<PAGE> 1
[COVER IMAGE]
AIM ADVISOR REAL ESTATE FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31 1998
Invest with Discipline
--Registered Trademark--
<PAGE> 2
NEW YORK, NEW YORK
BY DIANA ONG (BORN 1940, CHINESE-AMERICAN)
[PHOTO IMAGE] EVOLVING FROM BROWNSTONES TO SKYSCRAPERS, FROM EMPTY
FIELDS TO INDUSTRIAL PARKS, THE REAL ESTATE SECTOR
HAS TRANSFORMED ITSELF THROUGH THE DECADES. LIKE NEW
YORK CITY, THE FUND IS IN A PRIME LOCATION TO TAKE
ADVANTAGE OF FUTURE EXPANSIONS.
AIM Advisor Real Estate Fund is for shareholders who seek high total return on
investment through growth of capital and current income through a portfolio
invested primarily in publicly traded securities of companies related to the
real estate industry.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor Real Estate 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 December 31, 1998, the Fund paid distributions
of $0.75 per share for Class A shares, $0.65 for Class B shares, and $0.65
for Class C shares.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% 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.
o Investing in a single-sector mutual fund may involve greater risk and
potential reward than investing in a more diversified fund.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The NAREIT (National Association of Real Estate Investment Trusts) Equity
Index tracks the performance of all tax-qualified REITs listed on the New
York Stock Exchange, American Stock Exchange, and the NASDAQ National Market
System. Equity REITs are defined as REITs with 75% or more of their gross
invested book assets invested directly or indirectly in the equity ownership
of real estate.
o The Russell 2000 Stock Index is an unmanaged index generally considered
representative of small-capitalization stocks.
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 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 REAL ESTATE FUND
<PAGE> 3
Annual Report/The 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
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 REAL ESTATE FUND
<PAGE> 4
ANNUAL REPORT/MANAGERS' OVERVIEW
---------------------------------
THE FUND OPTIMIZED THE
MARKET DOWNTURN BY BUYING
BARGAINS TO POSITION ITSELF FOR A
MARKET REBOUND.
---------------------------------
MANAGERS' OVERVIEW
FUND FINDS OPPORTUNITIES IN MARKET DOWNTURN
HOW DID AIM ADVISOR REAL ESTATE FUND PERFORM DURING THE FISCAL YEAR?
The market environment for the real estate investment trust (REIT) sector was
generally unfavorable during the past year. Results for the fiscal year ended
December 31, 1998, were quite disappointing. Total return was -22.54% for Class
A shares and -23.16% for Class C shares. Since inception on March 3, 1998, Class
B shares produced a cumulative total return of -21.02%.
Despite a weak market in 1998, REITs continued to report strong earnings in
the fourth quarter, exceeding 14% on average. In addition, the sector has
enjoyed increasing dividends and the market reported balanced construction with
tenant demand during the past year. In light of these factors, it appears that
the negative returns posted by REITs in 1998 had little to do with actual
earnings or other fundamentals of the real estate market.
IF NOT EARNINGS, THEN WHAT CAUSED WEAKNESS IN THE REIT MARKET DURING 1998?
A convergence of events led to the decline in REIT stock prices in 1998. Early
in the year, investors feared that the strong domestic economy would spark a
glut of new construction. While this concern may have had some merit in selected
metropolitan areas, the capital crunch of the late summer and early fall,
following the global currency crisis, limited the capital available to
developers. Even without these recent capital cutbacks, supply and demand were
generally in balance throughout much of the year. REIT performance also suffered
from aggressive pricing of properties. Over the past few years, most U.S. real
estate markets have recovered from the overbuilding of the 1980s. As markets
reached full occupancy, real estate prices increased. Along with other buyers,
REITs were paying more for properties over the last 12 months than a few years
ago.
A series of sell-offs by REIT investors also compounded weakening market
conditions. Many investors, who had entered the REIT market during 1996-97 when
returns were in the 20-35% range, became disenchanted with disappointing returns
earlier in 1998 and shifted to other types of securities. Tax-loss selling late
in the year continued to exert downward pressure on battered REIT share prices.
GIVEN THESE MARKET CONDITIONS, HOW HAVE YOU MANAGED THE FUND?
