25,000 1,584,375
- --------------------------------------------------------------
Bell Atlantic Corp. 25,000 1,420,313
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Mexico) 40,800 1,986,450
- --------------------------------------------------------------
US West, Inc. 30,000 1,938,750
- --------------------------------------------------------------
6,929,888
- --------------------------------------------------------------
TEXTILES (APPAREL)-1.33%
VF Corp. 58,500 2,742,187
- --------------------------------------------------------------
TOBACCO-3.75%
Philip Morris Companies, Inc. 48,500 2,594,750
- --------------------------------------------------------------
UST, Inc. 147,000 5,126,626
- --------------------------------------------------------------
7,721,376
- --------------------------------------------------------------
WASTE MANAGEMENT-0.44%
Browning-Ferris Industries, Inc. 32,100 912,843
- --------------------------------------------------------------
Total Common Stocks (Cost $123,395,128) 200,446,058
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-2.06%(b)
SBC Warburg Dillon Read, Inc.,
4.75%, 01/04/99(c) (Cost
$4,238,817) $4,238,817 4,238,817
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.51% 204,684,875
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.49% 1,003,333
- --------------------------------------------------------------
NET ASSETS-100.00% $205,688,208
==============================================================
</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 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 investments companies managed by the
investment advisor or its affiliates.
(c) 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
See Notes to Financial Statements.
6
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$127,633,945) $204,684,875
- ---------------------------------------------------------
Receivables for:
Investments sold 1,646,315
- ---------------------------------------------------------
Capital stock sold 179,131
- ---------------------------------------------------------
Interest and dividends 227,786
- ---------------------------------------------------------
Investment for deferred compensation plan 6,268
- ---------------------------------------------------------
Other assets 7,473
- ---------------------------------------------------------
Total assets 206,751,848
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 452,659
- ---------------------------------------------------------
Deferred compensation plan 6,268
- ---------------------------------------------------------
Accrued advisory fees 128,722
- ---------------------------------------------------------
Accrued operating services fees 32,189
- ---------------------------------------------------------
Accrued distribution fees 429,703
- ---------------------------------------------------------
Accrued directors' fees and expenses 14,099
- ---------------------------------------------------------
Total liabilities 1,063,640
- ---------------------------------------------------------
Net assets applicable to shares outstanding $205,688,208
=========================================================
NET ASSETS:
Class A $ 15,683,734
=========================================================
Class B $ 7,325,026
=========================================================
Class C $182,679,448
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 622,440
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 292,328
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 7,291,777
=========================================================
Class A:
Net asset value and redemption price per
share $ 25.20
=========================================================
Offering price per share:
(Net asset value of $25.20 divided
by 94.50%) $ 26.67
=========================================================
Class B:
Net asset value and offering price per
share $ 25.06
=========================================================
Class C:
Net asset value and offering price per
share $ 25.05
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $27,237 foreign
withholding tax) $ 3,755,243
- --------------------------------------------------------
Interest 458,728
- --------------------------------------------------------
Total investment income 4,213,971
- --------------------------------------------------------
EXPENSES:
Advisory fees 1,430,336
- --------------------------------------------------------
Operating services fees 858,298
- --------------------------------------------------------
Directors' fees and expenses 9,117
- --------------------------------------------------------
Distribution fees-Class A 38,204
- --------------------------------------------------------
Distribution fees-Class B 35,283
- --------------------------------------------------------
Distribution fees-Class C 1,763,061
- --------------------------------------------------------
Total expenses 4,134,299
- --------------------------------------------------------
Less: Fees waived by advisor (303,604)
- --------------------------------------------------------
Net expenses 3,830,695
- --------------------------------------------------------
Net investment income 383,276
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 13,666,132
- --------------------------------------------------------
Net unrealized appreciation of investment
securities 9,514,639
- --------------------------------------------------------
Net gain on investment securities 23,180,771
- --------------------------------------------------------
Net increase in net assets resulting from
operations $23,564,047
========================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 10
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 $ 383,276 $ 45,808
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities 13,666,132 17,674,268
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 9,514,639 24,024,117
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 23,564,047 41,744,193
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (63,186) (6,926)
- -----------------------------------------------------------------------------------------
Class B (4,659) --
- -----------------------------------------------------------------------------------------
Class C (130,140) (10,706)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (1,168,568) (415,931)