The Fund optimized the market downturn by buying bargains to position itself
for a market rebound. As of December 31, the Fund's largest property types
included office at 22% of total net assets, retail at 16% of total net assets,
and residential at 15%. During the third and fourth quarters, when markets
swooned, we continued to adjust positions in the Fund to take advantage of
opportunities that were becoming available due to recent weaknesses in the
REIT market. We established several new positions in well-capitalized REITs
that offered both attractive yields and excellent dividend coverage. For
example, we invested 1.44% of the Fund's net assets in Host Marriott, which
owns or holds controlling interests in more than 100 upscale and luxury
full-service hotel lodging properties. The company operates primarily in the
United States under the well-known "Marriott" and "Ritz Carlton" brand names.
In the low-interest-rate environment, which offers more affordable home own-
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
================================================================================
PROPERTY TYPE DIVERSIFICATION
- --------------------------------------------------------------------------------
Office 22%
Retail 16%
Residential 15%
Hotel 14%
Diversified 13%
Industrial 8%
Industrial/Office Mixed 4%
Self-Storage 3%
Healthcare 2%
Financial Services 1%
Manufactured Homes 1%
Mortgage Backed Securities 1%
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
================================================================================
See important Fund and index disclosures inside front cover.
AIM ADVISOR REAL ESTATE FUND
2
<PAGE> 5
ership, we have kept our holdings in the apartment sector in check. In the
retail sector, we believe the dominant, super-regional malls will continue to
perform well. However, we expect only moderate earnings growth for many of the
neighborhood shopping center REITs. As a result, we do not anticipate
significant increases in holdings within this area.
DO YOU FAVOR ANY REIT SECTOR?
We continued to favor the office sector due to the favorable earnings for
companies that own and operate this property type. Although some office REITs
were among the weakest performing sectors in 1998 and Fund performance suffered
as a result, we believe that they may offer some excellent opportunities in the
near term. A primary reason for the sector's weakness has been related to
investor concern about the potential for overbuilding similar to that of the
1980s. While new office construction has increased over the past several years,
it has generally been well in-line with demand.
We tend to focus on REITs that operate in some of the more
supply-constrained markets, such as California and the Northeast. Companies in
these markets continue to experience high occupancy and strong rental increases
on lease rollovers. According to Cushman & Wakefield, Inc., a New York
real-estate services firm, the overall vacancy nationwide for office buildings
in both downtown and suburban markets hovered below 11% at the end of the third
quarter of 1998-a number not seen in more than a decade.
In recent years, investors have favored suburban office buildings. But now,
downtown buildings are the favored category, especially in markets such as San
Francisco, Boston and New York. We hope to benefit from this trend by
maintaining holdings in REITs that own and operate properties in these regions.
For example, the Fund has 2.67% of its net assets invested in SL Green Realty
Corp., which specializes in owning, managing and acquiring office properties in
Manhattan.
WHAT IS YOUR OUTLOOK FOR THE REIT MARKET IN 1999?
With the combination of low valuation levels and the prospect of solid earnings
growth, REITs appear attractively priced going into 1999, with many selling at
below the underlying value of their properties. Industry analysts expect REITs
to deliver returns in the low to mid-teens over the next 12 months, compared to
expectations of single-digit returns for blue chips in 1999. Much of that return
will come from generous REIT dividends: the average property-owning REIT
recently yielded 7.2%.
Although it is difficult to predict when market sentiment may turn positive,
industry analysts believe that investors may begin to recognize REIT values in
the near future. Weakness during 1998 has provided an opportunity to add
companies with superior fundamentals to the Fund's portfolio. We believe our
continued emphasis on high-quality companies with solid earnings growth
prospects should allow the Fund to participate well during a REIT market
rebound.
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
<TABLE>
<CAPTION>
================================================================================
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
<S> <C>
1. Arden Realty Group, Inc. 4.42%
2. Starwood Hotels & Resorts 3.66
3. Charles E. Smith Residential Realty, Inc. 3.42
4. Simon Property Group, Inc. 3.42
5. Prentiss Properties Trust 3.34
6. CarrAmerica Realty Corp. 3.28
7. Essex Property Trust, Inc. 3.20
8. Avalonbay Communities, Inc. 3.13
9. CBL & Associates Properties, Inc. 3.12
10. Crescent Real Estate Equities, Co. 3.03
Please keep in mind the Fund's portfolio is subject to change and there
is no assurance the Fund will continue to hold any particular security.
================================================================================
</TABLE>
------------------------------------
WE BELIEVE OUR CONTINUED
EMPHASIS ON HIGH-QUALITY
COMPANIES WITH SOLID EARNINGS
GROWTH PROSPECTS SHOULD ALLOW
THE FUND TO PARTICIPATE WELL
DURING A REIT MARKET REBOUND.
------------------------------------
See important Fund and index disclosures inside front cover.
AIM ADVISOR REAL ESTATE FUND
3
<PAGE> 6
ANNUAL REPORT/PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ADVISOR REAL ESTATE FUND VS. BENCHMARK INDEXES
5/1/95-12/31/98
- --------------------------------------------------------------------------------
ADVISOR NAREIT
REAL ESTATE EQUITY S&P 500
C SHARES INDEX INDEX
- --------------------------------------------------------------------------------
5/1/95 10,000 10,000 10,000
6/30/95 10,195 10,591 10,631
9/30/95 10,564 11,090 11,475
12/31/95 10,912 11,549 12,166
3/31/96 11,078 11,812 12,818
6/30/96 11,482 12,337 13,393
9/30/96 12,471 13,145 13,807
12/31/96 14,888 15,622 14,958
3/31/97 14,880 15,731 15,359
6/30/97 15,545 16,513 18,039
9/30/97 17,795 18,465 19,390
12/31/97 17,699 18,787 19,947
3/31/98 17,599 18,700 22,728
6/30/98 16,455 17,842 23,478
9/30/98 13,898 15,965 21,146
12/31/98 13,600 15,499 25,646
Past performance cannot guarantee comparable future results.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/98, including sales charges
CLASS C SHARES
Inception (5/1/95) 8.74%
1 Year -23.89*
*-23.16% excluding CDSC
CLASS A SHARES
Inception (12/31/96) -5.98%
1 Year -26.20**
**-22.54% excluding sales charges
CLASS B SHARES
Inception (3/3/98) -24.76%***
***-21.02% excluding CDSC
================================================================================
Source: Towers Data Systems Hypo--Registered Trademark--.
Your Fund's total return includes sales charges, expenses, and management fees.
The performance of the Fund's Class A and Class B shares will differ from that
of Class C shares due to differing fees and expenses. For Fund data performance
calculations and descriptions of indexes cited on this page, please refer to the
inside front cover.
ABOUT THIS CHART
This chart compares your Fund's Class C shares to benchmark indexes. It is
intended to give you a general idea of how your Fund performed compared to these
benchmarks over the period 5/1/95 to 12/31/98. 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 your investment's return. In addition, it is worth noting that the S&P
500 represents stocks only; whereas your Fund is invested primarily in real
estate investment trust (REIT) securities that produce much of their returns
through current income in the form of yields. An index of REITs, such as the
National Association of Real Estate Investment Trusts (NAREIT) Equity Index,
includes all tax-qualified REITs listed on the New York Stock Exchange, American
Stock Exchange, and the NASDAQ National Market System, regardless of management
style and investment strategy.