- -----------------------------------------------------------------------------------------
Class B (558,881) --
- -----------------------------------------------------------------------------------------
Class C (14,182,679) (17,806,373)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 10,506,884 5,055,769
- -----------------------------------------------------------------------------------------
Class B 7,500,215 --
- -----------------------------------------------------------------------------------------
Class C 2,997,348 11,252,055
- -----------------------------------------------------------------------------------------
Net increase in net assets 28,460,381 39,812,081
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 177,227,827 137,415,746
- -----------------------------------------------------------------------------------------
End of period $205,688,208 $177,227,827
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $127,632,168 $105,927,721
- -----------------------------------------------------------------------------------------
Undistributed net investment income 210,789 5,961
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 794,321 3,757,854
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 77,050,930 67,536,291
- -----------------------------------------------------------------------------------------
$205,688,208 $177,227,827
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Large Cap Value Fund (the "Fund") is a series portfolio of AIM
Advisor Funds, Inc. (the "Company"). The Company is a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of five
diversified portfolios. 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 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 achieve a high total
return on investment through capital appreciation and current income, without
regard to federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income 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
8
<PAGE> 11
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. 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 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 are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's Board of Directors.
Investments with maturities of 60 days or less are valued on the basis of
amortized cost which approximates market value.
B. 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
declared and paid quarterly. On December 31, 1998 additional paid in capital
increased $700,000, undistributed net investment income was increased
$19,537 and undistributed net realized gains decreased by $719,537 as a
result of equalization credits and 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
reclassification discussed above.
C. 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.
D. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company 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 the annual rate of 0.75% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an
annual rate of 0.20% of the Fund's average daily net assets.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $565,610 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $292,688.
The Company 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 Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The
Fund, pursuant to the Class B Plan, pays AIM Distributors compensation at an
annual rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $27,288, $35,283 and $1,763,060, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $10,916 for the Class A shares.
AIM Distributors received commissions of $32,564 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to 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 commissions of $34,868 in contingent deferred sales
charges imposed on redemptions of shares. Certain officers and directors of the
Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
9
<PAGE> 12
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average net assets of the Fund are less than
$500 million, the Fund's expenses shall not exceed 1.55% for Class A and 2.20%
for Class C; on the next $500 million of net assets, expenses shall not exceed
1.50% for Class A and 2.15% for Class C; on the next $1 billion of net assets,
expenses shall not exceed 1.45% for Class A and 2.10% for Class C; and on all
assets over $2 billion, expenses shall not exceed 1.40% for Class A and 2.05%
for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $3,813
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $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 party 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 the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998, was
$99,685,561 and $94,791,863, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $78,415,322
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,364,392)
- -------------------------------------------------------------
Net unrealized appreciation of investment
securities $77,050,930
=============================================================
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock 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 546,830 $ 13,836,246 198,806 $ 4,859,057
- --------------------------------------------------------------------------
Class B** 312,678 8,015,582 -- --
- --------------------------------------------------------------------------
Class C 745,155 18,894,552 745,080 17,246,229
- --------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 48,828 1,187,383 15,389 365,541
- --------------------------------------------------------------------------
Class B 20,082 485,925 -- --
- --------------------------------------------------------------------------
Class C 553,152 13,379,377 683,868 16,255,395
- --------------------------------------------------------------------------
Reacquired:
Class A (180,617) (4,516,745) (6,796) (168,829)
- --------------------------------------------------------------------------
Class B** (40,432) (1,001,292) -- --
- --------------------------------------------------------------------------
Class C (1,159,833) (29,276,581) (955,477) (22,249,569)
- --------------------------------------------------------------------------
845,843 $ 21,004,447 680,870 $ 16,307,824
==========================================================================
</TABLE>
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales on March 3, 1998.