AIM ADVISOR REAL ESTATE FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS &
OTHER EQUITY INTERESTS-100.02%
DIVERSIFIED-12.72%
Beacon Capital(a) 55,000 $ 873,125
- --------------------------------------------------------------
Catellus Development Corp.(a) 53,900 771,444
- --------------------------------------------------------------
Crescent Real Estate Equities, Co. 79,000 1,817,000
- --------------------------------------------------------------
Glenborough Realty Trust, Inc. 70,000 1,426,250
- --------------------------------------------------------------
RioCan Real Estate Investment Trust
(Canada) 115,000 706,535
- --------------------------------------------------------------
Security Capital U.S. Realty
(Luxembourg)(a) 74,800 740,520
- --------------------------------------------------------------
Vornado Operating Co.(a) 2,625 21,164
- --------------------------------------------------------------
Vornado Realty Trust 37,500 1,265,625
- --------------------------------------------------------------
7,621,663
- --------------------------------------------------------------
FINANCIAL SERVICES-0.84%
AMRESCO, Inc.(a) 57,850 506,188
- --------------------------------------------------------------
HEALTHCARE (DIVERSIFIED)-1.97%
Meditrust Corp. 78,100 1,181,263
- --------------------------------------------------------------
INDUSTRIAL PROPERTIES-8.03%
Bedford Property Investors, Inc. 46,800 789,750
- --------------------------------------------------------------
Eastgroup Properties, Inc. 21,600 398,250
- --------------------------------------------------------------
First Industrial Realty Trust, Inc. 56,700 1,520,268
- --------------------------------------------------------------
Prime Group Realty Trust 45,200 683,650
- --------------------------------------------------------------
ProLogis Trust 22,500 466,875
- --------------------------------------------------------------
TriNet Corporate Realty Trust, Inc. 35,500 949,625
- --------------------------------------------------------------
4,808,418
- --------------------------------------------------------------
INDUSTRIAL/OFFICE PROPERTIES-3.74%
Liberty Property Trust 72,950 1,796,394
- --------------------------------------------------------------
Reckson Associates Realty Corp. 20,000 443,750
- --------------------------------------------------------------
2,240,144
- --------------------------------------------------------------
LODGING-HOTELS-14.55%
Crestline Capital Corp.(a) 6,260 91,553
- --------------------------------------------------------------
Hospitality Properties Trust 46,400 1,119,400
- --------------------------------------------------------------
Host Marriott Corp. 62,600 864,663
- --------------------------------------------------------------
MeriStar Hospitality Corp. 94,814 1,759,985
- --------------------------------------------------------------
MeriStar Hotels & Resorts, Inc.(a) 112,700 295,838
- --------------------------------------------------------------
Patriot American Hospitality, Inc. 190,000 1,140,000
- --------------------------------------------------------------
Starwood Hotels & Resorts 96,700 2,193,881
- --------------------------------------------------------------
Sunstone Hotel Investors, Inc. 132,800 1,253,300
- --------------------------------------------------------------
8,718,620
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURED HOMES-0.92%
Asset Investors Corp. 44,000 $ 550,000
- --------------------------------------------------------------
MORTGAGE BACKED SECURITIES-0.51%
CRIIMI MAE, Inc. 87,700 306,950
- --------------------------------------------------------------
OFFICE PROPERTIES-22.40%
Arden Realty Group, Inc. 114,300 2,650,331
- --------------------------------------------------------------
CarrAmerica Realty Corp. 81,800 1,963,200
- --------------------------------------------------------------
Cornerstone Properties, Inc. 35,700 557,812
- --------------------------------------------------------------
Highwoods Properties, Inc. 70,050 1,803,788
- --------------------------------------------------------------
Kilroy Realty Corp. 42,700 982,100
- --------------------------------------------------------------
Koger Equity, Inc. 30,000 515,625
- --------------------------------------------------------------
Mack-Cali Realty Corp. 43,700 1,349,238
- --------------------------------------------------------------
Prentiss Properties Trust 89,700 2,001,431
- --------------------------------------------------------------
SL Green Realty Corp. 73,900 1,598,088
- --------------------------------------------------------------
13,421,613
- --------------------------------------------------------------
REGIONAL MALLS-8.16%
CBL & Associates Properties, Inc. 72,350 1,867,534
- --------------------------------------------------------------
Macerich Co. (The) 25,500 653,437
- --------------------------------------------------------------
Simon Property Group, Inc. 71,900 2,049,150
- --------------------------------------------------------------
SPG Properties Inc., $2.19 Series B
Pfd. 7,000 178,937
- --------------------------------------------------------------
Taubman Centers, Inc. 10,000 137,500
- --------------------------------------------------------------
4,886,558
- --------------------------------------------------------------
RESIDENTIAL PROPERTIES-15.27%
Avalonbay Communities, Inc. 54,800 1,876,900
- --------------------------------------------------------------
Camden Property Trust 31,432 817,232
- --------------------------------------------------------------
Charles E. Smith Residential Realty,
Inc. 63,800 2,049,575
- --------------------------------------------------------------
Equity Residential Properties Trust 25,500 1,031,156
- --------------------------------------------------------------
Equity Residential Properties, $1.75
Conv. Pfd. 7,000 164,062
- --------------------------------------------------------------
Essex Property Trust, Inc. 64,500 1,918,875
- --------------------------------------------------------------
Post Properties, Inc. 33,600 1,291,500