10
<PAGE> 13
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998, and for a share of
Class C capital stock outstanding during each of the years in the five-year
period ended December 31, 1998.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
------------------ -------
1998 1997(b) 1998
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 24.11 $20.57 $25.59
- ------------------------------------------------------------ ------- ------ ------
Income from investment operations:
Net investment income 0.20(c) 0.23(c) 0.02
- ------------------------------------------------------------ ------- ------ ------
Net gains on securities (both realized and unrealized) 3.11 6.17 1.57
- ------------------------------------------------------------ ------- ------ ------
Total from investment operations 3.31 6.40 1.59
- ------------------------------------------------------------ ------- ------ ------
Less distributions:
Dividends from net investment income (0.12) (0.15) (0.02)
- ------------------------------------------------------------ ------- ------ ------
Distributions from net realized gains (2.10) (2.71) (2.10)
- ------------------------------------------------------------ ------- ------ ------
Total distributions (2.22) (2.86) (2.12)
- ------------------------------------------------------------ ------- ------ ------
Net asset value, end of period $ 25.20 $24.11 $25.06
============================================================ ======= ====== ======
Total return(d) 14.07% 31.66% 6.51%
============================================================ ======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $15,684 $5,000 $7,325
============================================================ ======= ====== ======
Ratio of expenses to average net assets(e) 1.30%(f) 1.46% 2.05%(f)(g)
============================================================ ======= ====== ======
Ratio of net investment income to average net assets(h) 0.91%(f) 0.77% 0.16%(f)(g)
============================================================ ======= ====== ======
Portfolio turnover rate 52% 34% 52%
============================================================ ======= ====== ======
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) After fee waivers and/or reimbursements. Ratios of expenses to average net
assets prior to fee waivers and/or reimbursement were 1.55% and 1.56% for
1998-1997 for Class A and 2.20% (annualized) for 1998 for Class B.
(f) Ratios are based on average net assets of $10,915,560 and $4,236,305 for
Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or reimbursements. Ratios of net investment income to
average net assets prior to fee waivers and/or reimbursement were 0.66% and
0.67% for 1998-1997 for Class A and 0.01% (annualized) for 1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
--------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.08 $ 20.57 $ 17.60 $ 13.96 $ 14.90
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.04 0.01(c) 0.05 0.10 0.09
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains on securities (both realized and unrealized) 3.05 6.21 2.97 4.11 0.32
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 3.09 6.22 3.02 4.21 0.41
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.02) -- (0.05) (0.10) (0.09)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (2.10) (2.71) -- (0.47) (1.26)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (2.12) (2.71) (0.05) (0.57) (1.35)
============================================================ ======== ======== ======== ======== ========
Net asset value, end of period $ 25.05 $ 24.08 $ 20.57 $ 17.60 $ 13.96
============================================================ ======== ======== ======== ======== ========
Total return(d) 13.15% 30.66% 17.17% 30.28% 2.69%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $182,679 $172,228 $137,416 $113,573 $ 77,929
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 2.05%(e)(f) 2.21% 2.26% 2.28% 2.25%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 0.16%(f)(g) 0.02% 0.24% 0.64% 0.61%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 52% 34% 19% 17% 21%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges.
(e) After fee waivers and/or reimbursements. Ratios of expenses to average net
assets prior to fee waivers and/or reimbursement were 2.20% for 1998.
(f) Ratios are based on average net assets of $176,305,963.
(g) After fee waivers and/or reimbursements. Ratios of net investment income to
average net assets prior to fee waivers and/or reimbursement were 0.01% for
1998.
11
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Large Cap Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Large Cap Value Fund (a
portfolio of AIM Advisor Funds, Inc.), including the
schedule of investments, as of December 31, 1998, and the
related statement of operations, the statement of changes
in net assets, and the financial highlights for the year
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 the financial
highlights based on our audit. The accompanying statement
of changes in net assets for the year ended December 31,
1997 and the financial highlights for each of the years
in the four-year period ended December 31, 1997, were
audited by other auditors whose report thereon dated
February 5, 1998, expressed an unqualified opinion on
such statement and financial highlights.