- --------------------------------------------------------------
9,149,300
- --------------------------------------------------------------
SELF-STORAGE-2.81%
Public Storage, Inc. 55,800 1,510,088
- --------------------------------------------------------------
Public Storage Inc., $2.50 Series E
Pfd. 6,000 170,625
- --------------------------------------------------------------
1,680,713
- --------------------------------------------------------------
SHOPPING CENTERS-8.10%
JDN Realty Corp. 67,500 1,455,469
- --------------------------------------------------------------
Kimco Realty Corp. 31,900 1,266,031
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SHOPPING CENTERS-(CONTINUED)
Pan Pacific Retail Properties, Inc. 47,700 $ 951,019
- --------------------------------------------------------------
Philips International Realty Corp. 76,600 1,177,725
- --------------------------------------------------------------
4,850,244
- --------------------------------------------------------------
Total Real Estate Investment
Trusts & Other Equity
Interests (Cost $66,915,860) 59,921,674
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-1.72%(b)
SBC Warburg Dillon Read Inc., 4.75%,
01/04/99(c) (Cost $1,028,091) $1,028,091 $ 1,028,091
- --------------------------------------------------------------
TOTAL INVESTMENTS-101.74% 60,949,765
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(1.74)% (1,040,480)
- --------------------------------------------------------------
NET ASSETS-100.00% $59,909,285
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to insure 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.
(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.
Abbreviations:
Conv. - Convertible
Pfd. - Preferred
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
$67,943,951) $ 60,949,765
- ---------------------------------------------------------
Foreign currencies, at value (cost $15,226) 15,187
- ---------------------------------------------------------
Receivables for:
Capital stock sold 185,829
- ---------------------------------------------------------
Interest and dividends 732,720
- ---------------------------------------------------------
Investment for deferred compensation plan 5,872
- ---------------------------------------------------------
Other assets 1,199
- ---------------------------------------------------------
Total assets 61,890,572
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,167,762
- ---------------------------------------------------------
Capital stock reacquired 649,902
- ---------------------------------------------------------
Deferred compensation plan 5,872
- ---------------------------------------------------------
Accrued advisory fees 46,459
- ---------------------------------------------------------
Accrued operating services fees 18,693
- ---------------------------------------------------------
Accrued distribution fees 92,599
- ---------------------------------------------------------
Total liabilities 1,981,287
- ---------------------------------------------------------
Net assets applicable to shares outstanding $ 59,909,285
=========================================================
NET ASSETS:
Class A $ 20,087,313
=========================================================
Class B $ 6,900,789
=========================================================
Class C $ 32,921,183
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 1,753,528
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 601,186
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 2,872,166
=========================================================
Class A:
Net asset value and redemption price per
share $ 11.46
=========================================================
Offering price per share:
(Net asset value of $11.46
divided by 95.25%) $ 12.03
=========================================================
Class B:
Net asset value and offering price per
share $ 11.48
=========================================================
Class C:
Net asset value and offering price per
share $ 11.46
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $11,814 foreign
withholding tax) $ 3,916,800
- ---------------------------------------------------------
Interest 198,373
- ---------------------------------------------------------
Total investment income 4,115,173
- ---------------------------------------------------------
EXPENSES:
Advisory fees 625,129
- ---------------------------------------------------------
Operating services fees 312,558
- ---------------------------------------------------------
Distribution fees-Class A 80,966
- ---------------------------------------------------------
Distribution fees-Class B 50,872
- ---------------------------------------------------------
Distribution fees-Class C 412,382
- ---------------------------------------------------------
Directors' fees and expenses 5,297
- ---------------------------------------------------------
Total expenses 1,487,204
- ---------------------------------------------------------
Less: Fees waived by advisor (59,719)
- ---------------------------------------------------------
Net expenses 1,427,485
- ---------------------------------------------------------
Net investment income 2,687,688
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (7,856,868)
- ---------------------------------------------------------
Foreign currencies (11,340)
- ---------------------------------------------------------
(7,868,208)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (13,364,558)
- ---------------------------------------------------------
Foreign currencies 56
- ---------------------------------------------------------
(13,364,502)
- ---------------------------------------------------------
Net gain (loss) from investment
securities and foreign currencies (21,232,710)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(18,545,022)
=========================================================
</TABLE>
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 $ 2,687,688 $ 930,868
- ----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (7,868,208) 3,781,061
- ----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and foreign currencies (13,364,502) 1,996,379
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (18,545,022) 6,708,308
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (879,078) (138,336)
- ----------------------------------------------------------------------------------------
Class B (195,557) --
- ----------------------------------------------------------------------------------------
Class C (1,184,516) (755,032)
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (434,776) (609,759)
- ----------------------------------------------------------------------------------------
Class B (143,531) --
- ----------------------------------------------------------------------------------------
Class C (703,226) (1,923,812)
- ----------------------------------------------------------------------------------------
Share transactions-net:
Class A 11,098,948 16,620,595
- ----------------------------------------------------------------------------------------
Class B 8,539,414 --
- ----------------------------------------------------------------------------------------
Class C 1,916,228 19,971,956
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (531,116) 39,873,920
- ----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 60,440,401 20,566,481
- ----------------------------------------------------------------------------------------
End of period $ 59,909,285 $60,440,401
========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 74,263,053 $52,709,732
- ----------------------------------------------------------------------------------------
Undistributed net investment income 490,850 72,384
- ----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (7,850,489) 1,287,912
- ----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (6,994,129) 6,370,373
- ----------------------------------------------------------------------------------------
$ 59,909,285 $60,440,401
========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Real Estate 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 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
8
<PAGE> 11
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.
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
was decreased by $1,269, undistributed net investment income was decreased
by $10,071 and undistributed net realized gains was increased by $11,340 as
a result of differing book/tax treatment of foreign currency transactions
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 reclassifications discussed above.
C. 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.
D. 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.
E. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements. The Fund has a capital loss
carryforward of $1,027,346 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2006. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
F. Expenses-Distribution 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 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 0.90% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Realty Advisors, Inc. ("IRAI") whereby AIM pays IRAI an
annual rate of 0.35% of the Fund's average daily net assets on the first $100
million and 0.25% of the Fund's average daily net assets in excess of $100
million.
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 $275,972 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 $36,586.
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
9
<PAGE> 12
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 $57,833, $50,872 and $412,382, respectively, as compensation under
the Plans. During the year ended December 31, 1998, AIM Distributors waived fees
of $23,133 for the Class A shares.
AIM Distributors received commissions of $85,554 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 $25,274 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.
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 1.70% for Class A and 2.35%
for Class C; on the next $500 million of net assets, expenses shall not exceed
1.65% for Class A and 2.30% for Class C; and on all assets over $1 billion,
expenses shall not exceed 1.60% for Class A and 2.25% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $3,558
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
$69,794,053 and $45,015,610, 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 $ 830,188
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (12,663,672)
- -------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities $(11,833,484)
=============================================================
Cost of investments for tax purposes is $72,783,249.
</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 1,866,966 $ 26,220,226 1,054,003 $16,739,222
- ------------------------ ---------- ------------ --------- -----------
Class B** 965,596 13,668,547 -- --
- ------------------------ ---------- ------------ --------- -----------
Class C 867,066 12,416,738 1,421,288 21,204,369
- ------------------------ ---------- ------------ --------- -----------
Issued as reinvestment
of dividends:
Class A 103,931 1,234,506 47,730 725,852
- ------------------------ ---------- ------------ --------- -----------
Class B** 26,797 312,988 -- --
- ------------------------ ---------- ------------ --------- -----------
Class C 146,264 1,732,251 162,326 2,458,661
- ------------------------ ---------- ------------ --------- -----------
Reacquired:
Class A (1,266,277) (16,355,784) (52,825) (844,479)
- ------------------------ ---------- ------------ --------- -----------
Class B** (391,207) (5,442,121) -- --
- ------------------------ ---------- ------------ --------- -----------
Class C (933,062) (12,232,761) (240,812) (3,691,074)
- ------------------------ ---------- ------------ --------- -----------
1,386,074 $ 21,554,590 2,391,710 $36,592,551
======================== ========== ============ ========= ===========
</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 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 a share of Class C