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 presentation. We believe
that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Large Cap Value Fund as of December 31, 1998, the
results of its operations, the changes in its net assets
and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 5, 1999
12
<PAGE> 15
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BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
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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 SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President INVESCO Capital Management, Inc.
1315 Peachtree Street, N.E.
Edward K. Dunn Jr. Dana R. Sutton Atlanta, GA 30309
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, TRANSFER AGENT
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Stuart W. Coco Houston, TX 77210-4739
Chief Executive Officer Vice President
Texana Global, Inc.; CUSTODIAN
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President State Street Bank and Trust Company
225 Franklin Street
Carl Frischling Karen Dunn Kelley Boston, MA 02110
Partner Vice President
Kramer, Levin, Naftalis & Frankel COUNSEL TO THE FUND
Jonathan C. Schoolar
Robert H. Graham Vice President Ballard Spahr
President and Chief Executive Officer Andrews & Ingersoll, LLP
A I M Management Group Inc. Renee A. Friedli 1735 Market Street
Assistant Secretary Philadelphia, PA 19103
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A., P. Michelle Grace COUNSEL TO THE DIRECTORS
Commissioner, New York City Dept. for Assistant Secretary
the Aging; and member of the Board of Directors, Kramer, Levin, Naftalis & Frankel
Metropolitan Transportation Authority of Jeffrey H. Kupor 919 Third Avenue
New York State Assistant Secretary New York, NY 10022
Lewis F. Pennock Nancy L. Martin DISTRIBUTOR
Attorney Assistant Secretary
A I M Distributors, Inc.
Ian W. Robinson Ofelia M. Mayo 11 Greenway Plaza
Consultant; Formerly Executive Assistant Secretary Suite 100
Vice President and Houston, TX 77046
Chief Financial Officer Lisa A. Moss
Bell Atlantic Management Assistant Secretary AUDITORS
Services, Inc.
Kathleen J. Pflueger KPMG LLP
Louis S. Sklar Assistant Secretary 700 Louisiana
Executive Vice President Houston, TX 77002
Hines Interests Samuel D. Sirko
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
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REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Advisor Large Cap Value Fund paid ordinary dividends in the amount of $0.159
for Class A shares and $0.062 for Class B and C shares per share, to
shareholders during the Fund's tax year ended December 31, 1998. Of these
amounts 100% is eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $16,284,268 for the
Fund's tax year ended December 31, 1998. Of long-term capital gains distributed,
100% is 20% rate gain.
<PAGE> 16
THE AIM FAMILY OF FUNDS--Registered Trademark--
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GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Money Market Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately $109
AIM Capital Development Fund billion in assets for more than 6.2 million
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS shareholders, including individual investors,
AIM Mid Cap Equity Fund(2), (A) AIM Advisor International Value Fund corporate clients, and financial institutions,
AIM Select Growth Fund(3) AIM Asian Growth Fund as of December 31, 1998.
AIM Small Cap Growth Fund(2), (B) AIM Developing Markets Fund(2) The AIM Family of Funds--Registered Trademark--
AIM Small Cap Opportunities Fund AIM Europe Growth Fund(2) is distributed nationwide, and AIM today is the
AIM Value Fund AIM European Development Fund 10th-largest mutual fund complex in the U.S. in
AIM Weingarten Fund AIM International Equity Fund assets under management, according to Strategic
AIM Japan Growth Fund(2) Insight, an independent mutual fund monitor.
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
INCOME FUNDS AIM Global Growth & Income Fund(2)
AIM Floating Rate Fund(2) AIM Global Utilities Fund
AIM High Yield Fund
AIM High Yield Fund II GLOBAL INCOME FUNDS
AIM Income Fund AIM Emerging Markets Debt Fund(2), (D)
AIM Intermediate Government Fund AIM Global Government Income Fund(2)
AIM Limited Maturity Treasury Fund AIM Global Income Fund
AIM Strategic Income Fund(2)
TAX-FREE INCOME FUNDS
AIM High Income Municipal Fund THEME FUNDS
AIM Municipal Bond Fund AIM Global Consumer Products and Services Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Financial Services Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Health Care Fund(2)
AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2), (E)
</TABLE>
(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. (E) 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.