capital stock outstanding during each of the years in the three-year period
ended December 31, 1998 and the period May 1, 1995 (date operations commenced)
through December 31, 1995.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
------------------ ------------
1998 1997(b) 1998
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 15.74 $ 14.19 $ 15.34
- ------------------------------------------------------------ ------- ------- -------
Income from investment operations:
Net investment income 0.58(c) 0.34(c) 0.37(c)
- ------------------------------------------------------------ ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (4.11) 2.39 (3.58)
- ------------------------------------------------------------ ------- ------- -------
Total from investment operations (3.53) 2.73 (3.21)
- ------------------------------------------------------------ ------- ------- -------
Less distributions:
Dividends from net investment income (0.50) (0.44) (0.40)
- ------------------------------------------------------------ ------- ------- -------
Distributions from net realized gains (0.25) (0.74) (0.25)
- ------------------------------------------------------------ ------- ------- -------
Total distributions (0.75) (1.18) (0.65)
- ------------------------------------------------------------ ------- ------- -------
Net asset value, end of period $ 11.46 $ 15.74 $ 11.48
============================================================ ======= ======= =======
Total return(d) (22.54)% 19.78% (21.02)%
============================================================ ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $20,087 $16,507 $ 6,901
============================================================ ======= ======= =======
Ratio of expenses to average net assets(e) 1.55%(f) 1.60% 2.31%(f)(g)
============================================================ ======= ======= =======
Ratio of net investment income to average net assets(h) 4.37%(f) 3.26% 3.62%(f)(g)
============================================================ ======= ======= =======
Portfolio turnover rate 69% 57% 69%
============================================================ ======= ======= =======
</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 expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.71% and 1.70% for 1998-1997 for Class A and 2.37% (annualized) for 1998
for Class B.
(f) Ratios are based on average net assets of $23,133,391 and $6,107,990 for
Class A and Class B, respectively.
(g) Annualized.
(h) 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 4.21% and 3.16% for 1998-1997 for Class A and 3.56%
(annualized) for 1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
------------------------------------------
1998 1997(b) 1996 1995
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.74 $ 14.19 $ 10.76 $ 10.00
- ------------------------------------------------------------ ------- -------- -------- --------
Income from investment operations:
Net investment income 0.50(c) 0.36(c) 0.33 0.16
- ------------------------------------------------------------ ------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (4.13) 2.26 3.51 0.75
- ------------------------------------------------------------ ------- -------- -------- --------
Total from investment operations (3.63) 2.62 3.84 0.91
- ------------------------------------------------------------ ------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.40) (0.33) (0.31) (0.15)
- ------------------------------------------------------------ ------- -------- -------- --------
Distributions from net realized gains (0.25) (0.74) (0.10) --
- ------------------------------------------------------------ ------- -------- -------- --------
Total distributions (0.65) (1.07) (0.41) (0.15)
- ------------------------------------------------------------ ------- -------- -------- --------
Net asset value, end of period $ 11.46 $ 15.74 $ 14.19 $ 10.76
============================================================ ======= ======== ======== ========
Total return(d) (23.16)% 18.88% 36.43% 9.12%
============================================================ ======= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,921 $ 43,934 $ 20,566 $ 5,565
============================================================ ======= ======== ======== ========
Ratio of expenses to average net assets(e) 2.31%(f) 2.35% 2.40% 2.40%(g)
============================================================ ======= ======== ======== ========
Ratio of net investment income to average net assets(h) 3.62%(f) 2.54% 3.21% 4.68%(g)
============================================================ ======= ======== ======== ========
Portfolio turnover rate 69% 57% 25% 7%
============================================================ ======= ======== ======== ========
</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 and is not annualized for
periods less than one year.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.37% for 1998.
(f) Ratios are based on average net assets of $41,238,200.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 3.56% for 1998.
11
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Real Estate Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Real Estate 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 two-year period ended December 31, 1997 and the
period May 1, 1995 (date operations commenced) through
December 31, 1995, 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 audit 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 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 Real Estate 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
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President INVESCO Realty Advisors, Inc.
One Lincoln Centre, Suite 700
Edward K. Dunn Jr. Dana R. Sutton 5400 LBJ Freeway/LB-2
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer Dallas, TX 75240
Formerly Vice Chairman and President,
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley TRANSFER AGENT
President, Mercantile Bankshares Vice President
A I M Fund Services, Inc.
Jack Fields Stuart W. Coco P.O. Box 4739
Chief Executive Officer Vice President Houston, TX 77210-4739
Texana Global, Inc.;
Formerly Member Melville B. Cox CUSTODIAN
of the U.S. House of Representatives Vice President
State Street Bank and Trust Company
Carl Frischling Karen Dunn Kelley 225 Franklin Street
Partner Vice President Boston, MA 02110
Kramer, Levin, Naftalis & Frankel
Jonathan C. Schoolar COUNSEL TO THE FUND
Robert H. Graham Vice President
President and Chief Executive Officer Ballard Spahr
A I M Management Group Inc. Renee A. Friedli Andrews & Ingersoll, LLP
Assistant Secretary 1735 Market Street
Prema Mathai-Davis Philadelphia, PA 19103
Chief Executive Officer, YWCA of the U.S.A.: P. Michelle Grace
Commissioner, New York City Dept. for Assistant Secretary COUNSEL TO THE DIRECTORS
the Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of Jeffrey H. Kupor Kramer, Levin, Naftalis & Frankel
New York State Assistant Secretary 919 Third Avenue
New York, NY 10022
Lewis F. Pennock Nancy L. Martin
Attorney Assistant Secretary DISTRIBUTOR
Ian W. Robinson Ofelia M. Mayo A I M Distributors, Inc.
Consultant; Formerly Executive Assistant Secretary 11 Greenway Plaza
Vice President and Suite 100
Chief Financial Officer Lisa A. Moss Houston, TX 77046
Bell Atlantic Management Assistant Secretary
Services, Inc. AUDITORS
Kathleen J. Pflueger
Louis S. Sklar Assistant Secretary KPMG LLP
Executive Vice President 700 Louisiana
Hines Interests Samuel D. Sirko Houston, TX 77002
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Advisor Real Estate Fund Class A, Class B and Class C shares paid ordinary
dividends in the amount of $0.5865, 0.4830 and $0.4830 per share, respectively,
during the Fund's tax year ended December 31, 1998. Of these amounts, 5.75% is
eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $839,797 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--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund1 AIM Money Market Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately
AIM Capital Development Fund $109 billion in assets for more than 6.2
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS million shareholders, including
AIM Mid Cap Equity Fund2, A AIM Advisor International Value Fund individual investors, corporate clients,
AIM Select Growth Fund3 AIM Asian Growth Fund and financial institutions, as of December
AIM Small Cap Growth Fund2, B AIM Developing Markets Fund2 31, 1998.
AIM Small Cap Opportunities Fund AIM Europe Growth Fund2 The AIM Family of Funds--Registered
AIM Value Fund AIM European Development Fund Trademark-- is distributed nationwide,
AIM Weingarten Fund AIM International Equity Fund and AIM today is the 10th-largest mutual
AIM Japan Growth Fund2 fund complex in the U.S. in assets under
GROWTH & INCOME FUNDS AIM Latin American Growth Fund2 management, according to Strategic
AIM Advisor Flex Fund AIM New Pacific Growth Fund2 Insight, an independent mutual fund
AIM Advisor Large Cap Value Fund monitor.
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 Fund2, C
AIM Charter Fund GLOBAL GROWTH & INCOME FUNDS
AIM Global Growth & Income Fund2
INCOME FUNDS AIM Global Utilities Fund
AIM Floating Rate Fund2
AIM High Yield Fund GLOBAL INCOME FUNDS
AIM High Yield Fund II AIM Emerging Markets Debt Fund2, D
AIM Income Fund AIM Global Government Income Fund2
AIM Intermediate Government Fund AIM Global Income Fund
AIM Limited Maturity Treasury Fund AIM Strategic Income Fund2
TAX-FREE INCOME FUNDS THEME FUNDS
AIM High Income Municipal Fund AIM Global Consumer Products and Services Fund2
AIM Municipal Bond Fund AIM Global Financial Services Fund2
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Health Care Fund2
AIM Tax-Free Intermediate Fund AIM Global Infrastructure Fund2
AIM Global Resources Fund2
AIM Global Telecommunications Fund2
AIM Global Trends Fund2, 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.
